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The Dangerous Rise of Underground Short-Term Rentals: New York’s Unintended Consequence

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By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage

New York City Grapples with the Chaos of Short-Term Rentals

A Startling Drop In Registrations

Only about 2% of New York City’s prior 22,000 short-term Airbnb listings registered with the city after a new law restricting such listings was enforced. This has resulted in a drastic decline of Airbnb’s listings according to Wired, with the number plummeting by over 80%, from 22,434 in August to just 3,227 by October 1st. And of those, only 417 properties received the city’s official nod to continue operations.

Emergence of the Rental ‘Black Market’

With the city’s crackdown on such listings, a ‘black market’ of sorts has emerged. As Lisa Grossman from Restore Homeowner Autonomy and Rights (RHOAR) puts it, people are “going underground”. Property owners are turning to alternative platforms like Facebook, Craigslist, and Houfy to advertise their rentals. This circumvention means renters and hosts are operating without the security checks of platforms like Airbnb. Moreover, as hotel demand potentially rises, so could their prices.

Shifts in Airbnb’s NYC Business Model

The regulations have transformed Airbnb’s business model in the city. About 94% of their listings in New York now cater to long-term stays. The stringent rules demand that hosts can only accommodate two guests and must be present during their stay. This has largely eliminated whole-apartment listings, barring a few exceptions.

Loopholes and Workarounds

But even with these rules in place, many property owners are trying to find loopholes. Some Airbnb listings now provide a space for hosts to mention a registration number or claim exemption. Despite the crackdown, there are listings that clearly don’t adhere to the new norms – like whole units available for short-term stays without any visible hotel or exemption indicators.

Small-time Landlords Push for Flexibility

This ‘chaos’ is a clear example of the teething issues cities face when trying to regulate emerging industries.  Let’s be clear, Airbnb and Short Term Rentals are no longer emerging industries, especially now that Airbnb is a publicly traded company, but cities like NYC are just now treating them like this new idea of renting out your additional space is a new idea. 

While supporters believe the new rule will free up housing for residents in a city known for high rents and housing shortages, others, especially small-time landlords, see it as a blow to their supplemental income sources. Groups like RHOAR, representing these smaller landlords, are pushing for change, seeking more flexibility in regulations.

The Evolving Landscape of Short-term Rentals

Away from Airbnb, the quest for short-term rentals continues in online spaces like Facebook groups and Craigslist. Websites like Houfy offer a platform to connect guests with hosts without the typical Airbnb fees.

At Open Air Homes, we have dealt with the ramifications of this underground market for years.  Guests are constantly swindled through Craigslist posts by individuals trying to collect money to rent our homes, and the deals they offer guests are so outrageously good, that we easily see how tempting it would be to fall for these schemes. 

Our belief is that the underground market being created will lead to more problems than the issue they were originally trying to address, and shows a clear message that the idea of renting out your additional space to short-term guests is an idea that is here to stay, and no amount of regulation will halt the activity from occurring, it will just make it more dangerous by forcing everyone into the black market. 

Where Does NYC and Airbnb Go From Here?

As New York grapples with these challenges, Airbnb is broadening its horizons. The company’s CEO, Brian Chesky, recently hinted at exploring longer rentals, car rentals, and even dining pop-ups. For now, though, Chesky views New York not as an exemplar but as a “cautionary tale.”

While I am not sure about the car rentals and pop-ups, I fully agree with Chesky that longer-term rentals, what we call Month+ (please, steal it from us Airbnb, as it makes so much more sense than Extended Stays or Medium Term Rentals), are what renters are asking for.  More and more people are embracing this cultural and work shift to work from anywhere, and want affordable options that are longer than your traditional week short-term rental. 

At Open Air Homes, in 2019 we realized that there was a big move towards people coming for longer periods of time, and we began to build our portfolio of exclusively Month+ rentals.  Guests who stay for longer periods of time are better for the environment (less travel for weekend trips), and also truly get to engrain themselves into communities, which is beneficial for all of the stakeholders involved – from the neighbors to the local coffee shops and restaurants.  

Our advice to Airbnb at this time in NYC (not that they need advice as a publicly traded company), would be for them to embrace and educate renters on the benefits of moving to a place like NYC for 1-3 months, and really encourage the adoption of this idea that people ought to consider traveling for longer periods of time.  

Further, along with a marketing campaign to encourage people to move to NYC for 1-3 months, they could consider lowering their fees for Month+ bookings for a period of time to make up for the losses to NYC hosts from this new regulation.  By providing travelers with a more affordable way to explore NYC, Airbnb can help further this wave of travelers looking for Month+ stays, travelers who are better for the environment and treat the neighborhoods as if they were their own. 

As the CEO of Open Air Homes, I did just this for the summer, and used Barcelona as my base-camp for work.  My productivity and creativity was enhanced being in a new environment, and while I understand not everyone can take this approach, as the WFH movement seems here to stay for many companies, it is becoming the reality for more and more people. 

NYC is a Pivotal STR Market for Airbnb and Will Remain One Worth Fighting For

In conclusion, this is a tricky time for NYC hosts. Airbnb is so diversified that will be just fine regardless, but NYC is a pivotal and influential market full of the types of renters that make Airbnb what it has become.  Having an offering in NYC is critical, and I would venture to say that even if that offering is exclusively Month+, Airbnb can use it as a test case for what the future of Month+ rentals looks like. NYC has forever been a leader in innovation, and our hope is that both hosts and Airbnb embrace longer stays, begin to educate travelers that this can be done affordably and give hosts a true alternative to shutting down their listings.   

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