I don't know about California, but in Massachusetts short term rental activity is explicitly residential, and not commercial, per existing case law. That may be why they didn't do what you suggest.
Prior to the internet, it was difficult enough to get word out and so forth about a spare room that short term rentals could be regulated largely as an afterthought. Now, they're a multi-billion dollar industry.
There may be a middle ground we need to find, something between "government out of my private home" and surprise inspections of a hotel. But things like unpermitted wiring, lead paint, uninspected furnaces, the absence of carbon monoxide alarms… while these things are actually illegal in residential units, I think the game really does change when you start to expose potentially hundreds of people to this over the course of a year through commercial use of a property.
It's kind of like running a restaurant out of your dining room, but claiming that the government has no right to inspect your kitchen, because you're "sharing" meals. If I invite friends over for dinner, I should be careful about food prep, but the government clearly doesn't have the right to suddenly show up and inspect my counters and refrigerator.
But if I start charging and serving a large number of meals this way? Totally different game.
I agree that when commercial activity takes place, inspections are necessary so that people don't have their implicit expectations violated. But your comment demonstrates a big problem with how this ends up being implemented - people cut wide swaths through subjects they know little about (driven by fear of the unknown), leaving mandatory onerous regulations in their wake. And obviously once the regulatory bodies obtain power, they will work to expand their scope like any organism.
Take for instance the recent addition of mandatory AFCIs in the NEC. Yes, modern circuit breakers are now running unauditable and unupgradeable software! In addition, the prohibitive cost of these devices actually causes fewer circuits to be built out in new construction. The simpler solution would have been to stop running plastic-covered wires through wood-framed structures, but presumably the AFCI patent holders lobbied for such circuits not being exempt.
(Don't get me started on California title 24, user-hostile shutoff timers, and sickly GU24)
Huh? Of course it is - the case I'm referencing (Crowninshield v. Blaisdell) is explicitly regarding the classification of short term rentals. The courts found them to be residential, not commercial (which makes sense, if it's a residential short term rental).
Which, legally, it is.