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How one US city’s cap on Airbnb and short-term rentals had knock-on effects on home prices and its property market

  • Airbnb changed property markets worldwide as people rented rooms and houses short term, but many cities are clamping down on short-term rentals
  • A cap on rental properties in Palm Springs, California, has divided the city as house prices fall and the property market slows, with sales volume halved

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One of many cities clamping down on Airbnb and short-term rentals, California’s Palm Springs has capped the number of rental properties, causing house prices and sales to drop in the area. Photo: TNS

Two years ago, YouTube star Luan Palomera paid US$1.5 million for a chic holiday home in Palm Springs, California. Today, he’d be lucky to get US$1 million for it.

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As cities around the world continue to crack down on Airbnb, officials can turn towards the Californian desert for an example – perhaps a cautionary tale – of the potential side effects of curbing the short-term rental market.

In Palm Springs, a cap on short-term rentals in specific high-demand neighbourhoods has all but frozen the market in those communities. Sales are down. Homes languish on the market for months. Investors who bought Palm Springs properties during the Covid-19 pandemic are facing hundreds of thousands of dollars in losses.

Airbnb has changed the face of the rental market since it launched in 2008, making it much easier for homeowners to rent out spare rooms or entire houses. But in the years since, cities have started to notice the downside of so much housing stock turning into short-term rentals.

A home for sale in the Gene Autry housing community in Palm Springs, California. Photo: TNS
A home for sale in the Gene Autry housing community in Palm Springs, California. Photo: TNS

Activists argue Airbnbs remove affordable housing from the market. Residents complain that the influx of tourists leads to loud, late-night parties and lowers a place’s neighbourly ambience.

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Disputes between hosts and renters lead tol much drama and months-long courtroom clashes.

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