Does Banning Airbnb in Cities Actually Help the Housing Supply?

This is a complex issue that no one agrees on

The entry of short-term rental websites like Airbnb is one of the major disruptive elements in the real estate market in the previous decades. Many cities of the world are going through an affordable housing crisis and several of them have claimed Airbnb to be a major cause of it. However, the question is whether cities really should ban Airbnb to solve this problem, or is such a decision just a form of thinking? In this paper, we will cover the subtle ways in which Airbnb affects local housing markets, examine the bans, and discuss feasible, moderate actions that cities could take.

The underlying economic conditions: Airbnb's contribution to the housing market

Airbnb has been an enormous success story since it started operations back in 2008. It quickly turned from being exclusively a site for individuals to rent rooms in their home, to a multi-billion-dollar platform of short-term rentals. By 2023, there were more than 6 million active listings on the website, and in addition to these smillions of users, it was a rather enjoyable booking process. The platform's triumph brought enormous economic revenues, specifically to hosts and cities with a high percentage of tourism. But, the positives are counterbalanced by the negatives, especially in terms of housing accessibility and affordability.

The Impact of Airbnb: Researchers have recently come up with findings that point out the connection between the presence of such systems in cities and the lack of supply of long-term housing. An analysis made by the National Bureau of Economic Research (NBER) showed that there is a relationship between the growth of Airbnb in a city and the increase in rents and prices of residential housing​ (CMU Homepage). The correlation is even more evident in the areas of high Airbnb concentration, i.e. places where the Airbnb platform can cut the affordable housing stock significantly.

The so-called "Airbnb Effect" has been a widely recognized explanation for the housing crisis in such cities as San Francisco, New York, and Barcelona. Detractors assert that, turning residential property into profitable short-term rentals, Airbnb decreases quotas of rented properties for long-term residents, thus, besides, rents go up, and local communities are displaced.

Case Studies: Airbnb's Effect on Urban Housing Markets

1. New York City: A Tale of Two Markets

The New York City market, one of the biggest and most crowded places in the world and considered as one of the tightly contested areas for short-term rentals, has the forefront. The city features some of the most rigorous Airbnb regulations, including a ban on the rental of entire apartments for less than 30 days unless the owner is there. Despite these regulations, New York City had over 50,000 Airbnb listings as of 2020.

A report by Inside Airbnb, a project that analyzes and presents Airbnb data, discloses that in New York City, Airbnb has reportedly withdrawn about 13,500 units from the long-term enduring market. The decreased supply has been regarded as a factor that leads to an increased rent since Airbnb is thought to have driven rents up by $616 million in the aggregate every year​ (ArchDaily). It should also be noted that the impact is not evenly distributed, as wealthier areas like Manhattan and Brooklyn have reportedly faced the biggest increases.

2. Barcelona: A City Fighting Back

Barcelona is yet another city that has taken a stringent stance against Airbnb. This city is known for its long-standing housing crisis which has been critically worsened by the inflow of tourists. Испокоить the detrimental effects of short-term rentals, Barcelona has introduced very strict regulations, one of which is banning the granting of new licenses for the tourist apartments located in the city center.

Research carried out by the University of Pompeu Fabra findings showed that the Airbnb model had a negative impact on the whole housing market of Barcelona, with the most severe effects in the districts visited frequently by tourists such as the Gothic Quarter and El Raval. The study showed that Airbnb rentals grew 7% from 2014 to now, compared to that of the regular rentals, thus, a lot of residents were forced to leave. In reaction to this, the local government has been continuously monitoring the situation aggressively carrying out penalties by the shutting down of illegal rentals and applying functions on non-compliant hosts.

3. Los Angeles: Distributing the Power

Los Angeles, in this regard, presents a different point of view on the issue of regulating Airbnb. The 2019 regulations, that the city approved, are meant to let local homeowners rent out their main units for a term of 120 days per year, provided that they follow the certain measures. According to the city officials, the measure is intended to achieve a balance, on the one hand, allowing, the help of the homeowner, and others, the residents to keep their homes.

Research by the University of Southern California found that this technique will probably lead to a more stabilized rental market, especially in areas crowded with short-term rentals. The implications for the housing market, in this case, will be less visible than in New York orBarcelona, since the policy will just decrease the number of short-term rentals in vulnerable neighborhoods. The way of doing so has been seen as a more balanced and sustainable one to manage the influence of Airbnb on the housing market.

The Legal and Economic Implications of Banning Airbnb

The accomplishment of these Airbnb bans or tight regulations is a topic that has been argued about by the politicians, the economists, and the city planners. Although there are cities that successfully eliminated the factors contributing to the housing market such as the policy of short-term rentals, others had problems with obeying and got negative consequences.

Effects on the economy of local communities: One of the standard opposition arguments to Airbnb bans is a potential loss of the economy for the local community. Besides, short-term rentals add considerable revenue to the towns by tax contributions and extra spending in local businesses. A survey by Oxford Economics revealed that Airbnb visitors alone contributed 34 billion dollars to the U.S. economy in 2018, helping to sustain over 300 thousand jobs​ (CMU Homepage). In many cases, especially in those with tourism-centric economies, such income is necessary for the town to be able to run properly.

The distribution of this economic benefit, however, is not even. A report from Inside Airbnb pointed out that a minority of hosts largely dominate the listings, particularly in major cities. In New York City, nearly half of the listings are controlled by the top 10% of the hosts. This uneven wealth has prompted a discussion of the fairness of the platform and its role in gentrification and inequality.

Legal challenges and enforcement issues: The promotion and the imposition of the rules are the main legal problems in this case. In many places, Airbnb hosts have opposed the laws, resulting in a multitude of court cases. In some situations, these arguments have led to either the laws being weakened or abolished. As an example, a ruling by a Californian court in 2020 decided that the city of Santa Monica could not hold Airbnb accountable for unlicensed rentals undermining the very rules that the city was trying to enforce on short-term rentals.

Enforcement is another major issue. There are many instances of Airbnb being either banned or nearly regulated in cities, where a lot of the Airbnb hosts operate illegally. This black market short-term rentals are hard to control, especially in the cities that are lacking in budgets for the enforcement. On some occasions, the cost of the enforcement might become the bigger number compared to the one of the benefit, and this is why cities start to wonder if they should leave the rule.

Alternative Approaches: Balancing regulation and autonomy

Given the mixed results of Airbnb bans, some cities are exploring alternative approaches to regulating short-term rentals. These strategies aim to balance the need to preserve housing for residents with the economic benefits of Airbnb.

1. Licensing and Caps: The city can require a license to hosts operating short-term rents and cap the total number of nights per year that a property can be rented. This strategy has been used in London, where hosts are only allowed 90 nights per year. This does allow the city to have some control over short-term rental activities while at the same time providing opportunities for homeowners to use Airbnb and such platforms.

2. Taxation and Revenue Sharing: Imposing taxes on short-term rentals and directing them to the affordable housing programs can be both an alternative and a solution to the housing problem. For example, in the head of Airbnb, the transient occupancy tax that they collect of 14% is used to support housing programs whereas, it funds general municipal revenue.

3. Zoning and Planning: The cities are controlling the proliferation of short-term rentals through the zoning laws. For instance, Portland Oregon is the only place where short-term rentals will be allowed in specific zones. This way the host will be required to live at the site and this gives the option to concentrate energy on areas where the impact on the housing market would be less and to the people can benefit from the platform.

4. Community Engagement: Finally, certain cities are empowering communities in the regulation of short-term rentals. In Amsterdam for example, the local government cooperates with the neighborhood councils to monitor and regulate the activity of Airbnb. So this is a way of balanced governance, ensuring local residents' needs are being met and making sure regulations are suit wagtouch.

The Future of Airbnb and Urban Housing Markets

The interest in short-term rentals and housing continues however it's essential that we remember there isn't just one simple solution. The impact of short-term rentals on the housing market is complicated and differs from one city to another. Cutting down the Airbnb rentals might be a temporary relief in certain markets but it is far from being a solution to the extensive problems related to overall housing affordability and availability.

Cities need to take a more careful and elaborate route toward the regulation of short-term rentals. This may involve a combination of licensing, taxation, zoning, and community involvement specifically tailored to the needs of the city.

As the issue is being tackled by the authorities, they have to ensure their decisions are based on sufficient knowledge and understanding of local as well as global economic perspective. Balancing and informed decisions, cities can guide in maintaining markets that supply adequate decent homes for all residents as well as allow car owners to enjoy the short-term rent schemes of these houses.