Airbnb Regulation in New York: Impact on the Real Estate Market and Tourism

A new regulation for short-term rentals, known as Local Law 18, has caused significant changes in the real estate market and tourism sector in New York. This law, which took effect in September 2024, imposes strict limitations on landlords. Landlords must now be present in the property during guests' stays, and accommodations must be fully accessible to guests, including unlocking all interior doors. These measures have reduced the number of active short-term rentals, aiming to free up residential units for long-term rentals and alleviate the housing crisis in the city.

Effects on the Hotel Sector and the Tourism Market

The hotel sector is experiencing a significant increase in occupancy and revenue due to restrictions imposed on Airbnb. In the first few months after the new law came into effect, hotel room occupancy rose, and nightly rates increased by about 10% compared to the previous year. These changes come at a time when tourism in New York is rebounding, with the city expecting over 63 million visitors by the end of 2023. This trend is expected to continue, providing an additional boost to the hotel sector while reducing the availability of short-term rentals through platforms like Airbnb and Vrbo.

While the hotel sector benefits from these changes, the situation with landlords remains unclear. The number of short-term rentals has drastically decreased, but some landlords, faced with loss of income, are shifting their activities to informal channels, such as social media and sites like Craigslist. This raises the question of how effectively the new law will ensure that all short-term rentals are controlled and regulated by the city, especially with limited resources and enforcement capabilities.

Landlords and Opposition to the New Rules

While landlord and large property owner associations support the regulation due to reduced costs and risks associated with illegal rentals, many smaller property owners express dissatisfaction. The group Restore Homeowner Autonomy and Rights argues that many duplex and small house owners depend on income from short-term rentals to cover property maintenance costs. This group highlights that owners are now faced with tough choices - comply with the law and hope for approval, risk financial penalties by renting on the black market, or cease renting entirely, thus losing an additional source of income.

Impact on the Real Estate Market

The prescribed law is intended as a solution to the housing crisis, but the actual impact on the real estate market has been limited so far. Although the city has removed thousands of short-term rentals from the market, the number of vacant apartments has not significantly increased. The current vacancy rate in New York barely exceeds 1.8%, far from a healthy rate of around 5%. Experts emphasize that the effects of this regulation may not be felt for several years, as new long-term apartments begin to adapt to the market and when owners have time to adjust to the new rental conditions.

One of the main challenges for owners is adapting to long-term rentals. The process of transitioning from short-term to long-term rentals requires significant investments and additional costs, and many owners are not prepared for such changes. At the same time, the 2021 law, which requires developers to obtain special approval for building new hotels, could slow further growth in the hotel sector. Experts point out that the lack of new hotel units could further drive up accommodation prices in the future.

The Future of the Real Estate and Tourism Market in New York

New York is at a pivotal moment regarding the regulation of the real estate and tourism markets. While short-term measures may act as a solution to reduce illegal rentals and ensure residential units, the true impact on the real estate market has yet to be fully explored. Simultaneously, the hotel sector is flourishing and benefiting from reduced competition, but the question remains whether regulation will have a lasting effect on the long-term availability and prices of apartments in New York.