One common argument against Airbnb and other home-sharing companies is that they reduce housing supply by taking housing units off the long-term market.* As I have written elsewhere, I don’t think home-sharing affects housing supply enough to matter. But even leaving aside the empirical question of whether this will always be true, there’s a theoretical problem with the argument that if someone fails to use their land for long-term rental housing, government must step in.
It seems to me that this argument, if applied with even a minimal degree of consistency, leads to absurd results. For example, suppose that Grandma has a spare room in her house, and instead of renting it on Airbnb she allows the room to be unused. Should Grandma be forced to rent out the room? Of course not.
A home-sharing critic might argue that an unused room is different from a room that is likely to be rented out to a long-term tenant. Indeed it is- but in fact, Grandma’s failure to rent the room to anyone is more socially harmful than her renting the room on Airbnb. In the latter situation, a traveler benefits (from a cheaper rate than a hotel, or at least for a different kind of experience) and Grandma benefits by getting money from the traveler. By contrast, in the former situation, no one benefits.
It could be argued that Grandma’s rights should be unimpeded, but that regulation should be targeted towards the amateur hotelier who seeks to rent out an entire building all-year round, rather than using the building for more traditional tenants. Even here, the argument based on housing scarcity leads to absurd results. Suppose the evil landlord Snidely Whiplash decides, instead of renting out his building on Airbnb, to use the building for a vacation house one day a year and spend the rest of the year in Tahiti. I doubt anyone would support a government regulation forcing Whiplash to rent out the building. But if he uses the house one day a year, the impact on housing markets is worse than if he had rented out the house on Airbnb. In the former situation, no one benefits- while in the Airbnb situation, at least short-term tenants benefit.
And if turning long-term rentals into short-term rentals is socially harmful, isn’t it even more harmful to prevent those long-term rentals from being built in the first place? Yet government does exactly that through zoning codes- often at the behest of neighborhood homeowners.
I think the more interesting general question is what happens when you restrict the use of something. Let’s say the government stepped in and dictated that all pork bellies must be used and eaten as bacon and nothing else. You might think the supply of bacon would go up in the short run. But in the long run, what happens to the supply and price of bacon?
Also, if we hold the demand for short-term housing from equal, every unit rented on Airbnb means fewer hotel rooms needed. Therefore we can rezone hotels to apartments/condos and add more housing stock to the area. The effect would be to balance out supply for long term housing and short-term stays, but in a way that everyone prefers.