Kiyosaki: NYC’s Airbnb crackdown could trigger the next housing crash
Robert Kiyosaki, author of the best-selling “Rich Dad, Poor Dad,” thinks that New York City’s crackdown on Airbnb is the first domino to fall in America's impending housing crash.
In a social media post that has since gone viral, Kiyosaki warned, “Airbnb to lead real estate market crash,” urging would-be homeowners to lie in wait for bargains.
“If you want a new home, your happy days are around the corner. Same for rental property. The best time to get rich is in a crash,” he said.
So, what exactly is going on in NYC?
Last September, U.S. lawmakers passed a new regulation called Local Law 18, which requires Airbnb hosts to obtain city approval before they can list short-term rentals.
This wouldn’t be a problem if New York’s residential laws hadn’t long prohibited residents from renting out their entire homes for under 30 days.
So, in practice, Local Law 18 makes most NYC Airbnb rentals illegal, and failure to comply can lead to fines of up to $5,000.
So far, Local Law 18 has been a disaster for the city’s Airbnb hosts. Between August and October, short-term rentals plunged by 85%, according to activist group Inside Airbnb.
It's not yet clear how this will play out, but there's a possibility that declining rental profits could force many Airbnb hosts to sell their properties, triggering Kiyosaki’s doomsday scenario.
Forced to sell?
Airbnb may not face imminent collapse as some critics like to suggest, but there are signs that the short-term rental market has become over-saturated.
According to the analytics platform AllTheRooms, the number of U.S. Airbnb rentals surged nearly fivefold between 2016 and 2023. Then competition came in.
According to AirDNA, a vacation rental analytics platform, other major booking platforms started making a major push into short-term rental around 2022.
“There was an influx of new vacation rentals listed with Airbnb Inc. as well as other rental platforms such as Bookings.com and Vrbo during the pandemic,” AirDNA researchers wrote.
“This created greater competition among hosts—especially when demand for short-term rentals started to fall back toward pre-pandemic levels,” they said.
By the end of 2023, Airbnb hosts started noticing a meaningful drop in their bookings.
“My bookings are way down this year. I’ve been a superhost for years, and my bookings have steadily increased year over year, but not in 2023. I’m down about 30%,” said Sherry189, a host in Kailua, Hawaii.
“I have been superhost for past 10 years, I have experienced slow last holiday, and this holiday as well,” said Suzy0 of Birmingham, Alabama.
“I'm in Waltham, MA, and my bookings have almost completely dried up,” Mar74491 commented. “None of this makes any sense. I had a slow booking rate last year around this time (2022), but at least I had some. At this point, I am not sure what to do either.”
If the trend doesn't change course, experts warn there’s a possibility of a "wave of forced selling."
“The Airbnb collapse is real,” said Nick Gerli, the CEO of Reventure Consulting. “Revenues are down nearly 50% in cities like Phoenix and Austin. Watch out for a wave of forced selling from Airbnb owners [...] in the areas hit hardest by the revenue collapse.”
What really happened to Airbnb?
What initially began as a budget-friendly alternative to hotels has become an increasingly pricey accommodation that is losing its allure.
Even its CEO, Brian Chesky, has acknowledged the “tens of thousands” of how expensive bookings have gotten, largely due to exorbitant cleaning fees.
In fact, recent reports found that Airbnbs have become more expensive than hotels in most destinations.
Airbnb hosts now face a huge conundrum: they can raise rates if bookings drop, or they could cut rates to lure guests back in.
The problem with the first option is that Airbnb rates are already high, so raising them further could drive more customers back to hotels. The second option might increase bookings, but those will come at the expense of profits.
“For both the guest and the host, it’s just not a good value proposition anymore,” Melody Wright, founder of mortgage strategy firm Huringa, told Vox.
There isn't much of a value proposition in Airbnb for the broader community—primarily because short-term rentals tend to drive up long-term rental prices.
When Airbnb’s problem becomes your problem
America is grappling with one of the largest generational housing squeezes in history.
Record demand after the beginning of Covid and a chronically low supply of houses led to a major upswing in housing costs, which also spilled over into the rental market.
In fact, the inventory is so low that even cratering demand has very little effect on housing and rental prices.
As it turns out, Airbnb may have made the problem worse.
For example, a 2021 study by Elliott D. Pollock & Company found that 15% of residential houses in Sedona, Arizona, were being used as short-term rentals.
What’s so special about Sedona?
Nothing, really, but it represents the growing allure Americans have with smaller sunbelt cities. If they’re thinking about moving there to avoid the high prices of nearby Phoenix, they may want to think again.
According to AirDNA, at least 25 cities across the country have at least 600 Airbnb listings per 50,000. Many of these cities are in the sunbelt, where housing costs have seen the biggest increases.
Because of the influx of Airbnbs, “you have no affordable inventory for anyone anymore,” Wright said.
Wright’s conclusion is supported by a paper published by the Harvard Business Review, which found a positive correlation between Airbnb listings and rent prices.
“This means that as the number of Airbnb units in a neighborhood increases, the asking prices for rental units would increase as well,” Melih Cevik of the Harvard Political Review said in summarizing the report.