Association for Public Policy Analysis & Management

The Internet has profoundly changed the search for rental housing. In 2013 about 30% of renters who moved found their new home through Craigslist, many more than found their unit through newspaper ads or brokers. It is likely that the Internet will become even more dominant in the housing search as sites become more sophisticated. Online services now allow searchers to explore neighborhoods, apply to units with the click of a button, and receive immediate feedback about their application. Scholars have identified that the shift of the housing search to online media has an effect on market dynamics, but the mechanics of these effects are still unclear. Online searches may be less costly to renters, thus increasing renter mobility. It is also possible that online ads make it easier to rent out previously under-utilized spaces (potentially increasing rental supply) or make it easier for individuals to band together to form households (potentially increasing rental demand). I examine the rise of the most popular online rental housing search medium, Craigslist, on rental vacancy rates and identify the mechanism behind Craigslist’s impact. Policymakers from the federal to the local level often use rental vacancy rates and vacancy patterns have a profound impact on rent setting, particularly among the small properties that make up a majority of the rental stock.

I isolate the impact of the shift in the medium of the housing search by focusing on the mid-2000s when Craigslist expanded rapidly across the country. In 2005 Craigslist operated pages in 55 metros and hosted about 2.8 million housing ads per month. By 2007 156 metros had Craigslist pages and over 3.8 million housing ads were on the site per month. Using data scraped from Craigslist coupled with Census data, I show that this growth took the form of an exogenous shock. I then develop a method of quantifying the prevalence of Craigslist in rental markets and use this metric to show that increasing use of Craigslist caused a decline in observed rental vacancy rates.

In order to show the mechanism for this decline I use detailed data on rental vacancies from the Bureau of Labor Statistics’ Housing Survey to decompose vacancy rates into the frequency and average duration of vacancy. This decomposition allows for the disentangling of changes in renter mobility from shifts in the balance of supply and demand for rental housing. Preliminary findings from this decomposition suggest that Craigslist increased renter mobility. However preliminary findings also suggest that Craigslist changed the balance of supply and demand for rental housing. The analysis provides policymakers with a better understanding of the drivers of rental vacancy rates, a standard metric for assessing housing markets. Policymakers should also be concerned about the increase in renter mobility as it may cause rents to become more volatile in small rental properties.