A policy that could change Mexico City’s tourism and housing landscape for the worse.
In recent years, Mexico City (CDMX) has emerged as a magnet for digital nomads, drawn by its affordability, cultural richness, and growing international connectivity. To capitalize on this, in 2022 then-Mayor-now-President Claudia Sheinbaum established a partnership with UNESCO and Airbnb to promote the city among remote workers. Just two years later, members of her own political party, Morena, have imposed restrictive regulations on short-term rentals.
In October 2024, Mexico City approved what has been popularly known as the “Airbnb Law,” a set of reforms that restrict short-term rentals in the city. These reforms modify the Tourism Law of Mexico City and the Law for the Comprehensive Reconstruction of Mexico City (Ley para la Reconstrucción Integral de la Ciudad de México) and essentially consist of limiting the number of nights that a property can be listed to 180 nights per year. Once this limit is reached, the property’s permit is revoked and cannot be renewed until the following year. The law aims to “level the playing field” between short-term rentals and traditional hotels and “combat gentrification.”
However, as the old saying goes, “The road to hell is paved with good intentions.” This legislation not only undermines private property rights, but also imposes a heavy-handed approach that could reduce Mexico City’s appeal as a hub for international tourism.
There are three key issues:
1) Private Property
At the core of this law is a violation of private property rights, a fundamental pillar of liberty. As classical liberal philosopher John Locke argued, private property begins with labor. Individuals, through their efforts and talents, acquire resources and property, which they have the right to use as they see fit. In the modern world, this includes choosing whether to rent out a home or apartment on platforms like Airbnb.
This law effectively tells property owners, “The state knows better than you how to use your property.” It imposes an unjust limitation on how individuals can use their assets.
To learn more about the connection between private property and freedom, check out this article from our archives: “Private Property and Freedom.”
2) Competition
Competition is essential for innovation and quality improvement in any market. As economist Friedrich Hayek explained in his 1946 Stafford Little Lecture, “The function of competition is here precisely to teach us who will serve us well: which grocer or travel agency, which department store or hotel, which doctor or solicitor, we can expect to provide the most satisfactory solution for whatever particular personal problem we may have to face.”
Airbnb’s rise as a preferred accommodation model is a prime example of the power of competition. Tourists have voted with their wallets, choosing Airbnb over traditional hotels for its affordability, diverse locations, and flexibility. This law forces consumers back to higher-priced, less flexible options.
For more on the role of competition in market economies, see “The Meaning of Competition” from our friends at the Mises Institute.
3) Consumer Preferences
As someone who has explored Mexico City extensively, I believe that Airbnb offers a more affordable and genuine experience for most travelers. With more locations, a variety of styles, lower costs, larger spaces, and amenities like kitchens (useful to someone who is a keen cook like myself), Airbnb caters to modern travelers’ subjective preferences far better than traditional hotels. On one of my recent visits, I stayed in an Airbnb in an exclusive neighborhood, two blocks away from a 5-star hotel, for almost half the price. It offered double the space, unlimited coffee, and yes, it included a tiny kitchen.
This law not only harms travelers, but could also lead to a decline in tourism overall.
Mexico City risks repeating the mistakes of Barcelona, where a decade of restrictions on short-term rentals failed to solve housing or “gentrification” issues. Since 2014, these regulations have halved short-term rentals, driven rents up by 70 percent, pushed home prices by 60 percent, and left construction stagnated. Meanwhile, hotels control over 75 percent of tourists’ stays while increasing their prices by 60 percent. Barcelona’s policies worsened housing challenges, raised costs for tourists, and benefited only the hotel industry.
The Airbnb law in Mexico City is a textbook example of well-meaning but economically harmful regulation. By prioritizing government control over private property rights, market competition, and consumer preferences, this law undermines the very forces that have made Mexico City an attractive destination for tourists and digital nomads. Not only does it introduce distortions into the market, leading to higher prices for consumers, it also incentivizes informal (i.e. black market) transactions.
Whichever way you look at it, this law will drastically change the landscape of tourism and housing in CDMX—and not necessarily for the better. A city as vibrant as Mexico City deserves better policies.
