Housing Affordability Puts Short-Term Rentals Under Fire

Visiting New York City? Your Airbnb listing could soon be coming with a mandatory roommate. Today, Local Law 18 goes into effect in NYC, which mandates that rentals under 30 days can’t have more than two paying guests and that the host must be present.

Those wanting to list their property must register with the Office of Special Enforcement (OSE), and first violations can range between $100 to $1,000.

• With interest rates up, housing prices little-changed, and travel roaring back, affordability has become a greater issue this year — putting short-term rentals in the spotlight.
• For landlords, short-term rentals can provide additional income, but many also see it as a major contributor to the rise in rent and housing prices.

In the second quarter of 2023, 23% of low-priced US homes were bought by investors — which has steadily risen from under 10% in the past 23 years.

Rules were (not) meant to be broken

More and more cities globally are imposing rules like capping the number of allowable rental nights or requiring licenses. In many cases, landlords have turned to less regulated month-to-month rentals.

• Bookings of at least 28 days have become one of Airbnb’s fastest-growing categories — making up 22% of gross nights booked at the end of 2022, up from 16% in 2019 (BBG).
• But even with restrictions, some cities are finding it difficult to enforce these rules — leading many to choose a riskier route.

In Montreal, despite having strict regulations that impose fines as high as $100K for unlicensed short-term rentals, approximately 80% of Airbnbs advertised in February were unlicensed. But a fire that killed seven people, including some staying in illegal Airbnb rentals, showed just how easy it is to bypass the rules.

Forward-looking: New York University’s professor Sean Hennessey expects the laws to push more people towards hotels (WP). While NYC made up ~1% of Airbnb’s revenue, Morningstar’s Dan Wasiolek says, “It’s not going to seriously damage the company, which has a history of working through these situations.”