 |
Bon VoyagedSept. 5, 2023
|
Thousands of short-term rentals in New York City are about to be shut down as a 2022 law banning whole-unit rentals on sites like Airbnb and Vrbo goes into effect on Tuesday.
The new law requires New York City hosts on short-term rental platforms like Airbnb and Vrbo to register with the city. Entire-unit rentals have been banned, reservations are capped at two people, and hosts will have to stay in the unit with guests.
Some buildings designated for short-term lodging are exempt from the new rules.
Hosts found to be violating the new law will be fined up to $5,000 per stay, or three times the revenue generated, whichever is less.
Estimates for how many units are affected by the new law vary widely, but according to a report prepared for Airbnb by Boston University Professor Michael Salinger in December 2022, some 36,000 listings were active in the city, after peaking at more than 80,000 listings in 2016.
The move comes against a backdrop of increasing rents across the city, with the average rent in Manhattan reaching record highs over the past several months. In July, the average monthly rent reached a record $5,588, while the median rent was $4,400, according to a report from Miller Samuel and Douglas Elliman. Rents in Manhattan were up 30% compared to 2019.
“Given the state of the New York City real estate market it is imperative that there are more restrictions on Airbnb – in this city and at this time,” said real estate broker Bianca D’Alessio, star of “Selling the Hamptons” on HBOMax.
“In NYC we have a housing shortage. There simply is not enough supply to meet the demand, which is forcing prices to skyrocket. We have seen median rental prices increase quarter after quarter since the pandemic and there doesn’t seem to be a stop to it,” D’Alessio said.
She also said that Airbnb units bring down values in their buildings due to quality-of-life issues for other residents.
“Airbnb has posed safety concerns throughout the city and has impacted the value of various buildings in which they exist because of their transient nature. Rental restrictions exist in many markets, and the way Airbnb has operated in NYC has been like the Wild Wild West,” D’Alessio said.
But the changes could spell trouble for real estate investors who counted on short-term rental income.
“The advent of short-term rental uses for properties has given people a third alternative for how they use their real estate. People can now live in their property, rent it out long term, or go into the hotel business with it. This has had dramatic effects on available housing inventory, both rental and resale,” said residential and commercial real estate sales expert Josh Cadillac.
“The additional reduction in inventory has helped support higher pricing for resales and rentals while providing additional competition to hotel rates. Legislators are just waking up to this fact and trying to do damage control,” Cadillac said.
“The push for greater regulation is driven largely by the lobby of the hotel industry and those that feel that additional regulation is the way to soften the very tight rental market,” Cadillac said.
“In practice, most states that have regulations in place have found them difficult or impossible to enforce. They largely depend on scouring the internet for violators or neighbors turning people in. While necessary for regulation, neither is a great look for the use of government resources,” Cadillac said.
“Many people have invested in properties with the understanding that they could be used as a short-term rental. If this use is now no longer legal they may be unable to afford to keep these properties and unable to sell them without taking a loss,” Cadillac said. “This could cause the unintended consequence of people allowing the bank to take these properties back as foreclosures. A tragedy for individual investors, but possibly a slight relief to a market desperate for inventory.”
