Simply adding more supply would be the perfect solution if creating new buildings was as easy as dropping one down in SimCity, but in real life there are physical factors (eg. number of available trades, build time) that limit the rate of supply creation. It is possible for demand side factors that cause spiking rent increases can keep up with the rate of supply creation.
It is frustrating for a city government and its residents to go through the multi year effort to approve and build a new, dense building and only to have the number of units that reach the market scaled back by Airbnb hotel companies or even worse, capital gains focused investors that simply leave the apartments empty.
Additionally Airbnb hosting investors negatively impact residents that may want to purchase homes in a city to live in, as they have to pay more due to competition with these investors that have access to higher rents via Airbnb. It is in these residents' best interests for the city to enact policies to discourage people from buying condos for exclusive Airbnb use.
