San Francisco: rental restrictions
and pre-restriction host
Billie Ann Brotman
Department of Economics, Finance and Quantitative Analysis,
Kennesaw State University, Kennesaw, Georgia, USA
Purpose –San Francisco started regulating short-term vacation rentals on rooms/apartments/houses located
within city limits in September 2019. The objectives of this conceptual-scenario and regression study are to
calculate the present value of the net earnings for a short-term residential rental property located in San
Francisco pre-regulation and post-regulation, and consider a financial reason motivating households to list
properties as short-term rentals.
Design/methodology/approach –A present value approach is used to estimate the value of rental space to
tourists prior to the passage of San Francisco’s short-term rental regulations compared to post-rental rules.
Table2 shows pre- and post-income scenarios. Price increases of þ20, þ40 and þ60 percent over the initial base
rate failed to restore host earnings to pre-registration levels. The present value model calculates the net revenue
less net cost associated with listing a property. The regression model uses the number of listings as the
dependent variable, and housing prices divided by weekly wages as independent variables.
Findings –The short-term rental regulations significantly reduce the profitability associated with short-term
tourist stays offered by hosts and listed by online platforms. A host earns pre-regulation income when average
daily rents increase by approximately 71.5 percent. It will likely limit income earned by hosts and Airbnb and
other shared housing website platforms due to the reduced number of rental days allowed for shared housing
caused by ordinances and host enrollment restrictions. The regression model results suggest that homeowners
were listing properties for rent to help cover higher priced property purchases.
Research limitations/implications –Airbnb, VRBO, Booking.com, and HomeAway are all private
companies; this means that financial information is not publicly available. HomeAway, VRBO, and
Booking.com are companies owned by Expedia. FlipKey is owned by TripAdvisor. Due to limited public
information regarding income statements and property listing trends, regression analysis and descriptive
statistics cannot be generated using audited financial statements.
Practical implications –Rent control restriction frequently sets the maximum price below the market-
clearing price, which results in limited supply but increase in demand for housing. The San Francisco
regulations outlaw second-home rentals and seriously limit the availability of other rentals to tourists. FlipKey
and HomeAway tend to rent second homes, which San Francisco now bars from being rented for short-term.
Social implications –The San Francisco restrictions were enacted with the goal of increasing the supply of
rental housing available to permanent residents by restricting short-term rentals. This may have limited short-
term benefits to permanent residents, but inthe long term lowers income associated with single-family housing
which will encourage housing arrangements that would avoid leasing restrictions and lower the number of new
houses built. Other cities alsohave a history of rent controls, and are experiencing housing shortagesand at the
same time attracting large numbers of tourists. These cities may be motivated to enact similar rental
restrictions as those approved in San Francisco.
Originality/value –These short-term rental restrictions just started being implemented and enforced. A
court decision upheld them. There were media reports outlining the restrictions, but enforcement has just
started, so no research papers have been written about San Francisco. Prior research studies have not used net
present value analysis to calculate the loss to the host by enacted ordinances restricting tourists’length of stay
and have neither tried to explain why homeowners are listing properties for short-term rentals.
Keywords Affordable housing, Airbnb, Online platforms, Cost of rental restrictions, San Francisco rental
restrictions, Short term rentals
Paper type Conceptual paper
Airbnb, HomeAway, Stayz, and other rental platforms provide tourists shared-space
accommodation. Airbnb is a standalone company. HomeAway, Booking.com, and VRBO
The current issue and full text archive of this journal is available on Emerald Insight at:
Received 28 September 2019
Revised 17 December 2019
Accepted 18 December 2019
Journal of Property Investment &
Vol. 38 No. 2, 2020
© Emerald Publishing Limited