Airbnb Law Could Wipe Out Half a Billion Dollars in NYC
The New York Senate has passed a new law that would prohibit the advertisement of apartments, tenements, and flat houses for purposes other than “permanent residence.” While the law still needs to be signed by the governor, it is yet another chapter in the ongoing fight between New York and Airbnb.
But how much will this really affect Airbnb hosts? Using some not so fancy math that you can check out here, I estimated that nearly $500 million in gross revenue would be taken off of the table in New York City alone. Maybe some have become cynical about these numbers, but half of a billion dollars is a lot to me.
Admittedly, under a new version of zoning laws passed just a couple years back, these short term rentals are illegal, and indeed, this is what I was studying. But, legality doesn’t equate to logical.
For one, if this law is passed, New York could run afoul of a federal law statue known as Section 230, which limits platforms from being liable for the actions of its users.
But more importantly, many of the cities where Airbnb has become such a divisive issues were expensive even before the launch of the service. New York and San Francisco, as well as my home of Washington DC, have long had issues with zoning that are only now bubbling to the surface. In one report, aptly titled “Why is Manhattan So Expensive?”, economists Edward Glaeser, Joseph Gyourko, and Raven Saks estimated that zoning regulations made up 12 percent of the cost of New York City housing, over 50 percent for San Francisco, and over 20 percent of DC housing costs. And these numbers were calculated in 2003, far before the introduction of Airbnb.
What is the result? In places of opportunity with less regulation and restrictions, people can cheaply move in and better their lot in life. Indeed, income mobility has been found to be tightly connected with zoning regulation. Zoning is one of the few areas where there is bipartisan agreement with leftists like the Obama administration in lock step with both market-orientated conservatives and libertarians, who have been on this beat for a while.
While New York isn’t the most egregious in this category, the ongoing concern about Airbnb is misplaced. True, something does need to be done about zoning. But this law isn’t that something. The path forward isn’t a myopic ban of short term rentals, especially since many are using that income to afford rent. What is needed is an honest conversation about the cost and consequences of high housing. To start it off, local governments, like the one in NYC, need admit they are a big part of the problem.