Restricting short-term rentals may not alleviate housing scarcity concerns
New York City's stricter short-term rental (STR) regulations, introduced in late 2023, have led to a significant reduction in STR listings by about 90%. However, these regulations have failed to improve housing availability or affordability, according to recent studies.
The new laws, notably Local Law 18, require hosts to register rentals, be physically present during guest stays, and restrict occupancy. This has made it challenging for many hosts to rent out their properties short-term, drastically lowering the number of Airbnb and similar listings.
Despite the intended goal of increasing permanent housing supply by removing STR units from the rental market, housing affordability remains a serious concern. Most residents feel the situation is deteriorating, with little evidence of the regulations improving the situation.
The decline in STRs has also resulted in economic losses. A study estimates that the restrictions have caused a loss of $638 million in spending, and contributed to rising hotel prices by 14.4%. This has made New York City a more expensive destination for travelers, with hotels winning out at the expense of tourists and locals.
The high growth in hotel occupancy and room rates has also worsened the affordability crisis for residents. The decline in STRs reduced tourism-related spending and affected local businesses, while hotels gained higher occupancy and prices but concentrated visitor spending, which lowered the multiplier effect for the overall local economy.
Many New Yorkers and homeowner groups oppose the strict regulations, arguing that the loss of supplemental income for homeowners exacerbates affordability challenges and reduces flexible housing options. There are efforts underway to ease these regulations, such as bills to allow owners of small homes to rent short-term without being present and increasing occupancy limits, aiming to balance housing needs with economic benefits for hosts and neighborhoods.
Research from Australia, using New York City as a case study, suggests that nuanced policies balancing housing supply concerns with economic realities and resident needs are necessary. In Western Australia, an incentive scheme offers property owners $10,000 to transition their property to a minimum 12-month long-term tenancy, rather than offering STRs. This approach, while not without controversy, may provide a more effective means of addressing housing affordability issues while still offering economic benefits to property owners.
In conclusion, New York City’s stricter short-term rental regulations have reduced available STR units but did not achieve the desired improvement in housing affordability or availability and instead caused economic setbacks for tourism and local hosts. A more balanced approach may be necessary to address both housing needs and economic realities in the city.
References: 1. New York City's Strict Short-Term Rental Laws: An Assessment of the Impact and Potential Adjustments 2. The Unintended Consequences of New York City's Short-Term Rental Regulations 3. New Yorkers Speak Out Against Strict Short-Term Rental Regulations 4. The Economic Impact of Short-Term Rental Regulations in New York City 5. The Multiplier Effect of Short-Term Rentals in New York City
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