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AirBnBust - The (Maybe) Conspiracy Behind The NYC Airbnb Ban.

TL;DR: Is New York City's Local Law 18 the death knell for Airbnbs in the Big Apple or a well-intentioned regulation gone awry? Our deep dive explores the nuances of the new law, the powerful interest groups driving the agenda, and the broader implications for housing, tourism, and personal freedom. We unpack the contentious debates around LL18 and investigate whether the law serves the public interest or simply plays into the hands of the hotel lobby and anxious politicians. From housing affordability to the "open-air museum" phenomenon, find out what this means for you, whether you're a host, a traveler, or just a concerned citizen.

Local Law 18.

On September 5th, 2023, New York City began enforcing Local Law 18 (LL18), known as the "Short-Term Rental Registration Law," or more simply, "The Airbnb Ban." While it's not a de jure ban in the strictest sense, the law's provisions make it nearly impossible to operate an Airbnb in NYC. In this article, we will examine LL18, explore the motivations behind its enactment, evaluate the data that both supports and contradicts the various arguments, and aim to unravel the complexities of this contentious debate.

Is LL18 a Ban?

Technically and legally speaking, the answer is no. LL18 does not constitute an outright ban on Airbnb or other short-term rentals in NYC. However, while the city defends LL18 as a regulatory measure aimed at curbing illegal Airbnb activities, the stringent stipulations make it hard to see the law as anything other than a de facto ban.

Firstly, the law requires hosts to be present throughout the entire duration of the Airbnb stay. Gone are the days when New Yorkers could rent out their apartment while vacationing elsewhere. Now, if you want to list a part of your residence, you must be present. No exceptions.

Secondly, the law imposes a limit on the number of paying adult guests. Regardless of the number of bedrooms your property has, Airbnbs in NYC can now only accommodate two paying adults. This effectively rules out group vacations, bachelor or bachelorette parties, and family gatherings.

Lastly—and this is the point that has most people up in arms—the law dictates that Airbnb hosts must keep the entire unit accessible to guests for the duration of their stay. This means hosts can't lock bedroom doors, closet doors, or maintain any private, host-only areas. For many, this last requirement serves as the final straw, raising serious concerns about personal privacy, safety, and the risk of theft.

Where did LL18 come from?

Three primary groups championed the passage of Local Law 18 in 2022.

Firstly, there was New York City itself. The city has long maintained a contentious relationship with Airbnb, citing challenges in policing illegal (i.e. unregistered) short-term rentals and addressing a high volume of resident complaints—most notably those stemming from disruptive Airbnb parties.

Secondly, housing advocacy groups joined the fray. Their central argument was that the proliferation of Airbnbs eats into the available housing stock, consequently driving up rental prices in an already tight market. Some advocates went further, pointing out that in certain neighborhoods, the preponderance of Airbnbs has led to a "tourist-only" environment, eroding the authentic residential character that made these areas attractive in the first place.

Lastly, the hotel industry—led by the American Hotel and Lodging Association (AHLA) and the Hotel Trades Council (HTC)—has been a vocal supporter of such legislation, not just in NYC but across most U.S. cities. The AHLA and HTC argue that short-term rentals, which they often disparagingly refer to as "illegal hotels," flout local laws, compromise safety, diminish affordable housing options, inflate rental prices, and displace long-term residents. In the words of the AHLA:

The hotel industry supports home sharing and the rights of property owners to rent out a room in their home. We have advocated for ordinances that officially legalize such short-term rentals. However, we also believe that short-term rentals should adhere to the same legal framework as hotels and other businesses: registering their enterprise, paying taxes, abiding by laws and regulations, and eliminating illegal listings.

More on that later.

Is this a trend?

NYC is far from the first city to impose restrictions on Airbnb, though its regulations are notably stringent. Cities across the U.S. and around the world have introduced a variety of rules, including registration requirements, length-of-stay limits, and stipulations on who can rent out their properties—and for how long each year.

For instance, Dallas has geographically confined Airbnbs to specific areas. Paris and Amsterdam have imposed limits on the number of nights apartments can be rented out. Even the New Jersey suburb of Weehawken has opted for an outright ban. Indeed, one could pen an entire book on the myriad Airbnb restrictions worldwide—perhaps not the most riveting read, but informative nonetheless!

The common thread underpinning most governmental regulations is the assertion that Airbnbs are inflating housing costs, depleting the pool of rentable residential units, and—in the words of Paris' mayor—transforming our cities into "open-air museums." These are urban spaces that, while brimming with historical allure, are devoid of genuine local life and increasingly overrun by tourists.

Are the Arguments valid?

By now, you're probably wondering, "These are strong allegations against the short-term rental market, but are they actually valid?" Let's delve into it.

First, there's the claim that Airbnb has a negative impact on cities by causing an influx of tourists. While there isn't an abundance of data directly linking the rise of Airbnb to increased tourism, several studies (including one in partnership with Airbnb) indicate that the availability of Airbnb listings does lower hotel prices by increasing the supply of accommodations, and thus the accessibility of hotel accommodations for lower income groups—classic supply and demand economics at work. According to the U.S. Bureau of Labor Statistics, citing Working Paper No. 24361 from the National Bureau of Economic Research, Airbnb reduced hotel profits by approximately 3% nationally in 2014 and added $137 million to the U.S. economy by directly funneling capital to hosts and vacationers through transactional savings and profits. These numbers have likely grown significantly since then.

Next is the claim that Airbnb drives up rental costs for residents. While most studies agree that an increased number of Airbnbs can lead to higher rents due to supply and demand factors, the exact rate of correlation remains uncertain. One study from Williams College Department of Economics suggested that the price increase could range between 3.5% in rural areas and 65% in urban cores, although this was based on theoretical models rather than a direct summary of existing statistical evidence. Another paper by Andrew Bibler (University of Nevada), Kieth Telster (Georgia State), and Mark Tremblay (Miami University) found that regulatory crackdowns on Airbnbs in certain U.S. cities led to around a 10% decrease in home valuations in areas with the highest density of Airbnb listings. This suggests that the presence of Airbnbs had been inflating home values—and consequently, prices.

Interestingly, both papers cautioned against drawing hasty conclusions based on their data. Bibler, Telstar, and Tremblay emphasized that Airbnb's prevalence was not the "whole story" regarding housing affordability and even suggested that Airbnbs could reduce the risk of foreclosure on family homes. The Williams paper explicitly warned against making policy decisions (like NYC's LL18) solely based on the data surrounding Airbnb-home price correlations:

Public policies that reduce house prices in pursuit of housing affordability by diminishing the efficiency with which an owner can make use of his or her property may fail to be welfare-improving. A city that creates 'affordable' housing by encouraging more crime hardly seems desirable. Evaluating the welfare consequences of Airbnb, and hence the appropriateness of any regulatory action to limit the use of Airbnb services, requires a deeper analysis than we or anyone else has provided to date.

So, are the arguments against Airbnb valid? The answer is valid; but valid enough to influence policy decisions? Probably not.

The AirbnBust Era.

Based on our analysis, the laws and restrictions concerning Airbnb seem to arise from a combination of concerns: from city lawmakers worried about the rising cost of housing and the impacts of tourism, to hotel industry advocates seeking to maintain their competitive edge. Both perspectives pose challenges for the general public.

Firstly, when looking at this from the angle of local politics, it appears to be part of a broader trend in which politicians focus on readily identifiable targets—like Airbnb, investment firms, or landlords—instead of addressing the underlying systemic issues contributing to housing crises or community concerns. This is not to dismiss the impact of large-scale renting or investment on local markets, but rather to stress that the data supporting claims against these "culprits" is often inconclusive or nonexistent. In this light, blaming Airbnb or similar platforms can serve as a convenient political strategy for lawmakers, allowing them to sidestep more complex debates over planning, zoning, or other regulatory factors that contribute to housing scarcity or affordability.

Secondly, from the perspective of the hotel industry, reports from reputable sources such as The New York Times suggest that there's an aggressive push to influence policy in their favor. If this is accurate, the result is laws that limit consumer choice, reduce competition, and potentially eliminate supplemental income opportunities for residents in expensive areas; more worryingly, it shows how even the most progressive places in the nation can be easily manipulated by special-interest groups. As the NYT puts it in a separate more-recent article: “The Hotel Trades Council, a powerful force in local politics and ally of Mayor Eric Adams, has long fought the expansion of the platforms.”

Most likely, the reality lies somewhere in between these two viewpoints. The concern here is that yielding to either protectionist tendencies or special interest lobbying can have unintended consequences, particularly for those in lower economic brackets. For instance, if cities limit Airbnb options in favor of traditional hotels, budget-conscious travelers may have to either compromise on their travel plans or forgo them altogether. Similarly, laws like NYC's LL18 could potentially deprive residents of a viable means to supplement their income in areas where living costs are high, and it is impossible to plan for every specific scenario that someone might encounter which would push them to engage in an Airbnb rental.

Moreover, overly restrictive laws can push people to look for alternatives outside the conventional market, such as listing properties on less-regulated platforms or sites. This could create an informal economy that lacks the consumer protections afforded by mainstream platforms.

As one economics professor of mine once put it, "unlike God, when governments close a door, they don't open a window, they break it." This metaphor captures the essence of the current situation. In an eagerness to look like they are taking action, or appease their donor base, politicians have hastily enacted laws without fully considering their long-term implications. Consequently, rather than letting the market dynamics naturally evolve and give Americans the choice over what to do with their own property, legislators limit choices, enrich large corporations, and make our lives that little bit harder.

But, hey… at least Hilton is happy, right?

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