Across the country, state and local governments are passing increasingly restrictive short-term rental policies. These efforts are based on concerns about rising housing costs and neighborhood nuisances. However, these worries are often overstated or unsupported by the existing research on the origins of the housing crisis. Further, the types of proposed policy solutions frequently violate principles of property rights.
STRs generate substantial economic benefits through private income and increased tax revenue, while helping many homeowners offset rising living costs. Beyond these practical benefits, the right to rent one’s own home should not be unduly restricted in the name of goals that can be achieved through simpler and more justifiable means, namely, expanding the supply of housing, which should be done through deregulation. Rather than restricting STRs and the digital platforms that support them, policymakers should create and adopt rules that allow them to operate with minimal barriers while addressing legitimate community concerns through targeted enforcement.
Motivations for restriction vs. the data
Home price appreciation
A common justification for restricting short-term rentals (STRs) is the belief that they are a major driver of the current housing crisis. Home prices have risen dramatically, particularly since the COVID-19 pandemic, with real residential property prices increasing nearly 17% between quarter one of 2020 and quarter one of 2026. While this period is when home price increases became steep enough to cause national legislative concern, the Federal Housing Finance Agency (FHFA) reports that nationally, the housing market has “experienced positive annual appreciation each quarter since the start of 2012.”
The cause of this appreciation is well documented. Excessive state and local regulations on land use and new home development have prevented regional markets from adjusting to changing demand. Although housing markets vary significantly from place to place, excessive regulation is a common thread. Across many jurisdictions, developers and homeowners must navigate rules such as large minimum lot sizes, single-family-exclusive zoning, restrictions on innovative building technologies, among many other barriers, all of which are associated with higher home prices where they are present. Collectively, these regulations have compounded over time to create an environment hostile to new housing development.
Updated 2026 estimates from the National Association of Homebuilders (NAHB) find that cumulative regulatory costs account for $131,734, or 26.4%, of the cost of a new single-family home. For multifamily development, this figure jumps to 40.6%. These costs are then passed down to the buyer and influence the production of new units. A recent study using data from greater Boston found that eliminating multiple restrictive regulations, like the ones previously mentioned, has the potential to more than double the supply of housing and reduce its price.
These newer findings build on decades of research flagging over-regulated markets as creating a mismatch between the need for new homes and the amount of development permitted. In a 2003 National Bureau of Economic Research (NBER) working paper, economists estimate a “regulatory tax,” the gap between home prices and physical construction costs across 21 U.S. metro areas. They find the tax is small in most cities but exceeds 50% of home value in Manhattan and San Francisco and reaches 30 to 50% in a few other high-demand coastal markets. They attribute this finding to land-use regulation constraining new housing supply, driven by the increased ability of local homeowners to organize and block new development.
STRs have made a comparatively small contribution to rising home prices. A 2020 nationwide analysis of STR listings using data from Airbnb found that a 1% increase in listings within a ZIP code was associated with a 0.018% increase in rents and a 0.026% increase in home prices. For the median ZIP code, this translated to an increase of approximately $9 in monthly rent and $1,800 in home values. Larger effects are to be expected in markets with high tourism demand and more constrained housing supply. These tend to be the markets with the most restrictive land-use rules to begin with, which limit their ability to absorb additional short-term demand, further pointing to the importance of removing laws that restrict supply.
Well-functioning housing markets should be able to adjust to both demand from permanent residents and that coming from those who wish to rent out their property for short periods. If STRs are meaningfully subtracting from the housing supply, the subsequent increase in prices signals that development should increase. This response has failed to materialize, either because local markets are overly restricted, or, as has been demonstrated in some areas, the permanent and short-term housing markets are not as intertwined as has been believed. Homes used for STRs and permanent residents are not always necessarily substitutes for each other, or mutually exclusive. In Santa Monica, for example, two years after the city’s 2015 crackdown on STRs, listings had fallen 60%, but there was no significant change in rents. This finding suggests that restricting STRs as a means of improving housing affordability does not necessarily have the desired effect.
While the growth of the STR market due to the rising popularity of digital platforms naturally causes some disruption in already constrained markets, removing restrictions that prevent supply adjustment is the most straightforward and effective way to address these challenges.
On neighborhood nuisances
Another common justification for restricting STRs is the fear that they will attract party-throwers and cause disturbances in the surrounding neighborhoods. The evidence here is mixed as well, and dependent on the local dynamics at play. Some research finds that an increase in short-term rentals in a neighborhood is associated with higher levels of revelry, while others find that there is no significant impact or even a decrease. A 2024 study found that New York City saw a 5.1% decrease in noise complaints following the entry of Airbnb. The authors of this study attribute these findings to a lower physical occupancy of these units, with guests spending more time outside of the rental. They further note that platform governance is a possible contributing factor.
Both Airbnb and VRBO, two of the largest STR platforms, have built-in accountability screening systems that flag potential party throwers and ban guests who have verified complaints issued against them. The introduction of these features makes it easier for hosts to reject risky bookings ahead of time to prevent both damage to their home and potential noise risks to the neighborhood.
Further, most localities already have laws dealing with excessive neighborhood noise regardless of whether it comes from permanent residents or those in short-term accommodation. Nuisance laws are in place so that neighbors have a means of recourse when someone causes a disturbance in a neighborhood. If excessive noise is the concern, improving enforcement of the rules already on the books is a more targeted solution than restricting STRs.
Recent restrictive laws
Despite the limited, at best, evidence supporting the idea that STRs are behind the housing crisis, or always associated with neighborhood disturbances, both of these justifications have frequently been used to create policy that places undue restrictions on both the operation of local STR owners themselves and the digital platforms that support STRs. Table 1 depicts just a few examples of recent local ordinances targeting STRs through a variety of avenues:
Table 1: Recent local ordinances limiting the operation of short-term rentals
| State | Area | Year | Law | Description |
| Hawaii | Maui County | 2025 | Bill 9 | “Phases out” transient vacation rentals, defined as a rental term shorter than 180 days, in apartment-zoned areas, with the latest deadline for conversion being January 1, 2031. Affected owners must convert to long-term rentals, sell, keep the property for personal use, or seek a zoning change. This law is currently being challenged in court. |
| Kentucky | Louisville | 2023 | Ordinance 130 | Requires that every STR register annually, pay a $250 annual fee, and pay lodging taxes. Owner-occupied rentals get simpler administrative approval, while non-owner-occupied units need a Conditional Use Permit (CUP) and cannot be within 600 feet of another CUP-permitted STR in residential zones. |
| South Carolina | Charleston | 2018 | Ordinance 43 | Most residential STRs require the owner to live at the property at least 183 days per year, permits must be obtained and renewed annually, occupancy and parking limits apply, and commercial STRs are generally limited to designated areas. |
| Montana | Bozeman | 2023 | Ordinance 2149 | Requires permits and generally requires STR hosts to use the property as their primary residence at least 70% of the year. After Ordinance 2149, non-owner-occupied (“Type 3”) STRs are prohibited but existing ones qualify to continue as legacy rentals; 2026 zoning changes have further limited where STRs can operate. |
| Missouri | Kansas City | 2023 | Ordinance 230268 Update done through Ordinance 250965 (2025) | Resident STRs, where the owner lives on site at least 270 days a year, can operate almost anywhere. Non-Resident STRs are barred from residential zones, restricted to commercial zones, subject to density limits (no two within 1,000 feet, or under 12.5% of units in larger buildings), and barred from properties receiving city tax incentives. All STRs must register annually, pay a 7.5% STR tax, and face fines of $200 to $1,000 per day for operating unregistered. A 2025 update added a cheaper $50 “Major Event” registration option but does not waive the underlying zoning rules. |
A South Carolina case illustrates this covert approach. House Bill 3876 would have required hosts who use a property management company to handle tax collection and remittance separately from the digital platform used to facilitate their bookings. While this may appear to be a minor administrative requirement, the legislation failed to account for the way digital platforms are designed to integrate tax collection and remittance into the booking process. As a result, the requirement would have created significant operational challenges for platforms and could have made it very difficult for them to continue operating in the state.
Proposed restrictions of this kind are not unique to South Carolina. Increasingly, regulations can affect digital platforms, including STR platforms, through both direct restrictions on the platforms themselves, and through indirect rules governing how hosts, property managers, and platforms must interact with each other. These indirect restrictions can have significant consequences for the viability of digital platforms, especially when digital platforms are required to enforce these restrictions for the regulator, even when the legislation is framed as a requirement imposed primarily on hosts.
Regulatory efforts have, in many cases, advanced faster than policymakers’ understanding of the underlying technology or of which level of government is best equipped to regulate this market. This combination of factors has created uncertainty over who bears responsibility for enforcement, who is liable when errors occur, and whether the resulting policies are appropriately aligned with the objectives they are intended to achieve.
Platforms, profits, and principles
The growth of the short-term rental market, along with increasing political attention to its regulation, can be traced to the rise of the digital platforms that facilitate these transactions. Digital platforms substantially reduce the transaction costs associated with operating an STR by centralizing listings, providing mechanisms for quality assurance, and facilitating tax collection and remittance, among other features. By lowering barriers to participation, digital platforms have helped make operating an STR and staying in one more accessible and scalable, and the result is a huge and growing market.
Notably, in 2023 the United States short-term rental market reached $64 billion in annual revenue, and that figure has only grown since then. In 2025, Airbnb alone collected and remitted a total of $2.7 billion in taxes, and 46% of hosts reported that the additional income generated through STR listings helps them manage the rise in cost of living they are experiencing.
These economic benefits are important, but they are not the only or even primary reason to avoid excessively restricting short-term rentals. The more important argument is rooted in the ability for owners to use their property as they see fit. Homeowners should be free to decide how to use their own property, including earning income from it, if they do not interfere with their neighbors’ ability to use and enjoy theirs. The burden should therefore be on those seeking to restrict short-term rentals to show that they cause meaningful harm, rather than on property owners to justify a lawful use of their own homes.
Rather than assuming that STRs inherently harm communities, policymakers should begin with the presumption that homeowners are generally free to use their property as they choose, while protecting neighbors from unwanted externalities. The goal should be to establish clear, simple, and predictable rules that allow responsible STR operation, while providing neighbors with effective avenues for redress when hosts create genuine nuisances or fail to meet their responsibilities. At the same time, digital platforms should be subject to uniform, statewide standards that are practical at scale. Together, these clear rules can allow both responsible hosts and the platforms that support them to operate while ensuring that communities have protection when problems arise.
Policy recommendations
1. Deregulate land use rules to address housing affordability
The root of the nation’s housing affordability crisis is not the prevalence of STRs, but decades of policies that have constrained the construction of new housing. Housing markets depend on numerous local factors, and STRs may reduce housing supply in some high-demand tourist destinations. However, they are not the primary driver of rising home prices or rents in most areas and should not be unduly restricted when other policies would better address this concern.
A responsive, well-functioning housing market should be able to accommodate both the demand for permanent housing and the desire of some property owners to rent their homes on a short-term basis. Many communities have made it difficult or impossible to build enough housing to meet growing demand, particularly for smaller, denser, and more affordable homes.
To expand housing supply and improve affordability, policymakers should focus on removing barriers that limit new housing construction. Every area will have different avenues for reform that are dependent on its existing laws. Broadly, policy areas of interest can include removing single-family-exclusive zoning, reducing and standardizing minimum lot sizes, reducing parking requirements, and updating burdensome building codes and aesthetic standards.
Reforming land use code to be responsive to evolving market dynamics sets localities up for future success in addition to creating a path to respond to current affordability challenges. Even the most extreme and enforced ban on STRs cannot create the dynamic housing market needed to cultivate sustainable affordability.
2. Make policy related to digital platforms at the state level
State‑level regulation offers the clarity and consistency necessary for digital STR platforms to operate that a patchwork of hundreds of local rules cannot. For both platforms and hosts to engage in this market with confidence, they need to create expectations about the future and plan accordingly. When every municipality defines STRs differently, imposes varying licensing requirements, and sets its own enforcement timelines, platforms are forced to either develop numerous bespoke compliance systems or simply stop operating to avoid penalties. A single statewide framework for digital platforms to follow allows for variation in policy where differing preferences exist while being zoomed out enough for compliance to be feasible.
Statewide policy also enables stronger and more standardized enforcement of existing rules when differences across localities naturally arise due to varying preferences and tourism landscapes.
Moreover, despite frequent records requests sent to digital platforms, local governments often lack the technical capacity or legal authority to require and store data collected from platforms needed for enforcement of their rules. A state can set clear reporting standards, protect privacy more consistently, and create centralized enforcement mechanisms that ensure rules are followed and data are only sent over for legitimate reasons.
Communities differ in how they want STRs to fit into local planning, but digital platforms operate at a scale unsuited to the level of granularity that currently exists. Digital platforms reduce transaction costs and make compliance more efficient, but they can only deliver these benefits when the regulatory environment is compatible with the realities of their operation. Creating policy to provide clarity and consistency for digital platforms at the state level, while still allowing localities to regulate local-level hosts, is the most direct way to preserve the variation each area requires while still ensuring laws are coherent, enforceable, and fair.
3. Enforce local nuisance laws
Many local governments already have tools to address disruptive behavior that are more precise than broad restrictions on STRs. Local nuisance ordinances allow authorities to respond to verified complaints, issue fines, or take corrective action when a neighborhood disturbance, like a party, takes place. These laws apply equally to all residents and visitors, regardless of whether someone is staying in an STR, a hotel, or a permanent home. Enforcing these existing laws directly addresses the disturbance. Targeting the problematic conduct rather than the lodging type avoids sweeping policies that penalize responsible hosts and guests while still providing a mode for recourse when genuine disturbances occur.
Further, major STR platforms already have screening tools aimed at reducing the likelihood of noisy gatherings, including flagging high‑risk bookings and providing hosts with alerts or controls. These measures help, but they are not a substitute for public enforcement. Ultimately, responsibility for regulating noise and nuisance behavior rests with local governments and does not require sweeping measures that target STRs.
Relying on nuisance enforcement rather than restricting STRs is a more targeted, fair, and effective policy path. It addresses the actual problem—excessive noise—without undermining responsible hosts, limiting visitor options, or creating broad regulations that fail to distinguish between good and bad actors.
Key takeaways
Short‑term rentals are neither the root cause of today’s housing affordability challenges nor uniquely responsible for neighborhood disruptions. The true driver of rising housing costs is local land‑use systems failing to permit enough new housing to meet demand. Restricting STRs, either directly through restrictions on hosts or indirectly through restrictions on digital platforms, does little to improve affordability and often imposes sweeping burdens on responsible hosts, guests, and platforms.
Creating a more coherent and effective policy framework moving forward starts with the premise that homeowners should be free to use their property as they choose unless they impose harm on their neighbors. Protecting that principle requires targeted enforcement of actual nuisances, statewide consistency for digital platform‑related rules, and removal of land‑use barriers that prevent the construction of new homes.
Shifting policy focus away from punitive short-term rental restrictions and toward reforms that expand housing supply and clarify regulatory responsibilities sets the stage for policy that cultivates both community well-being and economic opportunity.