New York City’s Airbnb ban has disastrous unintended consequences

New York City’s Airbnb crackdown was supposed to boost apartment inventories, but all it did was raise hotel room prices.

According to data from AirDNA, there were only 4,000 short-term Airbnb listings in New York in May—a staggering 83% drop from last August, just before Local Law 18 came into effect.

Local Law 18 severely limits who can list their home on Airbnb or other short-term rental apps.

Under the law, only tenants who live in approved buildings can rent out their units for 30 days or less. Owners can only rent to a maximum of two guests at a time and must be present in their homes for the duration of the stay.

The Mayor’s Office of Special Enforcement says that as of June 24, the city had received 6,395 applications for short-term rentals. Only 35% of the applications were approved.

The dearth of short-term rentals means more visitors to the Big Apple have no choice but to book a hotel room.

It's no surprise that the average hotel price in the city eclipsed $300 in May, a new all-time high. In addition to a lack of short-term rental options, about 20% of the city’s hotels are currently being used to shelter migrants.

The law of supply and demand suggests prices have nowhere to go but up.

“It’s not surprising to me that you remove 20,000 short-term rentals, and all of a sudden, hotel rates are going up by 10%,” Jamie Lane, AirDNA’s chief economist, told Business Insider.

Has affordability improved?

New York residents still pay some of the highest rents in the country—both in absolute terms and as a share of their income.

“The rules haven’t improved housing affordability in the city—rents continue to rise, and housing stock has reached historic lows,” said Airbnb’s Northeast policy lead, Nathan Rotman.

According to real estate listing website Zumper, the average rent in New York City was $4,369 in June, up 4% from the previous year, based on 10,711 listings. Only 20% of the listings were priced at $3,000 or less.

By comparison, 35% were in the $3,001 to $4,500 price range, 23% were between $4,501 and $6,000, and 23% were over $6,001.

The average rent for 2-bedroom and 3-bedroom units has increased by 12% over the past year.

Like other parts of the country, New York City has failed to keep up with local housing demand. According to the City and State publication, New York created 1.2 million jobs in the last decade but has only built 400,000 housing units over the same period.

“We are in a moment now where there’s consensus that housing supply is a much-needed tool, to address our broader affordability challenges,” said Leila Bozorg, the City of New York’s executive director for housing.