“Airbnbust” rocks New York’s short-term rental landscape
New regulations could benefit rental landlords and hotels, harm hosts
New York City’s “Airbnbust” — the crackdown on illegal short-term rentals — went into effect last month to a mix of cheers and jeers.
Landlord groups like the Real Estate Board of New York and the Small Property Owners of New York applauded Local Law 18, which requires hosts to register short-term rentals with the city.
The city had already banned rentals for fewer than 30 days unless the host was present, but struggled with enforcement. Tenants illegally listed units, and landlords often picked up the tab on the associated fines.
Owners expect the law, which also lets landlords opt into a building-wide ban on registrations, will spare them those penalties and give tenants peace of mind.
SPONY’s Ann Korchak said in an email that a number of the group’s members put their names on a list that prevents the city from issuing registration numbers to short-term hosts.
“The security risks and inconvenience to other residents are often the reasons owners added their buildings,” said Korchak. She added that another reason is to prevent tenants in rent-stabilized apartments from “profiteering” on short-term rentals, which courts have found to be illegal.
The city adopted Local Law 18 in early 2022 but postponed enforcement amid a legal challenge by Airbnb, which called the measure a de facto ban on the company. After a state judge tossed the suit in August, the new law went into effect on Sept. 5.
But not everyone was thrilled.
Restore Homeowner Autonomy and Rights, a group of 350 one- and two-family owners, criticized the law for cutting off a revenue stream that made homeownership possible for many.
The homeowner group is made up primarily of two-family owners, 98 percent of whom say they depend on a short-term rental to pay their mortgage and support their family.
“Now they’re struggling to keep up with their expenses,” said Lisa Grossman, a spokesperson for the group.
Heads in beds
Hotel owners could benefit from the crackdown. They have long railed against Airbnb, saying it sapped demand from legitimate hotel rooms. Now that demand could come back.
There were about 23,000 “active listings” on short-term platforms in July — meaning those that had been rented in the previous month, according to the data firm AirDNA.
But about 40 percent of those were for shared or private rooms that are allowed as long as the host is present, the company’s figures show, and another 35 percent were for homes with minimum stays of 28 nights or hotels/serviced apartments that could be zoned for transient lodging.
Those listings are not likely to be affected by the new law.
“If there is less supply and the same amount of demand, you can assume that [hotel] room rates are going to go up.”
That leaves about 7,500 listings that could be impacted, according to AirDNA’s figures. Of those, about 3,500 had fewer than 20 reviews, which AirDNA said may indicate that they’re either new or rented infrequently.
All told, AirDNA estimates there are about 4,100 full-time listings that generate around 40 percent of the revenue earned in New York.
“These are the listings we are watching to see what the impact is on New York City hosts,” AirDNA spokesperson Madeleine Parkin wrote in an email.
To put that in context, the city’s hotel inventory stands at more than 135,000 rooms, according to research firm STR. The supply side of the equation, though, could still prove challenging for owners — at least in the short term.
The move comes at a time when the city’s hospitality industry is recovering.
In July, nearly nine out of every 10 hotel rooms were sold every night, according to STR.
“Occupancies are already pretty healthy,” said STR’s Jan Freitag. “What that means is that hotels would have more pricing power. If there is less supply and the same amount of demand, you can assume that room rates are going to go up.”
The average daily room rate for the first seven months of the year was around $260, Freitag said, up about 8 percent from a year ago. The return of tourist travel and the city’s use of hotels as migrant and homeless shelters have helped with the recovery.
Despite the fact that a number of hotels never reopened following the pandemic shutdown, with some being converted to other uses, the number of hotel rooms is actually up from the nearly 132,000 rooms in 2019.
That’s due to the large pipeline of new hotel developments. At the start of the year, New York was scheduled to add more than 10,000 rooms — or about 8.5 percent of the inventory.
And other properties like the Four Seasons on East 57th Street and still-closed portions of the Plaza Hotel are set to reopen, adding even more supply.
It’s not clear, though, that the pipeline of new construction will be refilled. In 2021, Bill de Blasio’s administration passed a law that required proposed new hotel developments to get approval from the City Council — a move seen as a back-door way to ensure that only unionized hotels would get built.
In the year following the law’s passage, not a single hotel developer filed for a building application. The only permit applications were for projects either exempt from the law or grandfathered in under the old rules.
The rising room rates could signal to developers that it’s time to build, according to Freitag.
“It’s a question for individual developers,” he said. “They may feel that the room rate increases and the absolute level of room rates eventually will make a new hotel more feasible.”