Opinion: Airbnb raises housing prices in Los Angeles. Here’s how we can undo
Airbnb is back in the headlines in Los Angeles: Thousands of short-term rental hosts are violating the law, and the city isn’t taking the problem seriously enough.
If this sounds like a familiar story, it is. In 2019, shortly after the city announced it had begun enforcing short-term rental rules, it found that illegal rentals were still thriving. My follow-up studies in 2021 and 2022 showed the same thing.
Why should we care about illegal short-term rentals? The simple answer is that they make housing more scarce and less affordable for Angelenos. A landmark study by Kyle Barron of the National Bureau of Economic Research found that Airbnb was responsible for nearly one-fifth of increases in residential rents in the United States between 2012 and 2016. A specific study in Los Angeles led by Hans Koster of the Vrije Universiteit Amsterdam found that between Between 2014 and 2018, Airbnb was responsible for a more than 30% increase in housing prices in Venice, as well as significant price increases in other major tourist destinations in Los Angeles.
High housing costs directly increase homelessness. Looking at the impact of short-term rentals in Los Angeles from 2014 through 2022, I estimated that short-term rentals are responsible for an additional 5,000 Angelenos experiencing homelessness every night. This is a human tragedy but also a financial tragedy, as it will cost the city $1.3 billion to build enough supportive housing to accommodate them.
Short-term rental hosts in Los Angeles are required to obtain a license from the city, and are only allowed to operate the rental outside of their primary residence. But these rules don’t seem to work. When I crunched the numbers last year, I found that nearly half of the short rentals operating in Los Angeles were illegal. A large portion had no license number at all, a quarter of the listings with a license number were using a fake or expired number, and many were clear business operations rather than home-sharing arrangements involving a primary residence.
What should the city do about it? First, you need to be serious about collecting fines from short-term rental hosts who violate the rules. A year ago, records from the city indicated it was collecting less than $4,000 a month in home-sharing ordinance fines. However, by my analysis, if every host that violates the rules pays the appropriate fines, this number should be a thousand times larger – at least $50 million annually.
In practice, if the city started strictly enforcing its own rules, hosts would stop breaking the law with impunity and the fines collected would decrease. But this is a good thing: similar to the approach of imposing so-called “sin taxes” on alcohol and cigarettes, part of the rationale for imposing fines strongly is to discourage socially harmful activity, not simply increase revenue from the same activity. .
Second, in addition to going after hosts, the city should hold short-term rental companies — Airbnb, but also many smaller players in the market — financially responsible for illegal activities that occur on their platforms. Currently, the Home Sharing Act imposes fines of $1,000 per day on platforms that accept illegal listing reservations, but such fines are rarely collected. The city should start collecting them on a large scale and increasing their size to the point where the platforms have no choice but to start taking them seriously.
The government of Quebec, where I live and work, has imposed fines of up to $100,000 for each listing that does not contain a valid license number. These numbers are tantamount to saying to Airbnb and other platforms, “Follow the rules or get out of town,” and it’s long past time for Los Angeles to take the same approach.
Finally, the city should rescind expanded home-sharing licenses. These licenses allow hosts to offer short-term rentals throughout the year, and they also enrich a small number of commercial operators at the expense of residents who pay more for their private residences. And in a city with as many high-quality tourist accommodation options as Los Angeles, there is no conceivable public interest justification for allowing scarce lodgings to operate as de facto hotels. Whatever revenue the city brings in through transient occupancy taxes is drowned out by the additional housing costs imposed on Los Angeles residents.
Home sharing can be a win-win for the economy and the Los Angeles housing market. A modest amount of part-time rentals would provide visitors with a wider range of accommodation options while helping some residents cover their housing costs. But this will only work if the city starts insisting that hosts and short-term rental platforms play by the rules — and starts penalizing them if they don’t.
David Waxmuth is Associate Professor of Urban Planning at McGill University and a Canada Research Chair in Urban Management.