Anaheim, California Lawmakers Say ‘Lights Out’ to Airbnb

Published August 5, 2016

Anaheim, California lawmakers approved new regulations targeting companies such as Airbnb, a peer-to-peer economy company connecting tourists seeking short-term housing and hosts who provide places to stay.

Part of the ordinance, which takes effect on August 11, requires the city government to deny electric and water utility service to any homeowners “who rent, offer to rent, or advertise for rent” space in their homes to individuals for fewer than 30 days. The Anaheim Public Utilities Department, a government agency, holds a monopoly on all electricity and water services for consumers in the city.

Homeowners violating the restrictions will be charged $500 per infraction, and companies accused of facilitating the voluntary transactions, such as Airbnb, will also be charged $500 for each violation.

Information Economy

Wayne Winegarden, a senior fellow in business and economics at the Pacific Research Institute, says sharing-economy services such as Airbnb and VRBO are good for consumers and the economy as a whole.

“It’s using information, using our resources more productively,” Winegarden said. “It opens up new opportunities. If you travel a lot, and you live in New York City, where you have a huge shortage and hotel rooms are very expensive, it becomes a very valuable way to do transactions, and Airbnb lowers those transaction costs. It improves the economy. It makes those people better off.”

Community Solutions

Winegarden says there are alternatives to government restrictions that Anaheim lawmakers could have explored to soothe residents’ concerns.

“Leave it up to the homeowners association,” Winegarden said. “There are many gated communities where a homeowners association can make that decision, to make it more of a local than a broad, citywide ban.”

Winegarden says Anaheim lawmakers are preventing people from realizing the value of their property.

“If I’m a homeowner in a desirable location, you’re taking away the value of my property by restricting my ability to rent it out,” Winegarden said. “You’re taking value away, and it’s more than just economic taking. This is a beneficial transaction.”

Zoning Alternative

Adam Smith, an associate professor of economics at Johnson and Wales University, says Anaheim lawmakers had better alternatives available.

“They could have zoned different parts of the city: Short-term rentals can only happen in zones 1 through 5, and zones 6 through 10 are Airbnb-free,” Smith said. “That would have an impact on how the city develops and how things look in the different zones.”

Smith says allowing short-term renting transactions to happen in some parts of the city and not others, would have been a better option.

This may create additional issues in regards to zoning, but that’s better than not having the option anywhere in the city, says Smith.

“You would have the issues that big cities have with zoning issues, but people could still offer their services,” Smith said.