A California Superior Court judge has cleared the way for the City of Los Angeles' price gouging lawsuit against Airbnb to proceed, a ruling relevant to westside residents who sought emergency housing after the Palisades Fire burned through neighboring canyon communities in January 2025.
Judge Robert Broadbelt rejected Airbnb's motion to dismiss the civil enforcement case, City Attorney Hydee Feldstein Soto announced Sunday, July 6. The lawsuit, filed in July 2025, alleges the platform unlawfully drove up rental prices on more than 2,600 listings while a state of emergency was in effect.
The ruling hinges on a key legal finding: even if individual hosts set their own prices, Airbnb can still be held liable for advertising and charging those inflated rates. Central to the case is the platform's "Smart Pricing" feature, an automated tool that adjusts rental rates based on market demand. When enabled, the city alleges, the tool actively sets and advertises prices that exceed the legal cap.
What the law says
California Penal Code Section 396 prohibits prices on essential goods and services, including short-term rentals, from rising more than 10% after a declared state of emergency. The L.A. County Department of Consumer and Business Affairs explicitly lists Airbnb and VRBO daily rentals as covered. Violations can carry fines between $10,000 and $30,000, one year in jail, or both.
Gov. Gavin Newsom's emergency declaration triggered those protections in January 2025, and L.A. County extended them through at least May 28, 2026.
The local stakes
The Palisades Fire burned more than 23,000 acres starting Tuesday, January 7, 2025, killing at least 12 people and destroying or damaging nearly 8,000 structures. Displaced residents from Pacific Palisades and adjacent hillside communities were among those seeking emergency short-term rentals in the fire's aftermath.
By October 2025, nine of 10 surveyed Pacific Palisades residents had not returned home, according to a Department of Angels survey of more than 2,300 fire-impacted residents. Roughly 75% remained in temporary housing.
"Although Airbnb subsequently took steps to curtail price gouging, evidence indicates that illegal gouging on the site continues and may be ongoing," Feldstein Soto said when the lawsuit was filed in July 2025.
What's at stake financially
The city seeks restitution for consumers, civil penalties, and permanent injunctive relief. The complaint sought fines of $2,500 per instance of alleged gouging, potentially totaling $7.5 million across 2,000 to 3,000 properties.
The court also upheld claims that Airbnb misled consumers through deceptive verification of host identities and property locations, with some verified addresses listed up to four miles from the actual rental.
Airbnb, CEO Brian Chesky, and the nonprofit Airbnb.org contributed nearly $30 million to fire recovery, including free emergency housing for nearly 24,000 displaced people, a company spokesperson said. The spokesperson disputed what they called "inaccurate allegations" but said the company supports Los Angeles' recovery efforts.
No trial date has been publicly scheduled. The case moves toward discovery.
Residents who believe they were charged inflated short-term rental rates during the emergency can file complaints with the L.A. County Department of Consumer and Business Affairs at dcba.lacounty.gov.
