LA's 320,000 Olympic STR Housing Shortage (And Why Short-Term Rentals Are The Solution)

LA's got a bit of a problem.

The city is gearing up for one of the biggest tourism moments of the decade: The LA28 Olympic Games.

Yesterday, a new report from Deloitte, published by Airbnb, dropped a statistical bombshell: During the LA28 Olympic and Paralympic Games, the demand for lodging in Los Angeles and Orange Counties is projected to exceed available hotel capacity on 13 out of 19 competition days.

Up to 320,000 visitors could be left scrambling for a place to stay on peak nights.

With thousands of LA homes and ADUs currently sitting on the sidelines because of bans, could it be time to loosen STR rules? And what will this all mean for the LA economy?

The Problem: Not Enough Hotel Rooms for a City About to Boom

The LA28 Games are expected to draw 15 million visitors.

Early registration numbers show the hype is huge—1.5 million tickets were requested in the first 24 hours of the draw. And it was still two and a half years away.

Hotels cannot scale fast enough to meet this spike. You cannot build a new high-rise in two years. But as the Deloitte report highlights, you can flip a switch on short-term rentals:

"Thoughtful policy adjustments to local short-term rental laws could enable the city and counties to deploy flexible lodging capacity and maximize the benefits of the tourism surge."

This is a serious economic and capacity challenge—especially for a city that thrives on tourism.

Why Short-Term Rentals Are Part of the Solution

Short-term rentals offer a flexible, distributed way to house visitors without needing new construction. Here’s why they're the best option:

Existing Supply, Ready to Go

Unlike hotels that need to be built from scratch, STRs are already spread throughout residential neighborhoods, condos, and second-home inventory.

That means:

• More rooms closer to local culture and community
• Less need for urban construction disruption
• Greater flexibility for different types of travelers (solo guests, families, groups, etc.)

Distributed Availability

Hotels are often clustered in downtowns or beach areas. STRs exist in virtually every neighborhood. That helps spread economic benefits to more parts of the city and more people.

STRs Can Reduce Strain on Housing Markets

While critics often worry that STRs pull housing supply out of the long-term market, Deloitte’s report suggests that when STRs are compliant and regulated, they can absorb surge demand without requiring permanent hotel expansion.

This means cities could better balance tourism needs with housing stability.

The Economic Impact of Airbnbs for LA28 Olympics

Deloitte’s findings make it clear: STRs are an economic engine.

When visitors stay in local homes:

• They spend money at restaurants, shops, and experiences outside of hotel districts
• STR hosts earn income that often gets reinvested locally
• Surrounding businesses benefit from increased foot traffic and demand

For a major global event like the Olympics, that ripple effect can be significant. But how significant?

The Deloitte team ran the numbers:

If STR supply increased by 20% → 79,000 visitors, $136 million in economic activity, 1,480 jobs created, $33 million in tax revenue.

If STR supply increased by 40% → 168,000 visitors, $257 million economic activity, 2,800 jobs created, $63 million tax revenue.

It's clear: Short-term rentals are not just a convenience for tourists—they are event-critical infrastructure.

But there's just one thing in the way (for now)...LA's STR regulations and restrictions.

LA’s Short-Term Rental Rules in 2026

Los Angeles has historically been one of the stricter big cities in the U.S. when it comes to STR regulations.

The City of Los Angeles operates under a "Primary Residence" model.

The following units are banned for short-term rentals:

❌ Second homes and investment properties (Even if empty, they cannot be rented short-term)

❌ Accessory Dwelling Units (ADUs) (Granny flats are ineligible)

❌ Rent-stabilized units

❌ Any property where the host does not live for at least 275 days per year

Even eligible hosts face a 120-night cap on unhosted stays per year (unless they pay $1,066 for an expensive Extended Permit).

The result: A massive shadow inventory.

Recent reports cited by Lodgify suggest that nearly half of Airbnb listings in LA are non-compliant with these strict rules.

The base registration fee is $199, and failure to register carries fines of up to $2,000 per day or twice the nightly rate.

But with the Olympic demand looming and reports like Deloitte’s highlighting the potential benefits, some policymakers and local leaders are reconsidering restrictive regulations.

Are the Tides Shifting on STR Regulation in LA?

Interestingly, the rules can bend when the need is urgent.

In response to the January 2025 wildfires, Los Angeles County temporarily suspended the primary residence rule and the ADU ban for unincorporated areas. Until May 31, 2026, hosts in those zones can:

• Operate multiple STRs.
• Rent out ADUs.
• Offer unlimited unhosted stays.

This proves two things:

1. The city understands that STRs are a vital housing resource during a crisis.
2. The regulations are not set in stone.

The question for 2028 is simple: If we can waive the rules for disaster relief, maybe we can waive them to capture $488 million in economic activity too?

And local leaders are starting to agree:

Stuart Waldman, President, Valley Industry and Commerce Association (VICA):

"The LA28 Games are expected to bring millions of visitors to LA and will create one of the largest tourism surges and economic opportunities we’ve ever experienced. Reasonable short-term rental rules are the practical solution to expand LA’s accommodation capacity without the cost of new construction. "

Jeffrey Ball, CEO, Orange County Business Council:

"By expanding short-term rental options, we can maximize the benefits of this once-in-a-lifetime event in our community, helping local shops, restaurants, and service providers thrive."

Justin Wesson, Senior Public Policy Manager, Airbnb:

"Short-term rentals are a simple and sustainable solution to not only accommodate more visitors in the L.A. area, but also generate millions in direct economic activity."

Final Takeaways: Will The Olympics Shift LA's STR Restrictions?

For years, the debate over short-term rentals in Los Angeles has been framed as a choice between housing locals and accommodating tourists.

The Deloitte report proves that narrative is outdated.

In 2028, LA will not have the luxury of choice. The visitors are coming. Will they stay in regulated, taxed, safe short-term rentals within the city where local businesses can benefit fully? Or will they be pushed to remote suburbs or unregulated shadow listings? Time will tell.

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