New NYC Data Shows that Airbnb Restrictions Aren’t Solving Housing Crunch
Restricting short-term rentals does not meaningfully impact housing affordability
Many cities across the world are trying to severely restrict or outright ban short-term rentals (STRs):
- Hawaii Governor Josh Green recently signed SB 2919, which allows local authorities to regulate STRs.
- The mayor of Barcelona recently announced a plan to permanently ban all short-term rentals in the city.
- Berlin banned all short-term rentals in 2016 but reversed its policy two years later after sustained protests from hosts.
- Last year, New York City began enforcing one of the strictest regulations of short-term rentals in the country, which effectively decimated the short-term rental market in a city that draws more than 52 million visitors every year.
Proponents of these restrictions argue that short-term rentals drive up rents and housing costs for residents. By their logic, landlords and property developers are incentivized to convert long-term housing units into short-term rentals, restricting the already short supply of housing. (It should be noted that the majority of hosts on Airbnb rent out their primary homes.)
In New York City, the strict regulations that came into effect last year were partly intended as a solution to the affordable housing crisis in the city. Now, some counties in Hawaii are considering regulating STRs in an effort to increase the housing supply within the state.
While proponents of laws like these believe they will offer renters relief from high prices and housing supply constraints, it seems unlikely that strict STR regulations will significantly increase the supply of long-term housing. In some areas, STRs make up such a small percentage of the housing stock that even outright bans cannot meaningfully impact the housing shortages. In many cases, STRs are second homes, and owners want to retain the ability to use their homes at certain times of the year.
Preliminary evidence from New York City serves as a cautionary tale for policymakers considering STR regulations. Data indicate that despite strict regulations, the housing supply has not increased significantly, and the housing shortage persists with high prices. Similarly, local and state officials should recognize that restricting STRs may not improve affordable housing outcomes, as evidence from New York City shows that such measures have not effectively reduced rent prices or increased housing availability.
Background on New York City Legislation
When New York City’s Local Law 18 went into effect in September 2023, the number of available STR listings shrank by 89%. The law aimed to crack down on unsafe and unauthorized rental listings by requiring all hosts to register and obtain a license from the city before listing their homes and imposing steep fines (on both hosts and platforms) for violations of strict listing standards.
Proponents of the law also argued that short-term rentals drive up housing prices and threaten hospitality industry jobs. Former Councilmember Ben Kallos, the original sponsor of the law, argued that “at a time when hotels are closing or sitting there empty, it is crazy to see apartments all over the city getting converted into illegal (hotels).” The Hotel Association of New York City made similar arguments, announcing that the law “protects both affordable housing and legal operators of STRs’’ and would “[result] in better outcomes for all (legitimate) hotels in New York City”.
While the law does not outright ban short-term rentals, the strict listing standards, steep fines, and slow approval process for licenses have made them unappealing to many hosts and guests. By January 15, 2024, the city had only approved 22% of the applications it received for short-term rental licenses, and more than half of the applications received were bounced back to get additional information.
The listing standards, some of which were in place before Local Law 18 but had not been enforced, also make guests and hosts uncomfortable. For example, the law requires that all rooms be accessible to all occupants–guests and hosts are prohibited from locking their doors at any point. Hosts are also required to be present in the home for the duration of the rental period.
Many hosts and guests expressed discomfort at the resulting lack of privacy. The law also limits the number of guests that can stay in a rental at any given time to 2, excluding families and groups traveling together. As a result, many hosts have been forced to pull out of the market altogether.
No Evidence of Rental Prices Declining
The original sponsor of the New York City legislation cited housing unaffordability as a reason for the law. If de facto STR bans, like the law in New York City, led to short-term housing being converted into long-term rentals then rental prices should fall as the supply of long-term housing increases.
However, the currently available data on 2024 rental prices do not show a decline. Apartments.com publishes data on rental prices by city, using listing data from the apartment listings on their platform. The data show that New York City rental prices in 2024 are even higher than they were in 2023, before the bill went into effect in September 2023.
However, all cities likely experienced some inflation in rent prices. If New York City’s law had been effective in increasing the housing supply, price increases would be lower than average compared to other markets. To examine whether New York City had lower price increases than average, I used 2024 data from Apartments.com and compared New York City to other cities with high rental costs.
In a January 2024 U.S. News & World Report article author Liz Brumer-Smith described the most expensive cities for renters, with New York City taking the number one spot. The list also includes Jersey City (which is within the New York City metro area but not subject to the STR restrictions), Boston, San Francisco, and Miami. The graph below shows the year-over-year increase in average rents for each city in 2024:
If STRs were converted into long-term housing, prices should have fallen in New York City. Instead, rental prices rose by over 3% last year. As the graph shows, prices have risen in all comparable cities as well, however, New York City experienced the largest increase, highlighting the absence of a decrease in prices.
The available data on rental prices do not support the notion that the STR ban reduced rent prices for New Yorkers. This could be because the short-term rentals that are no longer being used are not being converted into long-term housing. Instead these units might be used for medium-term housing or remain vacant for most of the year due to the STR ban.
An article from Business Insider quoted AirDNA’s chief economist as saying that medium-term rentals increased in the city.
“‘At the same time, the number of Airbnb listings for stays longer than 30 days rose rapidly. Many of these new medium-term rentals were simply converted from short-term’, AirDNA’s chief economist, Jamie Lane, told Business Insider.”
Vacancy Rates Seem to be Stagnant
Another sign that might indicate New York City’s de facto ban making progress towards improving housing affordability would be higher vacancy rates. If STRs are converted to long-term rentals then an increase in vacancy rates could reflect the increase in long-term units being open for rent.
However, vacancy rates have remained largely unchanged so far. Using data from Apartment List, I examined vacancy rates in the five most expensive cities to rent: New York City, Jersey City, Boston, San Francisco, and Miami.
If New York City’s STR restrictions were causing increases in the vacancy rate, we would expect to see an increase in vacancy rates compared to other cities, in the months following the law’s implementation. Instead, the data show that vacancy rates in New York City have remained largely unchanged.
Evidence does not support the idea that bans increase affordable housing
One goal of New York City’s policy was to increase affordable housing. However, several studies suggest that the supply of affordable housing does not decrease when STR bans go into effect.
An article from Harvard Business Review by Sophie Calder-Wang, Chiara Farronato, and Andrey Fradkin found that STRs had a minimal impact on rent prices in New York City. They studied whether STRs were forcing rents up by removing housing units from the already limited supply of housing in New York City. They found that STRs do increase rent for the median tenant, but only by $125.
This number is magnitudes lower than the overall rise in housing costs. Their findings suggest that Airbnb’s STRs contributed to about 1% of aggregate rent growth in the city. This important finding highlights the idea that the housing supply is constrained by many factors, not just the presence of STRs.
Their work also found that STRs tend to be located in touristy, centrally located areas where high-income earners typically live. Because STRs are located in these areas, the impacts of STR regulation and related housing supply changes tend to affect high-income households rather than lower-income households.
Additionally, they found that the number of housing units used as STRs constituted less than 2% of the overall long-term housing stock. Even if all STRs were listed as long-term housing in light of New York City’s new regulation, the impact on the long-term housing stock would be minimal.
A study of San Luis Obispo’s STR and housing markets similarly found that STRs made up roughly 2% of the housing stock in the area. The study also found that many STRs were second homes and thus are unlikely to be converted into additional long-term housing since the owners still want access to their vacation home during the year. Therefore, the study concluded that removing STRs entirely via a ban was unlikely to increase the housing stock by even 2%.
Conclusion
The recent trend of imposing strict regulations or outright bans on STRs, including the law in New York City, aims to alleviate housing affordability issues. However, available data suggest that restricting the use of STRs does not meaningfully impact housing affordability. Data from New York City indicate that the recent STR restrictions have not significantly increased the supply of long-term housing or reduced rental prices. Instead, rental prices have continued to rise, and vacancy rates remain largely unchanged.
Other studies show that STRs contribute minimally to overall rent increases and make up a relatively small portion of the housing stock. Policymakers in Hawaii who are considering restricting STR use should consider the underwhelming results of New York City’s ban.
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