COMMENTARY: Why the FTC should challenge local Airbnb bans

The hotel industry won big when New York City effectively banned short-term home rentals in 2023.

By last September, the average hotel room rate soared to a record-breaking $417 per night, pushing the cost of a weeklong stay to $2,919. That’s 67 percent more than what the average American pays in rent.

At that price, you would expect the room to come with a bedtime story performed by the cast of “Hamilton.”

The hotel industry spent years lobbying for New York’s Airbnb ban. In 2017, The New York Times reported that the head of New York’s hotel industry trade association complained about price competition: “Airbnb has brought hotel pricing down in many places during holidays, conventions and other big events when room rates should be at their highest and the industry generates a significant portion of its profits.”

So when New York City adopted Local Law 18 in 2023, it restricted supply, allowing hotels to maintain pricing power with little competition.

Unfortunately, New York City isn’t alone in cracking down on short-term rentals. New Orleans and Santa Monica, California, have similarly onerous policies in place, while Maui, Atlanta and Birmingham, Alabama, are eyeing restrictions.

So far, federal competition regulators have ignored this glaringly anticompetitive dynamic in the lodging industry. However, there’s a golden opportunity for the Federal Trade Commission to take action. And it’s rooted in the commission’s history.

The FTC primarily polices anti-competitive behavior in the private sector, but the agency also has a role in challenging “public restraints” — government policies that limit competition and drive up prices. That’s precisely what New York City’s Local Law 18 is.

More than a decade ago, the FTC went after anti-competitive taxi regulations in the District of Columbia and Colorado, where taxi-industry-backed rules effectively blocked ride-hailing companies from entering the market. These restrictions weren’t about promoting safety or consumer welfare. They were about shielding taxi operators from competition.

In several public letters, the FTC warned that these policies hurt consumers by reducing transportation options and keeping prices artificially high. That was enough to scare lawmakers straight: Colorado and D.C. reversed their protectionist policies, and no other states tried to follow suit.

For the price of some government letterhead, the FTC managed to expand consumer choice, shrink ride-hail prices and encourage balanced policies that allow taxis and ride-hails to coexist. There was more competition and lighter pocketbooks.

Unfortunately, the FTC lost its leadership voice against “public restraints” over the past few years. Former Chair Lina Khan called herself an “anti-monopolist” — but turned a blind eye to how laws such as New York City’s Airbnb ban were a city-granted monopoly that decreased competition and raised consumer prices.

We live in partisan times. There are many issues that Republicans and Democrats view differently. This shouldn’t be one of them. Combating public restraints should be an issue that unites the left and right.

Recent polling from the Chamber of Progress shows that Americans want the FTC to focus on protecting their pocketbooks by preventing consolidation that increases prices.

Addressing the public restraints in the lodging industry — such as those at play under New York City’s Local Law 18 — would give the FTC a bipartisan opportunity to deliver on that priority, likely without even setting foot in a courtroom.

The commission is split evenly between Republican and Democratic commissioners; this is a common-sense issue that can advance now.

New York City hotels shouldn’t pocket an extra $380 million, while Brooklyn Airbnb hosts report a 60 percent drop in monthly income and tourists get priced out of their trips. A crackdown on anti-competitive, short-term rental laws would be good for consumers, good for competition, good for tourism and good for the FTC’s mission.

At a minimum, the agency could investigate whether New York City’s ban constitutes an unlawful public restraint and issue guidance discouraging other cities from following New York’s lead. At a maximum, the commission could bring suit against the city’s law for restraining competition.

Whether motivated by pro-consumer principles or a partisan distaste for New York City’s policies, FTC commissioners have every reason to act. Consumers don’t care whether price hikes come from corporate boardrooms or city hall — they want fair prices and more choices.

Adam Kovacevich is the founder and CEO of the Chamber of Progress. He wrote this for InsideSources.com.