It’s been a year since New York City began enforcing some of the strictest short-term rental regulations in the world. How’s that been working out?
Not well in the view of Airbnb, which posted a report this week that concluded the regulations “have failed to deliver on their promise to combat the housing crisis.”
The short-term rental giant’s objections were never a secret. The company had unsuccessfully sued the city, claiming the “extreme and oppressive” rules were a de facto ban against short-term rentals. But now Airbnb can support its criticisms with data showing rises in both hotel prices and rents.
“New York City’s short-term rental regulations have backfired — disproportionately impacting outer borough communities, driving up travel costs and doing nothing to solve the housing crisis,” said Theo Yedinsky, the vice president for public policy at Airbnb. “Instead of improving affordability, these regulations have priced out everyday consumers and left former hosts struggling to make ends meet.”
While affecting only one city, New York’s actions have reverberated across the globe as a wave of other cities considered new and sometimes even more extreme measures, most prominently in Barcelona, where city officials said in June they plan to ban short-term rentals within four years.
The regulations in New York are a master class in how not to regulate. Instead of building new homes – which is what’s actually needed to address its deep supply and demand imbalance — the city diverted attention away from the real issue.
Nils Mattisson — Minut
As in New York, cities have cited housing woes for the crackdown on short-term rentals — a justification the industry has been increasingly vocal in calling out.
“One year on, we can see that the regulations in New York City have failed to take a single bite out of the Big Apple’s housing woes,” said Nils Mattisson, CEO and co-founder of in-rental monitoring provider Minut. “Hotel prices have soared, rents have continued to increase and everyday hosts are struggling to make their mortgage payments, while families traveling to New York are being priced out of the market.”
Lodgify, a vacation rental platform for independent hosts and property managers, reports a drop of 52% in the Airbnb bookings it processes over the past two years, according to a new report based on internal data from more than 5,800 bookings. The company also surveyed its New York City hosts, who expressed skepticism that the regulations were meeting their stated purpose.
“It’s proven that the law has not affected housing affordability at all,” one respondent said. Said another, “It does zero to alleviate any of those concerns. This was a misguided law passed as a gift to the hotel lobby, which is seeing record room rates now.”
Lodgify’s findings echoed a 2023 report on short-term rentals in the United States from AirDNA, which showed demand in New York City dropped 46% for the year, the biggest drop among the top 50 markets tracked in the study. Meanwhile, the nearby Jersey City/Newark market saw the highest demand growth at 54%.
“The regulations in New York are a master class in how not to regulate,” Mattisson said. “Instead of building new homes – which is what’s actually needed to address its deep supply and demand imbalance — the city diverted attention away from the real issue.”
NYC’s STR rules hurt outer boroughs
Besides requiring hosts of stays under 30 days to register with the city, Local Law 18 bars hosts from renting out an entire apartment or home and requires that they be present during their guests’ stays. Fines for hosts who violate the rules range up to $5,000, depending on the violation, and platforms like Airbnb could face penalties of up to $1,500 for processing payments from unregistered hosts.
Airbnb declined to comment last year when the stricter enforcement went into place. But the company had a lot to say this week — and numbers to back it.
“In the year since these rules took effect, there have been predictable outcomes, including a rise in hotel prices, which risks pricing out everyday people hoping to travel to New York City,” the company wrote.
Our communities need sensible policies. Attempting to solve the housing crisis while creating a tourism crisis is not the solution.
Randy Peers — Brooklyn Chamber of Commerce
Citing figures from commercial real estate information company CoStar, the report showed New York City’s average daily hotel rates increased by 7.4% between July 2023 and July 2024. The figure increased just 2.1% overall in the United States.
Rents were also up in the city even as they cooled nationwide. New York City rents in July were 2.4% higher year over year, according to online marketplace Apartment List, while they were down 0.8% nationwide.
With most of the city’s hotels clustered in midtown Manhattan, the regulations left the city’s outer boroughs with almost no accommodation options, leading to fewer stays and less spending outside Manhattan, Airbnb said.
The regulations hinder the outer boroughs’ potential to attract visitors and hurt their residents, small businesses and local economy, Brooklyn Chamber of Commerce president and CEO Randy Peers wrote in an op-ed published by Brooklyn Paper.
“This situation serves as a cautionary tale for other cities considering similar short-term rental restrictions,” Peers concluded. “Cities around the world need a sensible and balanced approach — whether allowing homeowners to rent their homes while away for a weekend or during major festivals, concerts and events which bring an influx of visitors. Our communities need sensible policies. Attempting to solve the housing crisis while creating a tourism crisis is not the solution.”
A push for proportionate regulations on STRs
While short-term rentals make for an easy scapegoat for rising housing prices in tourist-heavy locations, researchers have found their genuine impact to be minimal in the United States and elsewhere.
A study prepared for Airbnb and released this month by accounting company Ernst & Young found that Airbnb has little to no significant impact on the price and availability of housing in the United Kingdom. It concluded 95% of house price increases can be attributed to factors unrelated to short-term rentals, such as increases in income and inflation.
Those findings align with earlier reports. A June 2023 study from Oxford Economics concluded short-term rentals had a minimal impact on housing prices and rents compared with other factors like income levels and unemployment.
A similar study in February from Harvard Business Review concluded “it’s much more likely that the tight housing market in major cities is a bigger contributing factor to increases in annual rents than short-term rentals.”
The report found the ideal regulations for short-term rentals strike a balance between benefits to tourists and hosts and concerns for neighborhoods. “This can be accomplished with limits — rather than outright bans — on when and where housing units can be rented out to travelers.”
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That’s the sort of approach the short-term rental industry has been seeking.
In contrast to Barcelona’s threatened ban, Valencia adopted regulations last month requiring licensing, safety and insurance compliance. The Czech government approved a draft bill last month with measures that could include registration requirements and annual caps on the number of days a unit can be rented out.
While tension is likely to remain between the industry and governments seeking to regulate it, that sort of balanced approach is preferable to pointlessly blaming short-term rentals for a crisis caused by a shortage of housing, said Minut’s Mattison.
“Like all regulations, short-term rental laws should be proportionate and not driven by panic. Short-term rentals are not the enemy, nor are they the cause of any city’s housing crisis. Instead, they form an essential part of the tourism industry, bringing much-needed revenue to neighborhoods that typically don’t benefit from traditional hotel investments and keeping that money within local communities.”
Yedinsky concluded Airbnb’s report by saying it’s time for New York City to amend its regulations to at least allow homeowners to resume hosting guests.
“By rolling back parts of the law, the city can increase the supply of accommodations for consumers, support resident hosts and revitalize local businesses that depend on tourism dollars,” Yedinsky said. “A more sustainable, sensible and equitable model benefits residents, visitors and the broader community – ensuring that regulations support, rather than stifle, community and economic growth.”
The Phocuswright Conference 2024
Hear from Airbnb chief business officer and head of employee experience Dave Stephenson at The Phocuswright Conference in November as we dissect, debate and (yes!) define what travel will look like in the years ahead.
