COUNTERPOINT: Airbnb is a net positive for local Los Angeles economy

Hannah Luk | Daily Trojan

Hannah Luk | Daily Trojan

As another week passes, so too does another incident of an outdated industry commissioning a misguided study to persuade consumers and policymakers that their competition is unfair and unregulated. Financed by the American Hotel and Lodging Association, a recent study has ascertained that if Airbnb units were levied the same taxes as hotels, then the Los Angeles city government could collect an extra $41 million in taxes. It comes on the heels of another study which claims that Airbnb is partially responsible for L.A.’s housing crisis. However, the natural conclusion of these studies — that Airbnb ought to be taxed into obscurity for the sake of the city’s economy — ignores the overwhelming evidence that not only do Airbnb rentals yield massive economic benefit for the private sector, but they also fill a functional void that hotels are simply incapable of filling.

Let us begin with the most foolish conclusion first, that Airbnb is responsible for L.A.’s housing crisis. No, the city of Los Angeles is responsible for L.A.’s housing crisis. As I have discussed in this column before, fallacious regulation after fallacious regulation has disincentivized housing development to a point of stagnation. As regulations inhibit housing development, demand increases and rental prices skyrocket. Furthermore, the idea that profit-hungry Angelenos are taking huge numbers of properties off the market to rent out on Airbnb is simply not backed up by common logic or math.

According to a study conducted by the UCLA Luskin School of Public Affairs and commissioned by Airbnb, an Airbnb unit would need to be rented for 177 nights annually in L.A. in order for the homeowner to recuperate the costs of the original unit. However, in cities with the highest prevalence of Airbnb units, such as Santa Monica and Hollywood — which, coincidentally, are the areas where hotel price rises have effectively flatlined — that break-even point is even higher. This means that in order for the claim that people are taking housing off the market for Airbnb in droves to be true, most Airbnb units would have to be rented for at least 48.5 percent of the year and likely would have to be in much trendier areas. By contrast, a whopping 80 percent of Airbnb home listings are rented out for less than three months, not over half a year. In fact, only 8 percent of Airbnb home listings are rented out for more than half a year. Before you think that this study is cleverly ignoring short-term rentals, note that UCLA found that less than 1 percent of all L.A. housing units are rented for more than the break-even point of 177 nights total via Airbnb short-term rentals.

The issue of Airbnb’s taxation cannot be discussed without analyzing its private sector benefits. Researchers from the real estate and development consulting firm HR&A Advisors found that Airbnb renters in San Francisco contributed $56 million to the local economy annually, only $12.7 million of which went to host households. Because the majority of Airbnb users choose Airbnb over hotels purely for lower prices, the study found that guests who used Airbnb stayed an average of two extra days in San Francisco. If Los Angeles chooses to tax all Airbnb rentals as hotels, the economic benefit of Airbnb will be vastly diminished. In addition, Airbnb guests are more likely to stay in less central areas of a city, infusing smaller neighborhoods with plenty of unanticipated revenue. In a car-centric city such as L.A., the benefit of being able to choose from a wider variety of locations in which to stay can be priceless.

All of this is ignoring the fact that most Airbnb hosts are renting portions of their units simply to make their own rents. Adding another layer of taxation and regulation will do nothing to target the actual source of L.A.’s housing crisis — a lack of housing development — and it will once more usurp the individual’s rights to private property and throw the private sector under the bus in the pursuit of an ostensibly fair, antiquated economic playing field.

Tiana Lowe is a sophomore majoring in math and economics. “Point/Counterpoint” runs  Tuesdays.

3 replies
  1. Joelle Kraft
    Joelle Kraft says:

    I agree with the other comment – this is so well done, i didn’t even realize I was reading a college newspaper – because it is and I didn’t! Your insight is appreciated. I was the defendant in Chen v Kraft (2016), and an airbnb host since 2009, I had no idea the company would grow as it did, but I realized once it caught on, there was no stopping it. I had two teenagers my neighbors may not have appreciated much, they grew up and left, I no longer received child support and I had been laid off.I listed their empty room on craigslist and I was contacted by airbnb directly thru an ad on craigslist. I signed up with airbnb, my landlord and I signed a written agreement as it had been suggested and very few guests actually came thru airbnb in 2009 or even 2010. I’d send my craigslist responses to the airbnb website to see the pictures of the room but I didn’t have but a few airbnb guests when I started..airbnb who??. That would change and by 2012, I was busy corresponding with people all over the world, deciding who I wanted to host. Every single airbnb guest was great. My guests were ALL incredibly respectful,there was never one incident (the same could not be said about a few of the longer-term roommates I’d had), there was never a single complaint from anyone, ever. In fact my guests were ENJOYED by my neighbors both in the apartment building and in the neighboring houses. And common sense would explain why we kept the entire building clean, and made constant improvements to the property. Most of my guests used public transportation and they ALL, brought money to local businesses. I only charged $30 a night when I started, hosting mostly yoga instructors in town to for teacher training courses, interns, UCLA students, people moving to LA who needed to find a place etc, journalists and a few actual “tourists”, The money helped me pay the rent, I paid income tax AND I paid the occupancy tax to the city My building sold at the end of 2012- to Attorney Louise Chen – who succeeded in her 2nd eviction attempt, evicting me for using the premises , for “an illegal purpose”, my purported violation of the single family zone which the multi-family building I lived in was located – the “illegal purpose” of sharing my home, paying taxes, without any city involvement, and no actual violation, without a trial, a summary judgment in a summary proceeding. I appealed and the decision was affirmed. My failure to properly defend myself resulted in my homelessness, but the worst part of it all is my fraudulently procured eviction, affirmed on appeal, creates asinine case law. Airbnb hosts share not only “real property” but “personal property” it
    can not be called a hotel, or bed and breakfast. It is such a simple,
    practical case of supply and demand and I have never myself witnessed what the media portrays airbnb to be…loud parties, destruction of property,
    crime and criminals taking over’s all bullshit, special interest groups such as “keep our
    neighborhoods first” (who are not really who they claim to be) – where are all
    these thousands of tenants who were wrongly evicted? who actually receives $300 a night every night of the month? Are there not noise ordinances, police and special enforcement units in place in our city, fully staffed with city workers, for any reported nuisance abatement? I am completely astonished by the media propaganda, the constant blaming airbnb for the housing crisis, really? IT MAKES NO SENSE WHATSOEVER Your article, however, makes sense – THANK YOU!

Comments are closed.