Analysis of the Dynamic Developments in the Local
Lodging and Rental Housing Market in Lisbon
Gian Wieck Andres Montellano Zuna
Student of European Master in System Student of European Master in System
Dynamics (EMSD) Dynamics (EMSD)
gian.wieck@ gmail.com andres.montellano@ hotmail.com
Keywords: tourism gentrification, System Dynamics, housing market dynamics, Lisbon,
urban planning, public policy.
Affiliation: The research has been conducted as part of the European Master in System
Dynamics at the Universidade NOVA de Lisboa (Portugal).
Extended Abstract
Introduction & Problem Statement
The housing market in Lisbon is undergoing rapid change. Following the liberalization of the
rental market in Lisbon, the attraction of foreign investment and the expansion of urban
tourism, the market is experiencing unprecedented dynamics in the real-estate sector
(Branco & Alves, 2016). While formerly vacant buildings are renovated, the supply for long
term rentals decreases and rental prices are increasing rapidly (Mendes, 2016). Tourist
lodging in turn is booming and increases the competition of living spaces (Airbnb, 2016;
Airbnb, 2017; Airdna, 2017). The development contradicts the governmental goals aiming to
increase the residential housing supply in the historic center and thus raises the risks of
tourism gentrification undermining the social sustainability of the communities and
neighborhoods.
Research Questions & Expected Contribution
The research explores the unintended consequences of urban rehabilitation and tourist
lodging leading to a reduction of affordable housing in the city center of Lisbon. In particular,
the research aims to answer the following questions:
e What are the main factors and dynamics which lead the rise of the rental prices in the
city center of Lisbon?
e What are the impacts of the urban rehabilitation process and the possibility of local
lodging on the supply of residential housing?
To answer the research questions, the work analyzes the relationship between short and
long term rental dwellings, the dynamics of rental prices and options to increase affordable
housing. By developing a transparent, quantitative, dynamic hypothesis, the research aims
to contribute to the general understanding of the complex urban environment and to illustrate
the importance of coordination between urban actors. The developed model does not intend
to predict the future market development, but provides a platform to foster learning about the
systemic relations. In a broader scope, the research aims to illustrate how System Dynamics
as a tool and as a participatory method can support policy making in complex environments.
Methodology
The conducted research applies a case study approach combined with System Dynamics.
System Dynamics is a quantitative analysis method to analyze complex social systems
(Forrester, 1992). The method aims to quantify causalities between system elements to
develop a simulation model. The developed model aims to provide a potential explanation
for the market development of the past 40 years. The case study data is collected by
reviewing literature, interviewing local experts and accessing national statistics of the
housing market.
Findings
The research identifies the four main sectors which lead to the observed market
development: the general supply of dwellings, the allocation of dwellings by landlords, the
demand of tourists and the demand of local residents. Depicting the dynamics between
those sectors, the research model is able to replicate the behavior of the rental price of the
past. The research suggests that the liberalization of the rental market combined with the
high international and national attractiveness of Lisbon’s city center are the main drivers for
the exponential development of the rental price. Without adequate policy interventions, the
average price might continue to rise further. The analysis of potential policies reveals that
tourist accommodation can lead to a strong resistance of the system: Landlords can
circumvent rental regulations by shifting to the more profitable alternative of short term
lodging.
Discussion
The System Dynamics model provides a transparent, comprehensive insight into the
complex structure of the housing market. The methodology unveils the bounded rationality of
actors and highlights the critical feedback loops within the causalities of the system
elements. Future participatory research could extend the model structure to include
additional research areas and to monitor the development of the real system with the
simulation results of the model. The current model provides the basis for continuous
development to build a digital representation of the urban system and could prove useful as
a boundary object to reach a shared understanding between different stakeholders.
Conclusion
The city of Lisbon is highly attractive for residents and tourists alike. In a liberalized housing
market, the decisions of providing accomodation are merely based on monetary aspects. In
an attractive urban environment, this paradigm leads to rapid increases of rental prices
which in turn cause the displacement of residents, the destruction of social capital and a
financially driven homogenization of neighborhoods. The research developed a platform to
foster understanding of the interrelations underlying the complex housing dynamics in
Lisbon. Policies aiming for equality and social and functional mix need to systematically
consider local lodging to achieve favorable outcomes. Most importantly, urban actors of the
city need to be connected and coordinate their actions towards a common goal to overcome
bounded rationality and to sustain the cultural diversity which defines Lisbon.
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