I'm confused by the juxtaposition of these two arguments: > That's not really an externality, that's a market equilibrium. New York housing is very scarce, and

I'm confused by the juxtaposition of these two arguments: > That's not really an externality, that's a market equilibrium. New York housing is very scarce, and you should beware of economic thinking that arbitrarily assigns scarce resources to certain people. Everyone has a right to a place to live, not everyone has a right to a place to live in the most in-demand parts of America. and > one thing that is clear is NYC hotels are too few and too expensive. It's particularly baffling because there is much greater flexibility around choice with temporary lodging than permanent lodging on a wide number of axes (location, comfort, cleanliness, etc.). As for your other argument: > An externality would be something like if AirBnB guests were a major nuisance to other people and there was no market solution to this problem. If my neighbors are renting out their apartment on AirBNB, and their guests are a continual nuisance, what is the "market solution" to my problem? If I complain to the guests or the tenants listing the unit, there's a good chance that they won't listen. The only other person I could complain to is the landlord, and if the landlord does decide to pull their lease, that's recourse that they're only able to take because the tenants are breaking the law[0] - a law that was put in place specifically because of this externality. A "market solution" might be if AirBNB allowed neighbors to rate rentals on AirBNB, but that's a feature I would be very surprised if they ever added[2]. [0] The fact that they are breaking the terms of the lease does not inherently give the landlord the right to break the lease, but the fact that they are breaking the law may. [1] The history of tenant rights is pretty well-studied and documented, and there's a reason that virtually every jurisdiction in the US places restrictions of some sort on temporary lodging. [2] And frankly, I'm not sure it would do much good anyway, because the people reading those ratings would be the guests, the very people causing the issues in the first place.