Does Airbnb Save Homes? The Impact of Airbnb on Mortgage Delinquency and Housing Foreclosure

Abstract:

Since its inception in 2008, Airbnb has been growing rapidly and generating substantial economic returns for home owners who rent out their properties on the platform. In this paper, we aim to study the significance of such economic returns. Specifically, we investigate the impact of Airbnb listings on mortgage delinquency and housing foreclosure. The basic idea is that revenues obtained from Airbnb ease the financial constraints faced by home owners. The improved liquidity conditions can alleviate the mortgage payment pressures and prevent risky properties from being foreclosed. To empirically test this idea, we merge several data sources, including self-collected Airbnb listing data and publicly available loan performance and housing foreclosure data. In our empirical analysis, we differentiate two types of listings, namely the entire place listings and private room listings. An entire place listing provides the whole property for guests while a private room listing shares rooms with guests by the home owner. Roughly, two thirds of the listings in the market are entire place listings. Despite its smaller proportion, we find that 1% increase in private room listings reduces delinquent mortgage by 0.22% and further reduces foreclosure by 0.19%. In contrast, we find no significant impact of entire place listing on either outcome. We argue that this is because the home owners for private room listings are financially worse off than those for entire place listings. So, Airbnb revenue is more needed to repay the mortgage cost for the private room listing home owners. Further analysis suggests that this home saving effect concentrates in relatively low income areas and high mortgage cost/income ratio areas.

Keywords: Airbnb, Mortgage Delinquency, Home Foreclosure