COUNTERPOINT: Airbnb is a net positive for local Los Angeles economy
As another week passes, so too does another incident of an outdated industry commissioning a misguided study to persuade consumers and policymakers that their competition is unfair and unregulated.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.