New York City Is Having Second Thoughts About A Tough Stance On Airbnb

December 9, 2024
  • Airbnb Battled NYC For Years But Lost With A 2023 Law That Crushed The Market
  • New Bill Exempting 1-2 Family Properties From Significant Restrictions Being Proposed
  • In Reality, NYC Is A Rental Market, Dominated By Rentals

Don’t get me wrong. I love New York. However, I have found that economic market forces have always been a tough topic for both New York State and New York City to grapple with. That disconnect comprises our housing market reputation to outsiders. When I moved to New York City in the 1980s, someone told me “NYC is a place where you can screw over your next-door neighbor but do business with the one across the street.” That’s why the city’s housing continues to be one of the most expensive locations to build, purchase, or rent in the nation.

NYC real estate is vastly over-regulated yet accounts for more than half of the city’s tax revenue. This relationship was illustrated in the 2019 rent law that effectively eliminated the ability for building owners to convert to co-op, or condo apartments – despite being a good source of new housing supply. The latest disconnect came with the crackdown on Airbnb landlords that probably went too far.

It’s important to remember that NYC is predominantly a rental market.

Source: NYC Comptroller

And Airbnb took NYC by storm in 2008 even with the weirdness of some of the occupancy it offered.

Source: The Guardian

Airbnb landlords are creating short-term housing out of existing housing. Back in 2022, NYC wanted to significantly slow down Airbnb and other short-term rentals at the request of the powerful hotel lobby since there were no enforcement teeth. So in 2023, the city passed powerful penalties to Airbnb landlords to enforce the ban and it worked. We saw Manhattan rental listing inventory surge when the September 2023 ban came into effect and Airbnb supply plunged from 23,000 to 3,700. Hotel occupancy surged and the average stay cost a whopping $417 per night. This year Airbnb pushed out a study using Costar data showing NYC hotel rates rising faster than national levels. Despite the loss of most NYC revenue, Airbnb is seeing rapid income growth.

Before the 2023 enforcement law, a large number of Airbnb landlords blatantly violated the 30-day minimum rental requirement for multi-family units in New York City. I’m all in for the protection of co-op and condo owners who unexpectedly found themselves adjacent to an Airbnb unit rented out every 24 hours to tech and crypto bros drinking Louis Roederer Cristal until 4 am while cranking the latest EDM on their Denon Home 350 stereos. I also think about those college students spending a long weekend in the city partying until all hours or safety issues that stem from the paid rotation of guests walking through the building at all hours of the night.

But the law went too far and advocacy groups sprung up. I didn’t appreciate that the 2023 law placed severe restrictions placed on 1-2-family houses. Everyone should realize that the key to improving housing affordability isn’t just lower rents, but being able to generate income as a property owner (also enabling future tax revenue). A bill is being proposed in the NYC Council to fix the initial overreach – a promising sign.

Central to the legislation is more flexibility for the owners of one- and two-family homes. They say they have struggled without the additional income. The bill would allow four adult guests in hosts’ units—up from the two-person limit. Hosts wouldn’t need to be present during the stay, so people could rent out their space while on vacation, something that is currently prohibited.

A while back I consulted for a “luxury” type Airbnb known as “One Fine Stay” and they focused on townhouses but adhered to the 30-day policy. I even wrote a white paper on providing a solution to the oversupply of luxury condos back in 2016 when it was a growing problem for the market. During that experience, I learned that Airbnb landlords could make 2.5 times the rent per square foot of a one-year lease before considering vacancy. Of course, current short-term rental occupancy is about 53%.

Final Thoughts

In my view, Airbnb revenue is found money to property owners as long as they don’t interfere with the neighbors’ enjoyment of their properties. Airbnb usage in multi-families impedes the rights of adjacent owners (of co-ops and condos) and if they had known this beforehand, would have either not purchased the property, or won a significant discount. By looking more closely at 1-2 families, recognizing they are not the same as larger multi-families, this new bill seems to be threading the needle which is only fair to this class of property owner.

Realistic expectations should be considered when crafting new laws about housing.

Monday Mailboxes, Etc. – Sharing reader feedback on Housing Notes.

December 6, 2024, Taking Inventory Of 2025: Despite High Mortgage Rates, Housing Prices (And Sales) Expected To Rise

  • I notice the use of the term “inflationary tariffs” in you post today. I think it would be more correct to just call the tariff a tariff and not politicize. If strategically implemented like the 90+ tariffs implemented in the first term of President Trump, it helped a little to level the playing field and resulted in average inflation of 2.1% for 2017 through 2019, or 1.9% including the pandemic in 2020). Also, paychecks grew faster than inflation with average weekly earnings for all workers up 8.4% after inflation. (BLS and FactCheck.org)

Did you miss the previous Housing Notes?

December 6, 2024

Taking Inventory Of 2025: Despite High Mortgage Rates, Housing Prices (And Sales) Expected To Rise

Image: Grok

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