NYC Ban On Airbnb Created Massive Black Market In Home Rentals

Boy wasn’t this the most predictable thing ever? If you’re going to require strict rules and licensing for Airbnb-style home rentals, and then not process or approve even those rentals that likely follow the rules, then what exactly is going to happen?

  • People own or lease properties that they have to cover the costs on
  • They can’t just terminate their leases, or offload their properties (that in some cases may be underwater, at least factoring commissions and other sales expenses)
  • So they have to rent out their properties anyway

New York City no longer allows short term rentals for less than an entire home or for more than two guests. When the whole home is rented, the host must be there too. In other words, they have to share the entire home. They need a license for doing this, and platforms themselves are responsibility for verifying the licenses.

For all intents and purposes Airbnb is banned. Fewer than 2% of previous short term rentals (about 450 properties) are licensed and Airbnb listings have falled by more than 80%.

When you make a product or service illegal that doesn’t mean it goes away, it’s just no longer legal. See also drugs, prostitution. And that brings with it a whole host of other problems. New York City’s housing supply issues have nothing to do with Airbnb in any case. The problem is that it is too costly and cumbersome to build new housing! While other cities are looking at New York City’s Airbnb ban as a model they’d love to emulate – and hotel lobbies are pushing them to do so! – it should be a cautionary tale.

  • Short-term rentals are now booking through Craiglist and over Facebook
  • Others claim to be exempt from the rules and rent anyway, in contravention of the law
  • Or they’re being ‘advertised’ as long-term rentals exempt from the rules, and then rent short-term

Houfy is a site where hosts and guests book directly, and New York City listings jumped significantly there when new rules went into effect. They don’t take fees for bookings, so doesn’t appear to be violating the city’s new law… but has still gotten a notice from the city over their practices.

People can no longer rent out their place when they travel, which means they have less income. New York City was Airbnb’s biggest market. That’s been gutted. Short-term rental properties remain, though, and holders of the inventory have turned to a black market since they can no longer rent out in the open. This is going to mean even more scams, both by hosts and renters. It’s going to mean more people getting fleeced, more people in a financial jam, and more risk all around. And New York won’t have solved its lodging problems.

Meanwhile, combined with a quarter of hotel rooms taken out of the market to house migrants, the price of hotel nights is higher than it would be and that keeps away travelers which is bad for the city’s economy and for Manhattan’s still-lagging downtown.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I would never agree with a complete ban Airbnb. But it should be more tightly regulated. Having houses turn into bachelorette parties in the middle of residential neighborhoods is a bit too far for me. We recently sold a condo in a desirable part of Nashville. Unfortunately the HOA regulations allowed short term rentals. One company from out of state that specializes in short term rentals made an offer with an escalation clause basically putting anybody else out of contention. Since we like the neighbors, we took $5000 less and sold it to a young couple. I hope more people will do that

  2. People who live in NYC, most often in apartment buildings, do not want regularly changing random people in their hallways, next door etc. And it was a problem with people renting (often multiple) apts to put on Air B&B instead of renting to residents. This model may work for renting out houses, but it’s just is not appropriate for apartment buildings.

  3. NYC is a sh!thole.
    A tourist will go once and never come back.

    Now it just became a more overpriced one.

  4. The real problem is that NYC is housing so many migrants in hotel rooms. If those hotel rooms were available, there would be much less need for home rentals.
    And it is true that an apartment building is far less conducive to rotating guests than a single family house but our HOA doesn’t allow short term home rentals even in our single family home community just because no tenant has the same respect for the neighborhood that long-term renters or home owners have.

    Add in NYC’s crime issues – which are not just in their city – and urban visiting is far less desirable than it used to be.

  5. @Tim Dunn – “The real problem is that NYC is housing so many migrants in hotel rooms. If those hotel rooms were available, there would be much less need for home rentals.”

    There was inadequate supply of hotel rooms long predates current migrant issues.

  6. Property owners might want to think twice before violating the New York ban on short-term renting. A better solution might be to ban together and get legal representation to fight it in court. The city will find out. And one excellent source is your neighbors. Police could show up in the middle of the night and evict everyone on the property. Property owners could be slapped with “code violations” or similar that can actually amount to hundreds, even thousands of dollars a day in some places. There will also be non-payment of taxes and when caught can include penalties and yes, even jail time. Failure to pay could result in the loss of property. It’s a mess most property owners really don’t want to see themselves in. AIRBNB certainly was a disrupture in so many ways and the biggest mistake was thinking that they were so big that nobody could stop them. They are also one of the reasons why housing is becoming too expensive in many large cities. In some cities, more than 35% of all real estate is being sold to investors. Not owner-occupied. And yes, it has also increased the number of working homeless people. People are living in their cars because housing cost is no longer affordable.

  7. I don’t believe Cops in NYC will be showing up anywhere for any non violent crime any more.
    My favorite Marriott hotel in NYC was converted to some sort of transient housing in 2017.

  8. Having experienced neighbors who turned their homes into Airbnb’s, I’m all for banning this practice. Regular renters are bad enough, an endless rotation of short term ones are unbearable for folks who have to live their normal lives next to them. Some things simply transcend economic considerations.

  9. As for the black market problem, I’d bet unhappy neighbors will be more than willing to help enforce the law.

  10. I have followed this issue closely in the NY media.
    I’m not going to argue the few wrong statements you have made (I don’t just skim stories) but just point out this: the vast majority of properties there are controlled by “investors” (another word for vultures) who overextended themselves because greed.
    The Mom and Pops who live in their homes are ok.
    Too bad for those investors……

  11. So why don’t they just stick the migrants in these former Airbnb’s? that’ll make everyone happy.

  12. Gee, what a surprise to learn that a ban has created a black market. Will governments ever learn?

  13. New York City runs California a close second for having some of the stupidest legislators in the country.
    Airbnbs could be regulated to work with little or no detriment to other owners/tenants. But no, leave it to New Yorkers to use a sledge hammer when a small wrench is what’s needed.
    You New Yorkers elect ’em. You deserve ’em. You’d be much better off with others, but I’m not about to hold my breath till you wise up.

  14. Many years ago I rented a home on the beach. As I was packing my car to leave, the owners showed up about 30 minutes prior to the “checkout” time. “You are supposed to be out of this house by 11:00AM. Why are you not gone?” “Well, I have until 11:00am don’t I?” I was just carrying the last bags out and was going to make a final check to make sure everything is clean.” They got nasty. From that point on, I will never rent someone’s home. Kinda like getting sick on tuna salad and never wanting to eat it again. I read too many stories of hidden cameras, hidden fees applied AFTER booking a non-refundable…eh…at least I have recourse with hotels through my credit card. As for NYC, New York in general and California…”you voted for ’em. You keep ’em and suffer the consequences.” I am all for elimination of all hidden fees, resort fees, etc. One price includes everything. Then the consumer can make an informed decision.

  15. Development companies like Extell caused the AirBNB crisis in NYC but aren’t going to actually pay for it. Too many luxury developments in areas that result in units that have the sole purpose of being a vacation spot or investment property. Kill the issue at the source.

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