AirBnB, Rising Rent, and the Housing Crisis in Los Angeles


Sharing our homes has been commonplace for as long as there have been spare rooms and
comfortable couches. Whether through word of mouth, ads in newspapers or flyers on community
bulletin boards, renters and homeowners alike have always managed to rent out or share rooms
in their living spaces. These transactions were decidedly analog, but they represented a genuine
peer-to-peer marketplace. Websites like Craigslist eventually made connecting sellers to buyers
far more common. Companies like HomeAway applied the same principle to the vacation home
rental market, allowing owners of vacant homes to connect with vacationers. In all these cases,
transactions were limited to the buyers and sellers. If there were negative effects arising from the transaction, they were largely limited to the buyers
and sellers.

AirBnB changes this basic formula. By incentivizing the large-scale conversion of residential units
into tourist accommodations, AirBnB forces neighborhoods and cities to bear the costs of its
business model. Residents must adapt to a tighter housing market. Increased tourist traffic alters
neighborhood character while introducing new safety risks. Cities lose out on revenue that could
have been invested in improving the basic quality of life for its residents. Jobs are lost and wages are lowered in the hospitality industry.

This report seeks to explore the history of AirBnB, understand how its public pronouncements
deviate from observed facts, and identify the tangible and intangible effects that the company
is having on our housing market, neighborhood cohesion and public revenues.