Illegal Price Gouging During LA Fires: Airbnb Implements Host Pricing Restrictions

Uvika Wahi

Illegal Price Gouging During LA Fires: Airbnb Implements Host Pricing Restrictions

As the Palisades Fire continues to ravage neighborhoods across Los Angeles, the California Attorney General, Rob Bonta, has issued a consumer alert to combat illegal price gouging. This practice, where operators significantly raise prices during emergencies, is not only unethical but also explicitly prohibited under California law. 

With California’s strict price gouging laws in effect during declared states of emergency, violations carry serious consequences for hosts and operators.

Attorney General Rob Bonta’s Warning on Price Gouging

California Attorney General Rob Bonta recently issued a consumer alert emphasizing the importance of compliance with price gouging laws during emergencies. “California’s price gouging law protects people impacted by an emergency from illegal price gouging on housing, gas, food, and other essential supplies,” said Bonta. He urged anyone witnessing or experiencing price gouging to report it immediately through the Attorney General’s website or local law enforcement.

Under California law, price increases exceeding 10% of pre-emergency rates are prohibited for goods and services, including rental housing and short-term accommodations. Exceptions are limited to situations where costs for labor, materials, or goods have significantly increased for the business. Violators may face criminal prosecution, fines of up to $10,000, civil penalties of up to $2,500 per violation, injunctive relief, and mandatory restitution.

The price gouging restrictions are enforceable for 180 days, lasting until July 6, 2025.

Airbnb Takes Action to Prevent Price Gouging

In response to the fires and Attorney General Bonta’s alert, Airbnb has implemented measures to ensure compliance among hosts in Los Angeles and Ventura counties. Hosts attempting to raise prices by more than 10% compared to pre-emergency rates will encounter an error message on the platform. Airbnb has also communicated directly with hosts in affected counties to remind them of their obligations under the law.

Price Gourithmic or Manual?

Airbnb’s response gives way to conversation around the distinction between algorithm-driven price adjustments and manual interventions. Unlike ride-share platforms that use algorithms to adjust prices based on demand, short-term rental dynamic pricing algorithms tend to adjust more gradually.

Data from PriceLabs reveals that occupancy rates in affected neighborhoods, including Altadena, Pacific Palisades, Malibu, Pasadena, and Sierra Madre, have for the most part not spiked.

pacific palisades fire affected neighborhoods short term rental occupancy
A visible spike in cancellations coincides with the significant dip in occupancy in the Pacific Palisades, suggesting that the fires have caused a sudden wave of guest cancellations.

The short-term pickup (new bookings, shown as the dotted red line) briefly increases but is not sufficient to compensate for the cancellation surge, indicating demand instability.

It could be that while new bookings surged as displaced locals sought temporary shelter, cancellations—likely from out-of-town visitors—offset the demand increase, resulting in stable or even downtrending occupancy. 

Short-term rental pricing algorithms, which rely on historical data and adjust gradually to demand changes, would not trigger significant price hikes under these conditions. Instead, the gradual adjustments inherent in these algorithms ensure smoother pricing changes, unlike the erratic surges seen in some other industries like ridesharing. 

That said, manual changes enable operators to react more aggressively to emergencies—potentially leading to exploitation. Doing so during the state of emergency exposes them to significant legal risks. 

A Long Road to Recovery

The fires have left entire communities devastated, particularly in Altadena, Pacific Palisades, and Sierra Madre. PriceLabs data shows a significant drop in active short-term rental listings in these neighborhoods over the past week.

pacific palisades short term rental supply drops
Pacific palisades short term rental supply drop. Worth noting that many operators may not yet have found the werewithal to take their listings offline yet.

Recovery will be slow, with Mayor Karen Bass’ executive order aiming to expedite rebuilding efforts. The order directs city departments to fast-track permits, inspections, and “like-for-like” rebuilding projects, bypassing discretionary review processes to speed up recovery.

Lessons for the Short-Term Rental Industry

The current situation underscores the importance of ethical practices in the short-term rental market, particularly during emergencies. Operators must:

  1. Comply with Price Gouging Laws: Ensure that pricing adheres to the 10% cap to avoid legal and reputational consequences.
  2. Monitor Local Regulations: Stay informed about emergency declarations and their impact on pricing policies.
  3. Communicate Clearly with Guests: Provide transparency about pricing adjustments and ensure that guests understand the measures in place to protect them during emergencies.

For the industry to maintain trust and credibility, especially in times of crisis, property managers and hosts must prioritize ethical behavior over short-term gains. The devastation caused by the fires is a stark reminder of the need for solidarity and integrity in helping communities recover and rebuild.