The best evidence yet that banning Airbnbs will make rent go down

The crackdown was a turning point. Despite legal challenges and histrionics from landlords, the city had all but vanquished short-term rentals. The thinking behind the move was fairly simple:

New York City, where the average studio apartment costs $3,016 a month, is the epicenter of the country's sweeping affordable-housing crisis. By turning Airbnbs back into long-term housing, people will have more places to lay their heads and landlords will have more competition. In theory, this should make housing in the city more affordable.

Airbnb has long denied culpability in the country's housing crisis, but the latest evidence that New York City made the right move comes from the opposite side of the country. Irvine, California, a picturesque city of 300,000 in Orange County, banned short-term rentals back in 2018 as residents grew frustrated by increasing numbers of vacation rentals in once-quiet neighborhoods. Based on a new study published this summer in Real Estate Economics, the move had a notable impact. After Irvine's ban went into effect, long-term rents in the city dropped by 3%, according to the study, a decrease of $114 a month on average.

Irvine is a single case study, but it's also a real-world validation of years of research that's found Airbnb and its many copycats drive up rents and home prices. That might be good for property owners, but if you're worried about affordable housing, then it's worth taking a lesson from Irvine: Banning short-term rentals can, in fact, make rents go down.

The case of Irvine

When the city of Irvine took on short-term rentals in 2018, Airbnb seemed unstoppable. A decade after its founding, the company had upended the hospitality industry and was profitable for the first time in its history. Its tentacles had spread to cities across the globe, converting entire neighborhood blocks, in the most dramatic cases, to short-term rentals. "Home-sharing" had completed its metamorphosis from an idealistic, tech-enabled vision for more friendly travel into a bona fide force.

Irvine's 2018 short-term rental regulations — which barred rentals of 30 days or less in all residential areas — were hardly unprecedented. Plenty of cities had passed ordinances banning short-term rentals, only to see Airbnb listings continue to pop up. But as Michael Seiler, a professor of finance at the College of William & Mary and one of the researchers who worked on the new study, explained to me, Irvine was able to succeed in actually getting rid of Airbnbs for one reason: enforcement.

"What is so different about Irvine is that they did not just put a ban in place," Seiler said. "They actually enforced it."

It has long been the law in the state of New York, for instance, that residential apartments cannot be rented out for less than 30 days, except under very limited circumstances. For a decade, Airbnb hosts simply refused to heed this law. Why? It was extremely difficult to enforce. The thousands of Airbnb listings that evaporated overnight in September had always been illegal but managed to survive because they were "legitimized by this multibillion-dollar internet platform," said Murray Cox, the founder of Inside Airbnb, a project that examines Airbnb's impact on cities. New York City had just finally figured out a way to lay down the law: It established a registration process for short-term rentals and barred Airbnb and other platforms from advertising rentals that hadn't been registered with the city first.

In Irvine, it took about a year for the city to figure out how to root out the short-term rentals that had taken hold in its sunny, master-planned neighborhoods. The city had to hire a specialized property-tech firm to identify and locate illegal short-term rentals in order to enforce the ban. Even so, some landlords devised clever ways to get around the city's regulations, like offering 30-day leases that, if you looked at the fine print, could be canceled at any time, allowing for a weekend stay. "It took some detective work," said Ken Fairbanks, a board member of a homeowner's association in Irvine who used to frequently investigate complaints of Airbnbs in his own neighborhood. But now, Fairbanks said his neighborhood is Airbnb-free. That's consistent with data on short-term rentals in Irvine, which showed that by January 2021, the number of listings in Irvine had halved.

When researchers investigated the effect of the sudden disappearance of short-term rentals in Irvine, they identified a striking result: Within two years of the ban, long-term rents decreased significantly. They estimated that the roughly 60,000 rental units in the city saw a 3% rent decrease on average, which "sums up to a reduction of $80.7 million in annual total rental spending." The strength of the evidence led the researchers to conclude that the findings "provide local governments with empirical evidence that STR regulation policies could be helpful in reducing rents in cities."

'People were living there before'

While the Irvine study showed that Airbnb bans can successfully drive down rents, numerous studies have shown the other side of the coin: When short-term rentals come to town, rents go up. A 2020 study on short-term rentals in Berlin found that apartments listed on Airbnb increased the rents of nearby units. A 2017 study in Boston came to a similar conclusion. Other studies have documented these impacts on rents nationwide, including research from 2021 that estimated that Airbnb listings accounted for one-fifth of rent growth in ZIP codes with a median share of people who own and occupy their home.

When you consider the law of supply and demand, these findings make sense. When supply of a commodity drops but demand stays the same, the price of that commodity will rise. That's what Airbnb does to the housing supply. As the Berlin and Boston studies found, when houses or apartments are pulled off the long-term market to be used as short-term rentals, housing supply decreases. But actual residents still need a place to live, so they are forced to fight over — and pay up — for the more limited housing stock. The Irvine researchers figured that rents dropped after the local ban because when the landlords put their Airbnbs back on the market as long-term rentals, there was more housing supply. Suddenly, the landlords had to compete for tenants, making it harder for them to jack up rents. The Irvine study found little evidence for alternative theories, such as the notion that the Airbnb ban hurt the local economy by reducing tourism, thus displacing tenants and lowering demand for rentals.

It is "common sense," according to Cox. "It's not some abstract commodity," he said of short-term rentals. "People were living there before."

When I was a local reporter in Burlington, Vermont — where I covered the city's desperate housing crisis — I lived in an apartment in a shabby old building downtown, which I rented out for $1,300 a month. Shortly after I moved out, in June 2021, the unit was renovated, filled with the ugliest Ikea furnishings I'd ever seen, and converted to an Airbnb, where it goes for nearly $300 a night when you include the tricky "cleaning fee." If you do the math, that apartment is far more profitable for the landlord as a short-term rental — even considering the cost of the cosmetic upgrades. The unit likely rakes in thousands more dollars a month than what I once paid in rent. Given these incentives, it would, I'd surmise, take a strict ban to convert the unit back to a long-term rental. Why else would the landlord take such a loss?

To address these adverse incentives, some places, like Summit County in Colorado, have started paying landlords to convert short-term rentals into long-term housing. In the short term, programs like this could help bring back housing. But it's costly — and likely unsustainable — for cities to indefinitely pay the difference between long- and short-term tenants. In Summit County, the program spent $1.65 million over two years on just 87 units.

A desperate need for housing

If you paid attention to the discourse around New York's Local Law 18, you probably noticed the plethora of arguments that were made in opposition to the ban: Some said Airbnbs were not an important factor in the city's housing crisis. Others argued the units would just sit empty if they weren't used for Airbnbs, or they would benefit only higher-income renters, not tenants in need of affordable housing. In its lawsuit against the city, Airbnb claimed that the ban would "exacerbate the very problem of housing availability and affordability" by increasing hotel development.

When asked to comment on Airbnb's impact on housing affordability, a representative of the company said: "There are a number of complex factors driving today's housing affordability crisis — from growing income inequality, to decades of exclusionary zoning, and even changing location preferences post-pandemic, including the rise of remote working from home — but many experts agree the primary driver of the affordability crisis is chronic underproduction of housing, not short-term rentals. Unfortunately, short-term rentals, which in most cities make up a tiny portion of local housing stock, have become a convenient but misguided scapegoat for a housing crisis that started long before the founding of Airbnb."

The spokesperson added that in New York City, "there is no evidence the new rules will help alleviate the City's housing affordability issues," pointing to a statement from a former deputy mayor for housing, Alicia Glen, that she hadn't seen evidence that short-term rentals had a significant impact on the housing crisis.

Based on the research conducted in Irvine and elsewhere, it does appear that banning short-term rentals has a more significant effect on the availability of higher-quality, less affordable housing — housing, in other words, that's more likely to be turned into an Airbnb. But that doesn't mean the bans don't benefit low-income renters, too. Increasing the housing supply for higher-income renters can help reduce pressure on rental costs for low-income renters, which is "helpful and healthy for the overall housing market," according to Sarah Saadian, the senior vice president of policy and field organizing at the National Low-Income Housing Coalition.

And that's particularly true, she said, "if I'm looking at a place like New York City, where there's a tremendous need for housing at all income levels."

It's also worth noting the significant disparities in the US between homeowners and renters. People who own property, particularly those who own more than one property, are disproportionately white, for instance. And renters in the US are more likely to be people of color, have a lower income, and be otherwise disadvantaged. Short-term rentals only exacerbate these inequalities by driving up rents and putting the profits in the hands of property owners. Increasing housing supply and pushing rents down, on the other hand, can help vulnerable renters.

Of course, banning Airbnb is not a panacea for our country's devastating lack of affordable housing. The country still has a severe housing shortage — research estimates that the US needs as many as 6 million new units to truly bring the market back into balance. It's also true that, depending on the given housing market, such a ban might have only a marginal impact on housing costs. That doesn't mean that it's not worth doing. Housing is a critical need, and we should be doing everything we can to create more.

"If we wait for just the one solution that will solve all problems, we're not going to make any progress," Saadian argued.

Katya Schwenk is a journalist based in Phoenix, Arizona. She has written for publications including The Intercept, The Baffler, and Truthout, and is currently a fellow at The Lever.