Airbnbust? NYC’s short-term rental restrictions set to take effect

The short-term rental landscape will change drastically in New York City tomorrow.

Beginning Tuesday, short-term rental hosts in New York City will be required to register their units, which will likely have a significant impact on platforms like Airbnb and potentially steer travelers toward hotels or New Jersey, the Washington Post reported.

The new regulation, known as Local Law 18, includes several rules that may prove inconvenient for travelers and hosts:

• Limit on Guests: Short-term rentals can accommodate no more than two paying guests at a time, regardless of the property’s size or the number of bedrooms.
• Host Presence: Hosts are required to be physically present while their properties are being rented.
• Unlocked Doors: Hosts and visitors must leave the interior doors within the rental unlocked, allowing occupants access to the entire unit.

The measure  aims to curb illegal short-term rentals, enhance guest safety, and alleviate housing market pressures. However, it could drive travelers away from short-term rental platforms altogether, the restrictions effectively eliminate the appeal of staying in apartments, as it forces them to share space with strangers or opt for hotel rooms. 

“Unless it is a really big unit, I think a lot of travelers will find it uncomfortable to stay in an apartment that fully complies with and abides by the city’s new regulations,” Sean Hennessey, a professor at New York University’s Jonathan M. Tisch Center of Hospitality, told the outlet.

As of Aug. 28, the Office of Special Enforcement in New York City had received over 3,250 applications for short-term rental listings. They reviewed 808 submissions, granted 257 certificates, rejected 72, and returned 479 for further information or corrections, according to the Post.

The OSE also maintains a Prohibited Buildings List of units that can’t be rented short-term due to lease terms or rent regulations.

Penalties for hosts for violations of these regulations can range from $100 to $1,000 for the first offense, while guests will not face penalties for staying in an illegal property. 

Airbnb sued to have the law gutted, claiming it was effectively a ban on short-term rentals; a judge dismissed the lawsuit in August.

The company has stated that listings without a registration number will be unable to accept new reservations once the law is activated. To minimize disruptions to existing bookings, Airbnb will honor reservations made before Tuesday for stays through Dec. 1, refunding the service fee. After Dec. 1, Airbnb will cancel and refund reservations at uncertified properties. The platform, along with hosts, are attempting to work with local officials to pass a less-restrictive version of the measure.

New York City’s tourism market is already experiencing high demand, with more than 63 million travelers expected in 2023, the outlet reported. 

Airbnb alternatives are emerging to try and fill the short-term rental gap.  Some of these alternatives, however, may face similar predicaments to the short-term rental giant.

San Francisco-based Sonder could provide one alternative. The company has units in the Financial District and elsewhere that aren’t covered by the short-term rental law. The company’s business model, however, is reliant on receiving business from other platforms, including Airbnb.

Additionally, Sonder has had some issues of its own. In the spring, the startup was warned that it had until mid-October to improve its share price or face delisting from Nasdaq. The company, which manages and leases rentals itself (unlike Airbnb), has experienced multiple rounds of layoffs in recent months.

Aapartment-style units at 70 Pine Street that are considered legal in New York City. Unfortunately for visitors, that’s the company’s only location in the city.

Kindred is a startup that charges residents to join a cohort of travelers and homesharers to host or swap homes without money changing hands directly. There are more than 1,000 residents registered in the New York metro area, co-founder Justine Palefsky told Crain’s.

Traditional hotels, of course, also stand to benefit from Airbnb’s tumult in the city. But even some luxury brands are willing to at least partially embrace a short-term rental model. The Ritz-Carlton in NoMad has 16 short-term rental units up for grabs for $9,000 a night.

— Ted Glanzer, Holden Walter-Warner