The hospitality industry has faced tumultuous changes in the past few years, with policy shifts and global circumstances dictating the market’s direction. With NYC’s latest restrictive regulations on Short Term Rentals (STR), homeowners are once again forced to pivot and adapt. Could the answer lie in Month+ rentals? Let’s explore.
By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage
This is a four-part series on the crackdown of Airbnbs in NYC. The first delves into the hotel lobby’s efforts to curtail affordable options for guests visiting the city. The second urges the hotel lobby and industry to look inward about how they can create experiences that guests truly want, instead of spending their lobbying dollars to influence politicians to create draconian regulations. The third will explore if Los Angeles could be next on the hotel lobby’s list, as they attempt to shepherd travelers back into traditional hotels. The fourth, our recommendation for choosing the path of medium term, or Month+ rentals, for NYC residents, as we have done in Los Angeles successfully.
This post was inspired by the great NY Times podcast, Hard Fork. We highly recommend listening to the first segment of this podcast to hear Kevin Roose and Casey Newton’s take on the crackdown. And yes, we are purposely linking to their Threads instead of Twitter. The lesser of two evils.
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Los Angeles’ Adoption of STR Regulations in 2019
In 2019, the city of Los Angeles underwent a seismic shift with the introduction of regulations on short-term rentals. These laws capped the number of days a property could be rented out short-term at 120 days a year, as well as much needed restrictions on noise and party homes. Initially deemed draconian, recent developments in NYC make LA’s policies seem balanced in hindsight.
Breathe Malibu by Open Air Homes
Open Air Homes’ Medium Term Rental Pivot: A Case Study
Los Angeles, with its burgeoning tech scene and tourist-friendly climate, was a haven for short-term rentals. But it wasn’t just tourists flocking for the Hollywood dream; tech professionals, artists, and entrepreneurs began to see LA as a city where prolonged stays were beneficial. This shift was not mere happenstance but a marked change in the way people traveled and worked.
Open Air Homes, witnessing this trend, transformed a significant portion of its properties into Month+ rentals. Not only did this allow homeowners to monetize their homes in compliance with the law, but it also addressed a growing market demand. Although the transition meant reducing nightly rates by approximately 20% in many cases, the occupancy rate for medium-term rentals soared.
Oftentimes, our homeowners are making the same amount of money, if not more, when their homes are filled month to month when you account for the 100% occupancy rate when filled, as opposed to the 70-80% target rates we regularly achieve with short term rentals.
The Human Element in Rentals
Instant bookings, a common feature in many rental platforms, were identified as a potential pain point at the time. Open Air Homes believes in preserving the human element in the booking process, ensuring that guests are community-conscious and respectful. This philosophy goes beyond just profitability – it’s about sustainable and community-friendly business practices. By turning off Instant Bookings and requiring guests to send us an introduction message, we have nearly eliminated the party groups from renting our homes.
New York’s Looming Regulation and A Potential Way Forward
The impending regulation, set to roll out on September 5th, 2023, in NYC, paints a grim picture for many homeowners. However, NYC homeowners have an opportunity to take a page out of our playbook. By switching to Month+ rentals, they can not only comply with the new regulations but cater to an evolving market of long-term travelers and remote workers.
Benefits of Month+ Rentals
1. Community Integration: Longer stays mean guests assimilate into the neighborhood, fostering genuine connections. Longer term guests are more likely to respect your home, the community, and your house rules. They are not here for a weekend getaway to have a party, but instead to live in your neighborhood.
2. Steady Income: A prolonged rental often ensures a stable and consistent income for homeowners.
3. Adapting to the New Work Culture: With remote work becoming ubiquitous, many professionals seek destinations where they can work and vacation. NYC, with its vibrant culture and global appeal, is a prime choice.
4. Less Turnover: Many homeowners and neighbors prefer the Month+ strategy, as it lowers the turnover of guests in the home, and creates less wear and tear.
Navigating The Tenant Legal Waters
Transitioning to Month+ rentals isn’t without its challenges. One significant distinction lies in the realm of tenancy. In states like California and New York, anyone residing for over 30 days is legally considered a tenant and not a mere guest. This status shift bestows them with tenants rights.
Open Air Homes, having operated in LA, recommends NYC homeowners to be legally equipped. Engaging a real estate attorney to draft comprehensive rental agreements is crucial. Guests over 30 days do have tenant rights, and in California, by having all guests over 30 days sign a CAR form, we have a legal path forward should we ever face a situation where eviction becomes inevitable. Although Open Air Homes hasn’t faced eviction challenges, forewarned is forearmed.
The Silver Lining in Adversity
Many homeowners rely on rental income to support their work and passion projects. While the new regulations can seem daunting, they can also be viewed as a pathway to innovation and adaptability. As the hotel industry lobbies for stricter rental regulations, driven by a profit and occupancy motive, homeowners can find solace in alternative rental strategies.
Month+ Rentals Will Continue to Grow in Demand, And Now Is Your Chance to Adapt
New York City, a global hub, is resilient and ever-adapting. The hospitality landscape, influenced by policy, market demand, and global trends, will continue to evolve. Month+ rentals, bolstered by the irreversible shift towards remote work and prolonged travel, offer a promising alternative. For homeowners grappling with the new regulations, this could be the beacon of hope they’re searching for. Adaptation, after all, is the essence of survival and growth.
