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New York's crackdown on “commercial” Airbnb listings is misguided

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Lawmakers in New York have declared war on Airbnb, passing legislation last month that regulates short-term housing rentals in a way that threatens to reverse the company’s explosive growth.

As state assembly member Linda Rosenthal, one of the law’s sponsors, put it back in June, Airbnb has created “a black hole for New York’s housing stock — sucking in residential units and churning out commercial properties that deplete housing supply and drive up rent."

In an attempt to stop more long-term rental units from being converted into de facto hotel rooms, New York legislators have made it illegal to advertise a sublet for fewer than 30 days unless the owner or resident is present. If strictly enforced, that would affect 20,000 current Airbnb listings in New York — roughly half the city’s total.

But many experts think the problem New York is trying to solve here is overblown. Airbnb rentals account for a tiny fraction of New York City’s housing stock, and research shows that they have a very small effect on affordability. Meanwhile, the law threatens to quash much of what makes short-term rental services innovative and useful.

If the law is fully implemented, said George McCarthy, president of the Lincoln Institute of Land Policy, “The most likely outcome is it will harm people who are just trying to manage their lives in what is unfortunately a very unaffordable market.”

Airbnb isn’t just about “sharing”

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Airbnb founders Nathan Blecharczyk, Joe Gebbia, and Brian Chesky.
Photo by Charley Gallay/Getty Images for Airbnb

Short-term rental platforms like Airbnb, HomeAway, and VRBO allow ordinary people to take resources they already have — living spaces — and use them in new, useful ways. When someone rents out a spare room that would have otherwise been empty, it’s a win-win situation for everyone.

But not all Airbnb listings are like that. Some are posted by commercial operators renting out entire apartments that were acquired for that specific purpose.

How common is this kind of activity? A good way to estimate this is to look at the most active listings — those booked for at least 180 days over the course of a year. These listings account for about a third of all “host” income in Airbnb’s 25 largest markets, despite representing just 10 percent of all listings there. That’s according to an analysis based on data gathered from Airbnb’s website by analytics and consulting firm AirDNA.

We don’t know whether every such listing represents a unit of long-term housing that was removed from the market. But it’s a reasonable guess that a lot of them are. And in a market like New York where housing supply is tightly constrained, that raises red flags for a lot of people concerned about housing affordability.

Critics argue Airbnb has no obvious financial incentives to oppose commercial use of its site. Indeed, commercial listings seem to be getting more common, despite the company’s occasional en masse removals of such listings (often under political pressure).

New York’s law is part of a wave of harsher regulations aimed at commercial hosting

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The administration of New York Mayor Bill de Blasio will be in charge of enforcing the new law.
Photo by Kevin Hagen/Getty Images

Worries about Airbnb cutting into a limited housing supply — and evading safety, tax, and other regulations that apply to conventional hotels — has inspired a number of cities to pass a variety of laws regulating short-term rentals.

Some smaller cities such as Raleigh, North Carolina, and Jersey City, New Jersey, have embraced Airbnb and its peers, fully legalizing the services in exchange for agreements for hosts to pay taxes equal to those paid by hotels.

Larger cities have tended to be tougher. New York’s rules were some of the nation’s toughest even before the new law. Renting space in residential units for less than 30 days without the owner present has been illegal in the state since 2010.

Hosts have largely ignored the restrictions, though. Actual rental transactions don't appear on short-term rental sites. Only advertisements do, in the form of listings. That makes it difficult to identify specific cases of rule breaking.

The new law targets the listing itself, removing a major roadblock to enforcement. It also levies fines directly on hosts who violate the rules — $1,000 fines for the first infraction, $7,500 for repeat offenses.

New York is not alone in its aggressive approach. Santa Monica passed a similar law in 2015. Berlin’s effective ban on whole-unit rentals, passed in 2014, took effect this year.

Other cities, such as San Francisco, where Airbnb is based, have targeted their restrictions more narrowly at commercial use. The city mandates that all would-be hosts must register their listings, certify they live in them, and produce quarterly reports on their bookings. Hosts seeking to rent entire housing units must cap their activity at 90 days per year. San Francisco’s Board of Supervisors approved rules this week to reduce that cap to 60 days.

Many other cities have imposed or will likely soon impose such caps, including Los Angeles, Portland, New Orleans, Amsterdam, and Paris.

Commercial hosting has only a small effect on rents

New York’s law makes no attempt to distinguish commercial hosts from amateurs. Hosts who hope to rent out their living spaces while on vacation, say, will have to think twice for fear of incurring fines. Those listings are far more common than commercial ones.

The median whole-unit Airbnb listing in New York is booked for 37 nights a year, according to numbers the company released this month. Restricting such listings pleases some landlords, some angry neighbors, the hotel industry, and probably many others. But there’s every reason to think it’ll also hurt New Yorkers engaged in useful economic activity, some of whom rely on short-term rental income to afford their rent.

But even the harms from commercial hosting are overblown, according to many experts. Experts say that so far, the practice has had little effect on housing availability and rent.

Consider New York. As of last December, there were roughly 2,500 “commercial units” — defined as short-term rentals booked for 180 days or more over the course of a year — according to data Airbnb made available at a one-day-only, in-person viewing for reporters.

While 2,500 apartments isn’t peanuts, that represents just 0.11 percent of the city’s 2.1 million total rental units, according to the 2014 Housing and Vacancy Survey. That proportion roughly holds true in other large cities, according to AirDNA’s data.

“It is a valid concern, and a lot of cities are looking at it,” said Stockton Williams, executive director of the Terwilliger Center for Housing at the Urban Land Institute, “but it’s hard to discern any significant impact yet.”

Williams argues that other factors have had a much larger effect in pushing up rents, including strict zoning rules, rent stabilization policies, population trends, and the ongoing, gradual increase in the Americans’ demand for urban living.

We don’t know how tough New York regulators will be

The big question now is how strictly New York officials will enforce the law’s requirements. If regulators enforce the law to the letter, it could lead to tens of thousands of housing units being shuttered — an outcome that would be bad news for both Airbnb and a large chunk of the platform’s hosts.

But since New York’s law was signed, backers have signaled that they plan to keep enforcement fairly small-bore. Investigators will continue to work from phoned-in resident complaints rather than dragnet internet searches. And the focus will remain on truly commercial operators, not on residents making extra money while away on vacation.

Still, Airbnb isn’t taking anything for granted. In a statement, the company said the law failed to distinguish between ordinary users and illegal hotel operators. Its passage, the company argued, “was driven by Albany politicians seeking to target responsible home sharers at the behest of the price-gouging hotel industry and sends a message to the rest of the world that New York is not open for business when it comes to innovative ideas.”