That's an algorithm that supposedly is triggered by a set of factors that have been identified as high risk for parties. Under 25, coming from the local area, booking an entire home listing for 1 night, and maybe a couple other things. They don't block under 25s from making longer bookings, or if they are coming from outside your area, or private room house-shares, as far as I know.
It seems Airbnb can determine what is risky, but hosts aren't given the same autonomy.
And I do agree with your misgivings. I have 3 daughters, all grown now, tons of their friends used to hang out at our house, and I know that even if young people that age are super responsible, mature, not party types, they just don't yet have the consciousness to be alert and attuned to certain things. It's quite normal and natural. If you've never had to pay an electric bill in your life, with your own money, how would you be aware that it will be super expensive to turn the heat way up and leave the windows open? If you've never had to pay to repair an appliance you misused or a door lock you tried to force when it wouldn't open properly, how would you know that what you did could break it or how costly the repair might be?
It isn't just young people, either. I've found that people who have never been homeowners themselves, and always just rented, calling the landlord to repair whatever was broke, can be pretty clueless and careless about taking good care of things.
I've hosted quite a few guests in their early 20's, and they've all been great guests, but I just rent a private room in my home. I wouldn't entrust a 19 year old with an entire home I owned, myself.
@Lisa990