As many cities grapple with the high costs of housing, blame has been cast in many directions. The expansion of short-term rentals, which are units that lease to tenants for periods shorter than 30 days, through platforms like Airbnb and VRBO, is frequently accused of worsening housing shortages and contributing to rising home prices. In response, some local governments have limited short-term rentals through bans or stringent restrictions.
Critics of short-term rentals are correct that they place some upward pressure on home prices. However, this effect is downstream of the more fundamental problem: land use policy that restricts the supply of housing. Blaming and banning short-term rental platforms for high housing costs ignores the history of laws that have contributed to the current problem.
Healthy housing markets should accommodate the needs of property owners, visitors, and prospective residents. The markets can and will adjust if they are allowed to. Banning short-term rentals (STRs) or creating undue burdens collides directly with the property rights of owners and the affordability of travel. On the other hand, reducing barriers to development creates avenues for market adjustment.
The repercussions of constraints on short-term rentals warrant closer examination. Housing policy ought to address the underlying constraints that limit the number of available units rather than treating STRs as the cause of the housing crisis.
How did we get here?
Short-term rentals, also often called “vacation rentals,” have been around for a long time, and have recently surged in popularity. For many people, online platforms like Airbnb reduce the transaction costs associated with listing and advertising an STR, prompting a massive expansion of the market, which is projected to continue growing.
Those seeking to limit the availability of short-term rentals argue that they reduce the supply of homes that would otherwise be sold to permanent residents in the area. They say the prominence of STRs increases the profitability of housing as an investment, attracting speculators instead of families who would live in the homes.
An additional source of concern stems from other homeowners who oppose short-term rentals in their neighborhoods, believing they bring noisy guests and erode community cohesion. Under this belief, restricting these units is necessary because it will lead to lower housing prices and a more pleasant living atmosphere.
Reviewing the available data shows the extent to which STRs contribute to price increases compared to other factors.
Short-term rentals and housing prices
While still in its early stages, some academic research has examined the relationship between short-term rentals and home prices, typically finding that the entry of these units is associated with a slight price increase.
In 2021, research published Marketing Science analyzing U.S. data found that, on average, a 1% increase in Airbnb listings in a zip code is associated with a 0.018% increase in rent prices and a 0.026% increase in home prices. This small price increase makes sense when considering STR listings make up a small portion of the housing market on aggregate.
As of July 2025, there were 1.77 million short-term rental listings in the U.S., with an estimated 89% being whole-home listings according to AirDNA, a data analytics platform focused on STRs. With 148.3 million housing units in the U.S. as of the third quarter of 2025, whole-home listings make up about 1.2% of the country’s housing stock.
Further, housing markets adjust locally, so impacts can look very different due to location, neighborhood characteristics (such as owner-occupancy), and market conditions at the time of analysis.
For example, evidence, published in Housing Policy Debate, in 2019 from Washington, D.C., found that the presence of Airbnb could be responsible for between a 0.66% and 2.24% increase in single-family home prices following an influx of STR listings between 2016 and 2017. The impact was most concentrated in areas that are tourist hot spots.
It is no surprise that these modest price increases manifest following the demand shock caused by the increased presence of short-term rentals in a community. The problem is that this is where the analysis stops, with bans or restrictions deemed the appropriate response by some policymakers. Economic theory not only predicts the price increase following the entry of short-term rental units but also tells us that suppliers should respond to the resulting price signals by expanding supply. However, strict local land use laws have hindered the adjustment process, limiting supply. Consequently, cities are feeling the aftermath of increased demand, such as in the short-term rental market, without the adaptation and increase in housing supply that should follow.
The main cause accompanying its price hikes: excessive land use regulation
While short-term rentals have contributed to noticeable housing price pressures, especially in tourist destinations, cumulative land-use restrictions are responsible for far more of the overall housing cost increases seen in recent decades.
Worse, these land-use policies hinder an effective response to rising local demand. Widespread use of short-term rentals is relatively new, but restrictive land-use laws have been significantly increasing housing prices for decades. An abundance of academic literature has linked these regulations with higher home prices.
Restrictive land-use laws include provisions such as minimum lot sizes, stringent building codes, zoning and density regulations, parking minimums, and more. These laws are pervasive in almost every locality across the country.
A 2002 working paper for the National Bureau of Economic Research stated plainly, “our evidence suggests that zoning and other land use controls play the dominant role in making housing expensive.” A 2021 estimate from the National Association of Home Builders, the main trade organization for home builders and developers, found that cumulative government regulations on housing development account for 23.8% of the final selling price of a single-family home. As always, the exact magnitude depends on location and local laws.
Because these restrictions are so intertwined, some research has estimated the effect of these regulations by bundling them into “restrictiveness indexes” and then gauging impacts based on a community’s index placement. A Florida State University paper found that being in a slightly more restrictive area is associated with a 5% higher average home price.
Importantly, places without these excessive regulations are better equipped to respond to housing challenges without massive price accumulation. Houston, Texas, for example, is known for having among the most liberal land use regulations in the country, with no formal zoning, and among the lowest home price appreciation.
Restricting short-term rental offers, at best, a temporary and limited housing response because the number of rented units is finite. A robust housing market should be able to accommodate sustained population growth and an evolving market. Easing land use restrictions would have a far greater impact on affordability without eliminating a potential income source for property owners. Even in areas where STRs have a significant effect, communities would be better served by addressing restrictive land use policies before limiting what homeowners can do with their properties.
On neighborhood quality
Beyond worries about rising housing costs, some homeowners oppose STRs due to noise or perceived declines in neighborhood quality. However, these problems are already largely covered by existing laws and do not provide sufficient justification for restricting what property owners can do with their homes.
Many STR opponents cite the potential for disruption when campaigning for restrictions. Clark County, Nevada, even codifies this fear into its county code, citing potential use of STRs for “large, disruptive parties” and saying they “harm the quality of life for the residents.”
Existing legal frameworks for dealing with disruptive neighbors include nuisance laws, which would also apply to guests and/or hosts. Further, STR platforms have built-in accountability measures, with many hosts explicitly banning parties or unlisted guests. Guest noncompliance jeopardizes their ability to continue using the platform. Airbnb has even gone so far as to institute a “party ban” and has taken measures to enforce it, recently using artificial intelligence to identify likely party-throwers. The fear of guest disruption is insufficient grounds for bans when both property owners and neighbors already have avenues to hold violators accountable.
Research from George Mason in 2021 found that these concerns may be less of a problem than previously expected. Analyzing noise complaints in New York City, this study finds that the entry of Airbnb into neighborhoods is associated with as much as a 5.1% decrease in noise complaints monthly. This reduction is due to lower occupancy in these units compared to permanently occupied homes.
Further concerns stem from the fear of erosion of community character if too many homes are used as STRs. While some residents dislike the increased turnover, others welcome the activity and diversity it brings. Community preferences are important, but they alone do not justify overriding the property rights inherent in homeownership.
Case studies: Anti-short-term rental legislation
Over the past several years, cities across the country have passed anti-STR legislation in an attempt to address their housing challenges. The most common deterrent tools include imposing fees and taxes, requiring unit registration, and limiting the areas where STRs can operate. During the regulatory process, tensions have risen between STR platforms and regulatory bodies over data sharing and enforcement of bans. Table 1 includes some examples.
Table 1: Examples of Anti-Short-Term Rental Legislation
| Year | Location | Legislation | Provisions Relating to Short-Term Rentals |
| 2022 | New York City | Local Law 18 | New York City’s Local Law 18 requires STRs to register with the city and verify registration through STR platforms. This law also limits the number of guests in a unit at any given time to two. Further, it bans the leasing of a full unit and requires that the host be present during the stay. Hotels are exempt from these requirements. |
| 2021 | Clark County, NV | County Code Chapter 7.100 | In 2021, Nevada passed Assembly Bill 363, and Clark County could no longer maintain its blanket ban on short-term rentals. In response, the Clark County Code now discourages the use of short-term rentals as much as possible by allowing select areas to maintain their bans, limiting application windows for a license to operate, and limiting the proximity of short-term rental units to each other and to hotels, among other requirements. |
| 2018 | Irvine, CA | County Code Chapter 3-25 | One of the nation’s strongest Airbnb restrictions is in Irvine, California, where a complete ban on STRs has been in place since 2018. |
| 2018 | Washington, D.C. | D.C. Law 22-307 | This law requires hosts to register their STR within different categories depending on whether the host will be present during the stay. Listings must be the host’s primary residence. |
| 2015 | Santa Monica, CA | Home Sharing Ordinance (HSO) | Santa Monica’s HSO establishes a licensing requirement, imposes penalties for noncompliance, and bans the leasing of entire properties. |
| 1981 | Palm Beach, FL | Town of Palm Beach Code of Ordinances | While Florida’s statewide law preempts localities from completely banning short-term rentals, the town of Palm Beach has longstanding rules against short-term rentals that override statewide laws. Palm Beach has banned short-term rentals and time shares in residential districts since 1981 and maintains this ban in all residential districts. |
Anti-STR policy efficacy and future legislation
Have these laws been effective? Let’s consider the two California cases.
Proponents of these policies have heralded Irvine’s 2018 ban on short-term rentals as a major success. A 2024 report in Real Estate Economics linked the 2018 short-term rentals ban in Irvine to a 3% decrease in rents. This minor market adjustment is to be expected. However, regardless of short-term rentals, Irvine, in California’s Orange County, isn’t a model of affordability. Median rent for all properties in Irvine is $4,800 per month, and the median home price is over $1.5 million. Irvine had among the largest home price appreciation during the pandemic among major U.S. cities. These high housing prices suggest that home and rent prices in Irvine are attributable to regulatory costs, and supply and demand factors beyond short-term rentals.
In Santa Monica, another high-cost city in Southern California, research finds no significant reduction in home prices and rents following the home sharing ordinace. While many factors contribute to high prices in beachfront Santa Monica, the policy’s inefficacy points to problems with its assumptions. Despite massive reductions in whole-home short-term listings following the ban, not all units transitioned into the permanent housing market. Short- and long-term leases are not necessarily substitutes for each other, and not all STRs detract from the permanent market.
Blanket short-term rental bans hinder economic gains for travelers and hosts, even if they have no relation to the long-term housing supply. These lingering problems again point to a need for more tailored housing policy.
Looking forward, some areas are positioning themselves to enact anti-STR legislation in the coming months and years. For example, despite an Arizona state law that prevents localities from banning STRs, several cities have enacted and proposed measures that make it more difficult to operate them. In 2023, Phoenix started requiring both permits and a minimum $500,000 liability insurance to operate. In 2025, Flagstaff passed a resolution urging the state government to allow cities to regulate the location and quantity of STRs.
For the 2026 legislative session, an Arizona legislator has pre-filed a bill that would allow cities with fewer than 70,000 residents to regulate the number of short-term rentals and impose minimum distance requirements between them. While most state-level anti-STR measures have not made it past the legislature, a narrative is emerging in Arizona that frames short-term rentals as the problem, guiding housing policy toward restriction. Instead, legislators should seize the current attention on housing policy to advance development rather than targeting STRs.
The role of hotels and political economy
While many short-term rental skeptics are concerned homeowners and affordable housing advocates, hotels play a substantial role in funding prohibitive regulatory efforts. Developing coherent housing policy requires disentangling these interests and prioritizing homeowners’ property rights rather than allowing law to be shaped by anti-competitive corporate lobbying.
Threatened by competition from short-term rental listings, hotels have strong incentives to finance anti-STR efforts. In New York City, for example, a study finding increased competition from STR platforms cut into hotel revenues may have prompted campaign contributions from the hotel lobby to city politicians. The winning combination of a policy message that sounds good and the financing of hotel giants culminated in the passing of Local Law 18. The result has been not only higher hotel prices for New York City’s visitors, but also lost revenue for New Yorkers hoping to utilize STR platforms.
New York City is not alone. Analogous cases can be found in Chicago, Boston, San Francisco, and Honolulu, among others.
The incentive structures within regulatory processes and the desires of vested interests—both corporate and community—have culminated in regulatory outrage toward STRs, while years of local land use restrictions with a much larger impact on home prices go untouched. Policymakers concerned with market competition should level the landscape by reducing regulations on hotels as well.
Conclusion
States and cities looking to address their housing affordability challenges holistically, fairly, and successfully should look elsewhere. Short-term rentals are the trendy scapegoat for housing challenges, but problems in most communities run much deeper.
Banning short-term rentals means cutting off revenue for property owners, expending resources on enforcement, and making travel more expensive for guests—all without a substantial or sustainable home price adjustment. Healthy housing markets should absorb demand shocks by expanding supply to meet residents’ needs. Instead of restricting what homeowners can do with their own property, lawmakers should remove unnecessary laws that limit the supply of housing and drive up costs for families.