Neither less supply nor reduced competitiveness. The “Airbnb tax,” introduced by the Norwegian government years ago because of the platform’s rising influence, appears to have had little impact. It hasn’t prompted landlords to shift properties to the long-term rental market or lower prices, nor has it significantly affected the rates listed on the short-term rental platform.
A recent study published in Economics Letters suggests the measure has had little effect on supply or pricing in the short-term rental market.
This finding is sparking interest globally, as countries like France, Italy, and the U.S. grapple with Airbnb’s rapid growth and its impact on local housing markets.
The Norwegian Approach
Years ago, Norway faced controversy over the Airbnb boom, particularly regarding the tax exemption for short-term rentals. Income from these rentals, typically under 30 days and geared toward tourists, wasn’t subject to taxation.
As the platform gained popularity in the country, it created unease among hotels and some of the population. Hotels faced new competition, and residents saw their options for affordable housing become more complicated.
In response to growing concerns about Airbnb’s impact on affordable housing and competition with traditional hotels, Norway introduced the Airbnb tax in 2018. Landlords were required to pay a 22% tax on income from short-term rentals intended for tourists.
That’s the big picture, of course. The fine print is more complex.
The new policy imposed a 22% tax on rental income exceeding 10,000 kroner (approximately $900) annually, though only 85% of this income was subject to taxation. The Norwegian Tax Administration, Skatteetaten, provided detailed guidance on how the tax would apply, including examples specific to Airbnb listings.
Researchers Marcel Garz and Andrea Schneider, who analyzed the tax’s effects, noted that the government had two main goals: To encourage landlords to move properties to the long-term rental market, thereby increasing affordable housing, and to generate additional tax revenue.
“The tax should theoretically result in the exit of hosts for whom the tax liability makes renting unprofitable, induce price increases as hosts share part of the tax burden with the customer, or both– at least if hosts comply with the tax,” they say.
That was the theory. The reality was different.
After analyzing the market response in detail and comparing it to Sweden, a country with similar social, tourism, and real estate characteristics, Garz and Schneider reached a resounding conclusion: “Using individual-level data on the population of hosts between 2015 and 2019, we do not find evidence that hosts in Norway exited Airbnb or increased their prices.”
Their findings were clear: The tax didn’t achieve its intended outcomes. It had any relevant “economic impact.”
“We do not find a significant effect of the tax on hosts’ propensity to list property on Airbnb, with point estimates close to zero. Hosts did not significantly change their number of listed properties either,” they said. As for prices, they insist: “Hence, any potential price increase was small at best, compared to the tax rate of 22%.”
According to Garz and Schneider, hosts earned an average of $5,131 annually in 2018–2019, resulting in hundreds of dollars in taxes each year. The experts note that this amount is “high enough” for some hosts to deem listing their properties on Airbnb no longer profitable. At the very least, they say, these costs would likely be passed on to customers through higher prices.
Neither happened. The researchers attributed these outcomes to insufficient enforcement of the tax. In their article, they speak of “poor tax enforcement” and insist on using “effective tax designs.”
“These findings support the conjecture that the tax was insufficiently enforced, as it relied on taxpayers to self-report their rental income,” they conclude. In fact, Norway is already exploring other ways to target the sector, such as creating a tourist tax.
Norway isn’t alone in seeking to regulate Airbnb’s influence. Other cities and countries have adopted varied strategies. Amsterdam partnered with Airbnb to collect a tourist tax directly from users. New York City imposed strict rental limits, pushing short-term listings to nearby New Jersey. Barcelona moved to ban short-term vacation rentals outright, and France updated regulations to tighten controls on Airbnb hosts.
While Norway is exploring additional measures, such as a tourist tax, Garz and Schneider’s study underscores the need for more effective implementation strategies. Without proper enforcement, policies like the Airbnb tax may fall short of their goals.
The Norwegian experience serves as a cautionary tale: Even well-intentioned regulations require robust design and oversight to achieve meaningful results.
Images | Ignacio Ceballos (Unsplash) | Samuel Han (Unsplash)
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