@Patricia, something like this has happened to me. Trust me, you should be relieved that they told you ahead of time as opposed to showing up on check in day with way over the maximum amount of people and leaving you with little options.
Tell them that your house cannot accommodate more than 8 due to codes, insurance, etc., something that tells them its non-negotiable. Tell them they are welcome to cancel the reservation for a full refund (Airbnb service fees will be refunded if the guests cancels within 48 hours of booking). If they do decide to keep the reservation tell them only 8 will be allow access to the home. Play it off like "it's your call but let's solve the problem now and give you more time to book a vacation somewhere else." DO NOT cancel on your own. Either the guest will have to do it or you need to call Airbnb as Donna suggested.