Spatio-Temporal Variation in the Bid–Rent Functions of Long-Term and Short-Term Rentals: Evidence from South-East Queensland, Australia

Abstract

Platform-mediated short-term rentals (STRs) are a relatively new addition to the housing landscape, providing accommodation on a temporal scale that falls between hotel stays and long-term rentals (LTRs). Given the potential for STR hosts to charge significantly higher nightly rates for the same property than they might through an LTR lease enumerated in months or years, many have asked whether a ‘gap’ exists between the two, and how persistent this may be over space and time. In this paper, we modify and validate classical bid–rent theory to investigate spatial variation in the rent gap between STRs and LTRs over time in two distinct contexts in Queensland, Australia. We conduct statistical analyses on STR data against LTR data from local property records in Brisbane and the Sunshine Coast, identifying a significant rent gap, particularly close to high-amenity areas. We find strong evidence of distance decay in the rent gap, with rents converging with increasing distance in most cases, indicating that STRs only ‘outcompete’ LTRs near high-amenity areas, which in this analysis are the central business districts (Brisbane) and the beach (Sunshine Coast). We also find that the rent gap increases as properties get larger in size, and over time. These findings carry implications for policy aiming to balance the needs of multiple stakeholders and political agendas against planning frameworks prescribing where short-term accommodation is best situated.