Kung: We argue that Airbnb drives up house prices and rents through two channels. First, Airbnb causes some landlords to switch from supplying the long-term rental market to the short-term rental market. Since the two markets are segmented, this drives up rents in the long-term market. The increase in rent will also be capitalized into house prices. However, we identify a second channel through which Airbnb can increase house prices even further, which is that it increases the ability for homeowners to generate income from excess housing capacity, like extra rooms or time away from home.

GlobeSt.com: Airbnb contributes to less than a half-percent increase in rents, but L.A. rents increased 7% last year. Aren't there other more crucial factors than home sharing contributing to the affordability crisis? How much pressure do home sharing services really put on the economy?

Kung: In our view, there are much more important factors driving the affordability crisis than Airbnb. Chief among them are lack of supply and stagnant incomes. However, if the question is whether there is any evidence that Airbnb is driving up housing costs at all, the answer would be yes.

GlobeSt.com: Are there other economic benefits to home sharing that offset these costs?

Kung: Yes. Our results show that Airbnb increases the value of homeownership by increasing the ability for homeowners to generate income from their excess housing capacity. This is a pure economic efficiency that should not be discouraged through regulation. Airbnb may also have other beneficial effects that we do not measure, such as increasing the revenue to local businesses. However, there may be additional unmeasured costs as well, such as noise, congestion, or safety concerns related to increased short-term residents.

GlobeSt.com: What is the regulatory and government response to home sharing, and what do you think the solution should be to this issue?

Kung: Different cities have responded differently. Some cities, like Santa Monica, prohibit short-term rentals of less than 30 days. Others may limit the total number of days a property may be rented out in the short-term market. It's unclear to us how well these policies are enforced. The regulatory frameworks are city-specific and constantly evolving, it seems. In our view, home-sharing policy should at most seek to limit the conversion of long-term rentals to short-term rentals, but should not impact the ability of owner-occupiers to share the excess capacity of their primary residences.