The city of Los Angeles is considering an ordinance that would force thousands of small businesses to close their doors. These businesses currently provide a valuable service to customers and much-needed income to their owners.
The ordinance I have in mind is the one targeting Airbnb rentals. Hosts could offer only one unit for at most 90 days per year, with draconian financial penalties for violations. Since many hosts currently offer multiple units, each for 365 days per year, the ordinance would radically shrink the city's Airbnb market. And since the city has the right to collect taxes on the income Airbnb hosts earn, the ordinance would also severely limit a potentially important source of revenue.
To justify choking off so much commerce, the city needs a good reason. Airbnb rentals don't just benefit the visitors who use them and the hosts who make money from them. They also bring free-spending tourist traffic into neighborhoods lacking hotels, in parts of the city visitors usually miss. Airbnb enables residents of neighborhoods such as the Hollywood Hills, Echo Park and Silverlake to house guests within walking distance of their homes.
Proponents of the proposed clampdown argue that Airbnb fills neighborhoods with unfamiliar faces and cars. They note that when rude renters can pick up and leave the next day, there is little accountability for loud parties and other nuisances. And they blame Airbnb for increased gentrification.
But the most important charge they level—the charge primarily motivating the proposed ordinance — is that Airbnb hosting substantially worsens the city's rental crisis.
The rental crisis is real: Far too few units are available, and residential rents are far too high. Airbnb does contribute to the problem. Landlords remove rental units from the long-term market because they can make more money from short-term Airbnb rentals. Reduced supply, coupled with constant demand, means higher prices.
What really matters, however, is not whether Airbnb drives up rents — it's by how much. And the truth is that we don't know the magnitude of the problem, because it's been insufficiently studied.
Airbnb critics often cite a 2016 article in the Harvard Law and Policy Review that claims the service has caused rent increases approaching 3% in some Los Angeles neighborhoods. Don't let the name Harvard confer unwarranted authority: The Harvard Law and Policy Review is a student-edited journal and the author, who is currently attending law school, drew his data from an earlier study produced by a worker advocacy group with political reasons to oppose Airbnb. The article was never subjected to the pre-publication vetting by experts that is standard in the social sciences. Its results might stand up to scrutiny from the wider social-scientific community, or they might not.
Los Angeles-specific studies pointing the other way are just as untrustworthy — like one funded by Airbnb that found the service had almost no effect on rents.
Granted, research documenting Airbnb's effect on rents in other cities may be more reliable, but that hardly warrants aggressive regulation in this one. Many place-specific factors influence rent prices; what's true in San Francisco or New York or Berlin is not necessarily true in Los Angeles.
The city does have an interest in encouraging owners of suitable units to offer them on the long-term rental market. But many Airbnb units do not meet this description. A small guesthouse with no kitchen or laundry facilities — like the property I currently host on Airbnb — is unlikely to work as long-term housing. Why should I be forced to leave such a unit empty for 275 days each year? That restriction can't possibly help lower long-term rents.
The proposed ordinance also bans short-term rental of unconventional units like Airstream trailers, even though such units are unlikely to meet the city's criteria for long-term rental. Banning the rental of unconventional spaces — thus forcing visitors to buy hotel rooms instead — is nothing but a handout to the hotel industry.
Further, restricting Airbnb rentals could have the perverse effect of punishing victims of the rental crisis. Many Airbnb hosts are renters who manage to pay their inflated rents on time thanks to income generated by subletting part of their space through Airbnb. The proposed ordinance, which would permit only owners, not renters, to host through Airbnb, could force many people currently renting apartments in the city to relocate.
Before establishing potentially harmful rules, the city should slow down and examine all the pros and cons of limiting Airbnb rentals. Perhaps it's time the city commissioned a study of its own.
Gideon Yaffe is a professor at Yale Law School, a resident of Los Angeles, an Airbnb host, and a frequent Airbnb guest.