Kennett Square Borough Council voted last week to limit the number of Airbnb-style short-term rentals in the borough to 20 and to prohibit single-family homes from being used as short-term rentals altogether.

Kennett Square already has a limited housing supply, and there is a reasonable argument that short-term rentals can make that problem worse. Every single-family home being operated primarily as an Airbnb is one less home available for a long-term resident. There are also quality-of-life concerns: many residents understandably do not want a constant rotation of strangers staying in the house next door.

At the same time, Kennett Square is not just a residential community. Tourism, restaurants, events, and visitors are an important part of the borough’s small-town economy and identity. Short-term rentals help support that activity by giving visitors a place to stay.

The more complicated question is who gets to be one of the 20?

A strict cap can unintentionally or intentionally lock the existing market in place. Once all 20 permits are taken, new property owners may have no way to enter the short-term-rental business, while existing operators could be protected from future competition.

That becomes especially important when considering how concentrated those permits might become. If one person or business controlled a large share of the permitted rentals, the cap could make it very difficult for anyone else to compete or expand. The same type of situation could raise additional concerns if someone involved in creating or approving the regulation also had a financial interest in existing short-term rentals.

There is also a potential effect on property values. A property that already has permission to operate as a short-term rental could become more valuable than a similar property without that permission because the buyer would not simply be purchasing the real estate; they would also be gaining access to a scarce, legally protected business opportunity.

That does not necessarily mean a cap is wrong. Kennett Square has legitimate reasons to regulate short-term rentals, including housing availability, neighborhood stability, parking, and public safety.

But when the government limits a market to a fixed number of operators, the details matter. The borough should make clear how those 20 permits are awarded, whether they can be transferred, how ownership concentration will be handled, and what safeguards exist to prevent the regulation from creating an unfair competitive advantage for a small number of existing operators.

Let’s move Pennsylvania forward.