By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage
Regulatory Repercussions: The Underbelly of Overreach in NYC’s Rental Market
In the heart of Palm Springs and Los Angeles, two cities where Open Air Homes has firmly planted its roots, we’re no strangers to the allure and promise of short-term rentals. Over time, platforms like Airbnb have become synonymous with travel, providing travelers with a taste of local living and homeowners with an additional source of income.
But, what happens when the delicate balance between commerce and community is disrupted? We need look no further than the recent clampdown on Airbnb in New York City to witness the unintended consequences of strict regulations.
Regulation Ripple Effect
In a move meant to address housing concerns, as outlined in the NY Post, New York City’s recent restrictions on Airbnb have had a stark impact. Most short-term stays have been curtailed, and guest limits have been put in place. From a whopping 22,000 listings, Airbnb’s presence in NYC has plummeted to a mere 2,300. While some may see this as a win for housing advocates, it’s had the unintended consequence of driving this market underground.
Remember the old saying: nature abhors a vacuum? Well, in the world of real estate and rentals, the same principle applies. The void left by Airbnb’s decline has been quickly filled by underground listings, popping up on platforms like Facebook Marketplace and Craigslist.
The Perils of Going Underground
This shift to underground listings presents a significant concern. At Open Air Homes, we often hear of potential guests who’ve stumbled upon suspiciously low-priced listings of our homes on sites like Craigslist.
It’s a bitter pill to swallow, but a listing for a home that typically rents for $5000, suddenly available for a mere $1600, is almost certainly a scam. We have had our fair share of frustrated people reach out to us to “confirm their home is booked,” only to find out that they sent money to a stranger over the internet.
Now, with NYC’s clampdown, these scams are likely to proliferate. Sites like Craigslist, while useful, don’t have the security checks and infrastructure to vet every listing. The risk? Unsuspecting renters paying for non-existent properties. Syed Lateef, a seasoned Airbnb super host, underscores this risk, noting the absence of Airbnb’s background checks and insurance provisions when turning to alternative platforms. In essence, without the safety net of established platforms, renters are treading in murky waters.
The Unintended Economic Impact
Beyond the immediate risk to renters, there’s a broader economic story unfolding. Airbnb projects an $85 million loss in annual revenue due to the NYC regulations. The city’s hotel industry, on the other hand, is experiencing a surge in room rates, with an 8% increase reported in October alone.
For cities like Los Angeles and Palm Springs, this NYC narrative offers valuable lessons. While regulating short-term rentals is essential to preserve the character and affordability of neighborhoods, it’s crucial to strike a balance. Overregulation can push the market underground, exposing renters and hosts to risks and depriving the city of valuable tourism revenue.
In Palm Springs for example, we are aware of a lot of homeowners who believe the Palm Springs regulations are too stringent, and they end up taking private deals on the side. These private deals are void of insurance and vetting, and can create more trouble for communities as a result.
At Open Air Homes, all of our homes operate within the regulations set forth, we see it as the only way to operate a business, but the NYC crackdown and subsequent underground market is a cautionary tale to other cities about what will happen if the regulations you enact are too restrictive.
A Balanced Approach To Regulating The Short Term Rental Industry
The NYC-Airbnb saga is a testament to the intricate dance between regulation, market forces, and consumer needs. As proponents of the short-term rental market, we at Open Air Homes have always championed the cause of responsible renting, both for hosts and guests. As cities grapple with housing shortages and the evolving role of platforms like Airbnb, it’s essential to approach the issue with a balanced perspective, considering the broader implications of stringent regulations. The journey from commerce to community is a two-way street, after all, and the current regulations set forth by NYC will likely end up doing more harm underground than good.
