According to the website containing the dataset, a short term rental is a property with less than 30 minimum nights required to stay (“Inside Airbnb”, 2022). To no surprise, the majority of the top owners do not require a large amount of minimum nights to stay at the rental, resulting in them being the most successful in the business. In turn, long-term rental/housing is in less of a demand, due to these properties being turned into short-term rental units.

The constant increase in tourism also influences Airbnb owners to acquire more property in the area to meet the needs of these rental spaces. By getting into this cycle, it is easy to earn a bigger profit by reinvesting the money from current short-term rentals into more properties to use for short-term rentals. Owners will easily start building up multiple property ownership due to this income strategy. Using the dataset from Inside Airbnb, the visualization below shows this pattern of top hosts and the amount of properties they own:

(For host type: blue is 'Entity' and purple is 'Individual')

With companies such as Blueground, owning hundreds of Airbnb locations in just the Los Angeles area, plenty of these locations are used strictly for short-term rental. Even individuals are capitalizing on this; Shelly, a single host entity who is not affiliated with a company, owns over two hundred properties alone. With many people buying vast amounts of properties for their business, the housing availability is bound to shift. Horn investigates this in her article about the impact of Airbnb density in Boston, where an increase in Airbnb listings will increase rent price askings close by (Horn, 2017). The fact that most of these top Airbnb owners will invest money into more properties will cause a significant increase in housing/rental prices in the area. Large-scale acquisitions are a big part of successful Airbnb businesses, causing a big shift in available properties due to so many becoming unavailable to others.

The Wealth Gap and Property Owners

Greater Airbnb usage causes an exacerbation of the wealth gap and escalates rising gentrification.

The top five listings in Hollywood, Beverly Hills, Downtown, Santa Monica, and Beverly Grove stand out for containing more expensive average price listings. This concentration reinforces existing wealth disparities within the city, emphasizing property ownership among wealthier individuals in expensive, high-traffic areas. These property owners are positioned to invest in prime real estate, contributing to the broader trend of affluent communities being controlled by a select group of individuals. If the number of high-value listings sees an increase in upscale areas, then the affordability and availability of housing becomes a significant challenge for renters in less affluent neighborhoods, eventually pushing these residents out of those communities.

As we have shown already, a rising increase in Airbnb listings leads to a rising increase in home prices. This increase has led to a “rent gap” between landlords and renters, which has incentivized landlords to turn to more affluent newcomers while ignoring and displacing poorer residents (Wachsmuth, 2018). In such scenarios, a cycle unfolds that unfortunately tends to leave the more economically vulnerable members of the community at a disadvantage, while simultaneously contributing to the prosperity of the more affluent residents. This dynamic widens the wealth gap and leads to greater gentrification (Wachsmuth, 2018).

Airbnb has also proven itself to be a major financial incentive for professional landlords. From 2014-2015, the Los Angeles Alliance for a New Economy (LAANE) found that the presence of leasing companies on the platform jumped from 6-9% and that 37% of all revenue from the site was from these companies (Wachsmuth, 2018). In contrast, the amount of hosts renting a single room (which tend to be individuals instead of companies) has dropped from 56% to 37% (Wachsmuth, 2018). Airbnb has also been shown to disproportionately skew its gains to those with more wealth (Li, 2019). This unequal distribution of profits, combined with the increase in housing purchases being made by leasing companies, has made it increasingly harder for lower income residents to enter the real estate market, which has led to greater gentrification in residential neighborhoods with a greater Airbnb presence. As such, the concentration of property ownership among wealthier entities has skyrocketed in these neighborhoods (Li, 2019).

The challenges associated with Airbnb have become increasingly pronounced, signaling a call for action from policymakers. However, there are a lot of problems surrounding the creation and enforcement of policy regarding short-term rentals. Firstly, lawmakers have found it challenging to differentiate between residential units used as permanent residences for long-term homeowners and renters, and as hotel-like accommodations for short-term guests (Wegmann, 2017). Lawmakers are also having a hard time enforcing policies that they create as most cities can’t seem to find the right balance of enforcement that is necessary (Nieuwland, 2020).

Los Angeles already has a set of policies that lawmakers believe is sufficient. However, the current enforcement situation in Los Angeles is sub-optimal. The vast majority of listings in Los Angeles aren’t operated with a license, and around 20% of the ones that are operated with a license don’t comply with the policies that the license mandates (Nieuwland, 2020). This leads us to believe that although setting good policies is important, it’s more important to enforce policies. 

Various resolutions exist for these issues. For example, Denver has found a moderately successful way to enforce their policies on short-term rentals. A study on their enforcement system found that they have a compliance rate of around 50%. After Denver passed its major policy in 2016, the city decided to keep their licensing and enforcement entirely online. Instead of doing door-to-door inspections and listed properties, Denver officials police listers by requiring that they include their license number and everything they do to comply with the policies in the descriptions of the listings. This allows officials to enforce the policies by simply keeping track of the online descriptions of listings (Nieuwland, 2020). 

We believe that policies should strike a balance between addressing affordable housing issues and the economic growth that can come from short-term rentals. For example, limiting(or completely banning) entire homes in residential neighborhoods as listings has proven to be an effective way of striking such a balance (Nieuwland, 2020). This solution allows the city to protect affordable housing, while also allowing a growth in tourism in non-residential parts of the city. Another effective policy we would recommend would be limiting the number of days a property can be listed per year. This policy strikes a good balance as it forces properties to alternate between being short-term and long-term rentals.

The scarcity of housing, especially traditional long-term rentals, is becoming much more of a prevalent challenge in certain neighborhoods. In the case of cities within the Los Angeles area, Huntington Beach, Hermosa Beach, and Dana Point, these areas have implemented policies to prohibit short-term rentals in residential areas due to increasing worry about the ever-increasing imbalance of tourists and residents (Matin, 2015). These implementations are then influencing other nearby neighborhoods, such as the home of Disneyland, Anaheim, California. Even with the city not being a part of Los Angeles County, this tourist hub is prevalent due to the impact policies can have on short-term rentals and how cities see them as a threat. Concentrated areas and tourist spots making the effort to adopt similar regulations to restrict these rentals which can better the survival of long-term rentals, although if not happening fast enough, Airbnb with its short-term rentals will continue to dominate (Martin, 2015).

The shift to short-term rentals within the housing market is causing an increase in property prices. A 1% increase in Airbnb listings leads to a 0.026% in housing prices (Wyman, 2022). This transformation heightens concerns about housing affordability in certain neighborhoods, especially hot-spots for tourism. Full-time short-term rentals have increased by 4 times the amount in 2010 within Los Angeles, causing an increase in rent prices where Airbnb was more popularized (Wyman, 2022).

Rental Dynamics, Affordability, and Consumer Experiences

Airbnb’s Influence on Property Owners

Due to Airbnb’s impact on the housing market, property owners have recognized the influx in demand for short-term rentals and are taking advantage of the shift to utilizing Airbnb. This online platform became another way for owners to market their properties and guarantee high rental yields, twice or three times higher, especially in more populated cities with competitive markets (“Airbnb: A Game-Changer for the Commerical Property Market”, 2015). The main component driving the conversion of properties into short-term rentals is that they gain higher rental rates than long-term rentals. Not only that, the majority of these listings have kitchens and outdoor private lounge spaces, which then allow for these properties to be more desired and easily shift to short-term while maximizing the economic utility of the property. The rental can then benefit the property owner while residents can enjoy the upkeep of their neighborhood’s authenticity ( Wyman , 2022). 

This does not mean that long-term rentals are out of the picture altogether. With the new wave of hospitality services, landlords are now using this business in addition to their long-term rentals to market their properties (Li, 2019). Property owners are incentivized to keep their listings under Airbnb because even if there are no long-term tenants at the time it is posted, it is still beneficial to capitalize on short-term surges until higher or more frequent long-term rentals are needed (Barron et al., 2021).

The pie graph portrays the amount of listings per room type in addition to the minimum number of nights per listing that fall in the same category. This graph was made using Tableau.

It is important to note that Inside Airbnb does not provide data on the current state of Airbnb within Los Angeles, though, it is still highlighting very valuable information. In this chart, the hierarchy of room types is displayed in addition to the minimum nights. The leading category is entire home and private room categories are 30 minimum night listings. This graph supports how the majority of listings within Los Angeles do take advantage of the benefits and loopholes of being recognized as “long-term” rentals, as we will delve into later. 

Airbnb has issued a roadmap for their company, announcing the new goals they want to achieve by 2028. They have recognized that their platform has grown past their initial design to appeal to solo travelers and how families and groups of people are taking advantage of their services (Airbnb, 2019). The acceptance from the company realizing their initial goal has been shifted to appeal to different  and larger communities further supports as to why entire homes with 30 minimum nights rank the highest in listing within the pie charts. They acknowledge that the market is geared towards rentals for certain occasions, like music festivals, weddings, and family travel. Airbnb’s method is the main option when it comes to finding group lodging for people needing to go to these events.

Although, Airbnb have not totally neglected their initial goal of appealing to solo travelers as private rooms are the second largest dominating room type.  This goes to show that Airbnb as a company are fully adaptive to what is thrown at them and is expanding to meet the ever-increasing demands. As this company expands by offering new property types and investing more into the already loyal community, there is a definite expansion of the number of listings and room types available in the near future (Airbnb, 2019).

Presented in the visualization above, this bar graph displays the number of listings against the minimum number of nights needed for stay, ranging from 1 to 35+ nights. The short-term rental (STR) threshold marks the divide between what minimum nights are considered for a short-term rental while separating what long-term rentals are. According to California Senate Bill No. 60, Chapter 307, short-term rentals are anything listed with 29 consecutive nights and under. Anything 30 consecutive nights and above is considered a long-term rental (California Legislature, 2021). This graph was made using Tableau.

With making listings above the STR threshold, there are certain regulations hosts can avoid (“Inside Airbnb”, 2022). This leads to hosts falling under the radar of policies or creating loopholes in regulations. This includes things such as the Strict long-term policy and firm long-term policy ( Airbnb , 2023). These both extend the standard cancellation policy and limit the cancellation to happen 28 to 30 days before check-in. Consequently, guests who cancel will pay for the nights spent in addition to 30 additional nights. The Transient Occupancy Tax (TOT) is also another factor Airbnb hosts are aware of when it comes to hosting. TOT affects short-term rentals. In Los Angeles, the TOT rate is 14% ( Airbnb , 2023). Hosts see how this additional cost is unappealing to guests and can be a headache for pricing strategy. Due to this, this is why there are so many hosts with listings as long-term rentals with 30+ nights in order to avoid it all.

Legal Regulations and Avoidance from Landlords:

Although it is enticing to property owners to gain an extra buck when listing under Airbnb, they have found ways to make use of the ambiguities within legal regulations. The process of converting a traditional long-term property into a listing on Airbnb is simple, as there are ways landlords can avoid any risk when making the switch in little to no time. The Ellis Act is a state law that permits property owners to evict tenants to “go out of business” (“Ellis Act Evictions”, 2023). Filing an Ellis Act with the Rent Board is usually utilized when landlords want to change the use of the property. Thus, the transformation of having rent-controlled tenants residing in traditional long-term leases to short-term Airbnb guests is more beneficial from a landlord’s perspective. This then threatens traditional long-term tenants as more property owners use the Ellis Act to hasten the process of financial gain as the surge for short-term rentals increases. Traditional tenants usually benefit from their rights and protections, but with the uncertainty of landlords utilizing this legal loophole, there are fewer legal safeguards for them.

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