The Impact of Short-Term Rentals on Long-Term Rentals and the Housing Market in Riyadh

Abstract

Riyadh has recently witnessed rapid growth in the use of short-term rentals. Their impact on the city’s housing market and long-term rentals has been critical. The emergence of recreational festivals such as the Riyadh and Diriyah Seasons, with their accompanying events, as well as the widespread use of daily rental platforms such as Airbnb, have created a new market for short-term rentals that has changed the city’s rental landscape. This study compared data on the number of units geared toward daily rent and their average daily rates (ADRs), obtained from the Airbnb platform, with data on long-term rental units and their revenue, extracted from the Ejar platform. The data cover the five sectors of Riyadh city. Sample neighborhoods were selected from each sector. The results show that after a period of stagnation due to the precautionary measures taken during the COVID-19 pandemic, the short-term rental market saw a significant recovery once these measures were lifted. The emergence of the short-term rental market has negatively affected the long-term rental market by drying up its stock and raising rent prices, thus leading to tourism-induced displacement of low-income residents and further exacerbating the housing problem in the city. Therefore, there is an urgent need to regulate this new rental market to maintain a balance between short- and long-term markets in Riyadh.

Keywords

• short-term rentals
• long-term rentals
• Riyadh
• Airbnb platform
• housing