Why Short Term Rentals Are Good For The Economy as a Whole

Why Short Term Rentals Are Good For The Economy as a Whole

Short-term rentals (STRs) are major contributors to growing economies in cities, regions, and countries. STR platforms attract visitors to a location, and then through their visit, they generate economic activities.

From generating income tax revenues to support local governments to visitor spending on food, recreation, transportation, and other costs, STRs are no doubt one of the biggest economic drivers.

Here are six ways in which communities are reaping big economic rewards from short-term rentals:

Promote local tourism

Short-term vacation rentals are a great way to support the local tourism sector. According to multiple studies, tourists tend to stay longer in rented homes compared to hotel rooms.

Furthermore, because of the price advantage of short-term vacation rentals, little-known tourist destinations get the much-needed exposure.

There’s a direct correlation between increased tourism activity and job creation. Tourism is a sector that can employ thousands of local guides, cleaners, hospitality professionals, and more.

Diversified income streams

Short-term rentals help diversify income streams and stabilize the local economy. Along with jobs directly related to tourism (e.g. tour services, hotels, etc.), rental guests create jobs that indirectly support tourism (e.g. housing construction, food production, etc.).

Moreover, visitors spend their dollars locally, in shops, bars, museums, and restaurants, creating tens of thousands of local jobs and businesses. As a result, short-term rentals can generate endless employment opportunities for a country’s workers.

All the money raised has the potential to contribute to both the statewide and local economies, improving the livelihoods of people as a whole.

Increased tax revenue

Short-term rentals are a significant source of tax revenue for local governments. This includes accommodation and restaurant taxes, sales taxes, airport taxes, employee income tax, park entrance fees, etc.

Depending on the jurisdiction, the revenue collected from transient occupancy tax alone can range from 8% to 14% of the lodging unit rate.

Tax revenues are locally administered and can be used for the operation of the government and provision of public services, social security services, and Medicare.

Common uses of tax revenue include providing quality healthcare and other benefits to the residents, investing in infrastructures, such as roads and bridges, as well as in education, scientific research, and development.

Why Short Term Rentals Are Good For The Economy as a Whole

More cash for second homeowners 

Residents who own a second home, such as a condo in a city that they don’t visit frequently, can turn it into a short-term rental. Short-term rentals allow second homeowners to rent out their vacation properties that would otherwise stay unoccupied.

Renting out a property short-term offers incentives such as paying for property taxes, homeowners insurance, utilities, private mortgage insurance, and more.

Short-term rentals come with greater flexibility. That means it’s up to you to choose the days, weeks, or months to rent out your property.

Development of the private sector

In many countries, the private sector continues to develop because of short-term rentals. For example, the rise of the ride-sharing industry, including Uber and Lyft, is in part attributed to the growth of short-term rentals within the local communities.

Short-term rentals attract visitors to the city, who may need to commute around once they’re at their destination. Research shows that the average visitor spends an extra $24 on transportation for every $100 spent on renting a home short-term.

In addition, the average short-term renter typically stays in the city for 4.5 nights per stay. For a city with plenty of events in a calendar year, the transport sector can be extremely profitable.

Improved quality of life

Short-term rentals can transform the overall quality of life in the area. The money earned–whether through formal or informal employment–can bring a permanent positive change to the local economy.

For example, picture someone who is employed in a short-term rental property as a cleaner. That person earns a salary and spends it on his kids’ education.

The school spends the money on equipment in a bid to improve the quality of education. The kids graduate with good grades and secure well-paying jobs. They can then earn a salary and spend more in the local community.

Why Short Term Rentals Are Good For The Economy as a Whole


Short-term rental accommodations can bring positive economic impacts to communities in many ways. However, if not regulated, these rentals can increase housing shortages and unaffordability.

Community leaders and local governments need to implement more impactful and innovative regulations to tame housing shortages and boost sustainable growth.

A tailored legal framework can go a long way in protecting communities and neighborhoods against housing shortages. There is also the need to provide more affordable housing in areas where workers earn below the median income.

Failure to implement the right strategies needed to address housing shortages can put pressure on communities, resulting in unsustainable growth. 


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