A lot has changed since then New York City Start to strictly implement Local Law 18which effectively prohibits short term rental in the city. But it’s unclear whether improving housing affordability, the target of the crackdown, is one of those changes.
one Airbnb Analysis A report released in January found no evidence that the new rules affected rental prices or rental stock, even as new construction was completed,as well as The city has not reported any changes in housing affordability metrics as a result of the law.
Yet New York City housing prices are rising rapidly Hotel prices rise and growing Montenet The number of short-term rentals has declined significantly since last fall. New Jersey short-term rental landlords also benefit surge in demand Legal rental with easy access to NYC.
Nowadays, it has become more expensive and inconvenient for tourists visiting New York to find accommodation, but no less than expensive live there. Actually, Some former short-term rental hosts who relied on income to offset housing costs are now finding things even worse hard Maintain a balance of payments.
Implementation of new rules may be delayedand may be hard Measuring the impact of Local Law 18 on the city other efforts Improving housing affordability and mass other Factors affecting rental prices. But it is questionable whether the law A worth it effortEspecially as other cities look to New York City as a blueprint as they consider tighter regulation of the short-term rental market.
Reasoning behind local laws18
Rent growth outpaces wage growth in most cities, but gap Extremely wide In New York City, the supply of rental properties is tighter than it has been in 50 years. recent Report The vacancy rate for homes from the city is just 1.4%.
The average rent for an apartment in Manhattan last month was $4,771according to data redfin tuna. Naturally, city officials have an incentive to solve problems for residents since they can only afford approx. 5% Average New York City Apartment Salary.
The rental period is less than 30 days Multifamily Building has been illegal in many New York cities since the state Legislature amended the Building Code in 2011. Multiple Dwelling Act. The law includes an exception that allows New Yorkers to rent out a room in their primary residence for a period of no more than 30 days, as long as the owner is present and the guest has access to the entire apartment. But the rules Very difficult implementation.
By 2015, there were more than 43,000 Airbnb listings in the city, and officials worry that the growth in short-term rental activity will lead to fewer homes in the long-term rental market, exacerbating the shortage of affordable housing. The New York City Comptroller produced a Report In 2018, regression analysis estimated that 9.2% of total rent increases in the city between 2009 and 2016 were due to Airbnb’s impactresulting in tenants paying an additional $616 million in rent in 2016.
findings is based on Based on public data from short-term rental data analytics company AirDNA. However, an AirDNA spokesperson explain In 2018, the report reached “flawed conclusions” based on errors in data interpretation.
For example, the analysis is based on the total number of listings in each neighborhood, although many in these lists Inactive. it is also no difference in private room list and The list is Entire residence.
If New York City residents rented out their apartments for a weekend each year while they were away, or rented out their spare rooms for extra cash, that would have no impact on supply in the housing market. Regardless, the unit will never be rented long-term, and the analysis fails to account for this. Still, city officials used the report to justify the new rules. implement Short term rental policy.
To increase compliance with long-term restrictions, lawmakers passed Local Law 18, which will take effect in the fall of 2023. There yes More than 10,000 Illegal listing before measures were implemented promulgated.
Local Law No. 18 requires short-term rental landlords to apply for registration for arrive List their property legally on booking sites And allow short-term rental platforms such as Airbnb to collect fees after verifying that the registration is approved. The law also imposes heavy fines on violators. As of June 24, The city approved only 2,276 of 6,395 applications For short term rental registration.
it it seems it It is a mistake to think that strict enforcement of a near-ban on short-term rentals will cause existing landlords to become long-term rental landlords. At least, that’s not the initial result. After the law took effect, the number of short-term rental listings did drop from 22,246 to 2,646 in October 2023.
But many landlords are changing their short-term rentals to medium term rent for staying at Beyond 30 days, we hope to continue collecting income from guests seeking furnished temporary apartments. this all Number of Airbnb listings only That’s down 14% since the rule took effect. about 95% member’s Members of the New York Homeowners Alliance say they do not plan to rent their units to long-term tenants. Many people choose the STR model to avoid the problems that come with tenant lease agreements –expel New York apartments are notoriously long-term tenants hard.
There is a convincing evidence City of Irvine, Calif., says city ban on short-term rentals could lower rental priceswhich Meaning the full impact of Local Law 18 may not yet be felt. But so far, The most significant impact of this law is the increase in Hotel prices, causing people to look for other ways to obtain short-term rentals when visiting New York City.
The consequences of a shrinking short-term rental market
Local Law 18 has been a boon to New York’s hotel industry, with occupancy rates reaching 82% last year, well above the national average of 63%. Nightly room rates have increased 8.5% since 2022, reaching an all-time high of over $300 per night. Families traveling to New York City typically require two rooms or more expensive suites, putting this tourist destination out of reach for many budget travelers who may have opted for self-contained short-term rentals before the ban was implemented.
Other factors may have contributed to the surge. The city has struggled to provide housing and services to the influx of immigrants, approx. one fifth of new york city hotels Immigrants are now offered asylum in exchange for guaranteed payments from the city. Many of these hotels offer budget or mid-priced options to tourists.
But there’s reason to believe there’s a shortage of vacation rentals Also playing A function of high prices. “It’s not surprising to me to cancel 20,000 short-term rentals and suddenly hotel prices go up 10%,” Jamie Lane, chief economist at AirDNA, said in an interview. business insider.
Due to high demand, the remaining hotels were able to raise their room rates, even though they were already charging high prices for the rooms. some potential visitors so intimidated Due to the high price of hotels in amenity-rich neighborhoods, they are looking for Accommodation at black rental market. Illegal listings can be found on platforms like Facebook, Craigslist, and Instagram.
However, these avenues carry risks for both hosts and guests. Protections offered by traditional booking sites, such as host liability insurance, reviews showing host reputation, secure ways to exchange payment information, and support for disputes, all Absent through unofficial channels. The risk of fraud is high on both sides of the transaction.
But sometimes a lower price is enough of an incentive. Instagram account Book a New York Subletwhich Post new listings daily or weekly, Has over 5,000 followers.
Others are looking for vacation rentals in New Jersey where vacation rentals are located are benefiting from a surge in demand. As of February, Jersey City Short Term Rental Needs According to AirDNA data, year-over-year growth was 84%, while Weehawken and Hoboken grew 59% and 35% respectively. some smart owners Even avoiding Follow the rules by listing your New York City, NJ apartment and privately informing guests of the actual location. Other landlords continue business as usual, hoping they won’t get arrested for illegal rentals in New York City — many homeowners rely on rental income to make ends meet in New York.
bottom line
It’s been more than nine months since New York City came close to banning short-term rentals, but there has been no noticeable impact on the supply or price of rental housing. It may take some time for Local Law 18 to impact housing affordability in the city, but the tourist accommodation landscape in and around New York City is already changing significantly.
as More cities New York City may provide guidance to other local governments if they consider stricter regulations on short-term rentals in response to the affordable housing crisis, and changes in rental prices next year may be illustrative. Research into local laws becomes even more important given the impact these policies can have on investors’ livelihoods, and anyone investing in vacation rentals should be prepared to adjust when policies change.
Are you ready to succeed in real estate investing? Set up a free BiggerPockets account to learn about investing strategies; ask questions and get answers to our community of over 2 million members; connect with investor-friendly agents; and more.
Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
