Learning from New York: How Restricting Short-Term Rentals Did Not Lower Housing Costs

Photo source: Airbnb

A year after stringent regulations aimed at limiting short-term rentals in New York, real market dynamics appear to be undermining their effectiveness, according to a recent announcement by Airbnb.

The primary objective of the widely discussed Local Law 18 (LL18) in New York—to control long-term rental prices—has not been achieved. Instead, according to Airbnb, despite the law, “consumers face historically high hotel prices and residents encounter unprecedentedly high rents”.

For international travelers, New York is increasingly becoming an elusive dream destination, with hotel prices and rents both soaring.

Social and economic disparities are also becoming more pronounced. For example, the Brooklyn Chamber of Commerce has highlighted that, “In a city where the cost of living is continuously rising, the loss of income from home-sharing has severely impacted those who rely on it to cover basic expenses, as well as small businesses dependent on tourism.”

“New York’s short-term rental regulations have failed. They disproportionately affect the outer boroughs of Manhattan, increasing travel costs to these areas without addressing the housing crisis,” Theo Yedinski, Airbnb’s Vice President for Public Policy, said. “Instead of making prices more affordable, the new regulations exclude everyday consumers and leave former short-term rental owners struggling to make ends meet.”

According to CoStar data, Airbnb reports that hotel prices in New York rose by 7.4 percent in July 2024 compared to July 2023, while the national average increase was only 2.1 percent. In July 2024, the Average Daily Rate (ADR) for New York hotels reached $307.75, significantly higher than the national average of $157.39.

Source: Airbnb

Simultaneously, rental prices in New York have hit a historically high monthly average of $5,000. Supporters of short-term rentals argue that this outcome was anticipated, despite lawmakers’ assurances that Local Law 18 (LL18) would alleviate rental price pressures.

Data from “StreetEasy” show that rents surged during the first 11 months after LL18 went into effect. Additionally, “Apartment List” data indicate that the percentage of vacant apartments in New York has remained stable at 3.4 percent since the law’s implementation.

Source: Airbnb

LL18 became effective on July 1, 2023. Before its enactment, short-term rentals were widely available across all five boroughs of the New York Metropolitan area, with 37 percent located in Brooklyn and 13 percent in Queens. In contrast, most hotels are concentrated in Manhattan.

Airbnb data also reveal that visitors to New York spend an average of $260 per day, excluding accommodations.

According to Airbnb, one-third of these expenses are spent in the neighborhood where visitors stay. The company argues that the scarcity of short-term rentals outside Manhattan negatively impacts local economies, favoring large corporations over middle-class and small local businesses.

Theo Yedinski remarked, “It is time for New York to reconsider the effects of LL18 and the law itself…”