# The Costs of Home-Sharing Platforms

1 Research Highlights March 2, 2018 ![John J. Horton and Apostolos Filippas](/sites/default/files/styles/246w/public/assets/images/hortonbody.jpg?itok=3RzX7gDO) By John J. Horton and Apostolos Filippas > Horton and Filippas show that individual tenants left to their own devices might rent rooms out too often, while cities may artificially distort the market and inefficiently limit - or even forbid - sharing activity.

In today’s sharing economy, whether you own an apartment building or live in one, at some point the building’s policy on home-sharing via platforms such as Airbnb or HomeAway will become a hotly debated topic. Research from NYU Stern [Professor John J. Horton](http://www.stern.nyu.edu/faculty/bio/john-horton) and [PhD candidate Apostolos Filippas](http://apostolosfilippas.com/) delves into the negative externalities of apartment-sharing: short-term rentals can impose costs on neighboring tenants including noise, disregarding building rules, common resource congestion, and uncertainty.

In “[The Tragedy of your Upstairs Neighbors: When is the Home-Sharing Externality Internalized?](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2443343)”, the authors argue that previous regulatory approaches are unlikely to work in the home-sharing context, and examine alternative policies that can address this problem. They propose a market-based, decentralized approach, and consider what would happen in four different scenarios, based on who has the right to set policy on whether apartments can be listed for short-term rental on a sharing platform. Each party – individual tenants, building owners, the municipality, or social planners – has different incentives and different exposure to the costs of home-sharing.

Horton and Filippas show that individual tenants left to their own devices might rent rooms out too often, while cities may artificially distort the market and inefficiently limit - or even forbid - sharing activity. Instead, they show that the socially efficient amount of hosting is obtained when the decision building owners can choose a building-wide home-sharing policy for their buildings, to which the tenants then have to conform to. Further, they find that when building owners choose a home-sharing policy, market rental prices are not affected, finding supporting evidence in a data set of more than 22,600 New York City rental listings. The authors also explore additional real-life considerations, such as how tenant moving costs might affect their findings.

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*John Horton is an Assistant Professor of Information, Operations and Management Sciences. Apostolos Filippas is a PhD candidate at NYU Stern.* ## More Research by John Horton

- [What’s yours is mine (at least for now): The rise and impact of the sharing economy](https://www.stern.nyu.edu/index%2ephp/experience-stern/faculty-research/what-s-yours-mine-least-now-rise-and-impact-sharing-economy)
- [Outsourcing Digital Contract Work Benefits Small Businesses](https://www.stern.nyu.edu/index%2ephp/experience-stern/faculty-research/horton-outsourcing-digital)