Lawmakers’ Airbnb war leaves sky-high rent prices untouched

To solve big and complex problems, politicians who lack the stomach to pursue sweeping structural reforms all too often settle on small-potatoes proposals that are too clever by half. Such proposals usually involve complex schemes — often opaque but “supported” by crunchy data — and avoid root causes assiduously. The politicians advocating them benefit from seeming to be engaged actively in solving the problem, and their inevitable failures usually cost less politically than hazarding to enact more daring and apt solutions. This dynamic has cropped up repeatedly in American housing policy, in cities floundering amid high rental prices.

The small potato that local policymakers dug up this time is the notion that regulating away short-term rentals — i.e., services such as Airbnb — will prompt landlords to pivot their units to long-term rentals. This increase in supply will lower prices. Or so the theory goes.

Prosecuting a new and innovative market entrant like Airbnb has an ease and a simplicity that pursuing true reform — like a zoning overhaul — lacks.

Crushing STRs has, unsurprisingly, failed to solve urban housing crunches. Anti-STR policies have proven to function primarily as inconveniences to would-be travelers and unjust obstacles to property owners earning (often much-needed) income.

Such policy has been attempted at scale — at the largest scale. In January 2022, New York City kneecapped short-term rentals, enacting onerous regulations that excised 70% of the city’s Airbnb listings (some 15,000 listings) in the month prior to its enforcement date. To lawmakers’ dismay, these units did not re-enter the market as standard rentable housing. According to Wired, research suggests that post-regulation, many short-term Airbnbs remained Airbnbs, extending their rental to 30 days or longer to remain legally compliant. The city’s efforts did essentially nothing to ease its affordability crisis.

Most Airbnb-operating landlords prefer to avoid the hassles that plague traditional full-time landlords. Tony Lindsay, president of the New York Homeowners Alliance Corp, told Wiredthat “more than 95 percent of [his] group’s members say they have no intention of becoming long-term landlords,” in Wired’s words.

And while roughly 75% pivoted to offer longer-term services, thousands of landlords simply quit, forgoing Airbnb-generated income entirely.

The New York City hospitality industry’s … shall we say … hospitality to local politicians suggests that lawmakers harbored concerns for somebody other than the average citizen or property owner. As the New York Timesprimlyput it, “The Hotel Trades Council, a powerful force in local politics and ally of Mayor Eric Adams, has long fought the expansion of the platforms.”

Sure enough, the hotels have benefitted. “Hotel occupancy rates in New York have been slightly up year over year, by 4 percent in January and 3.4 percent through February 24,” Wiredreported.

Other benefits have accrued to non-New Yorkers. Wired in March noted that “Jersey City has seen demand [for STRs] rise 77 percent year over year as of mid-February … while in Weehawken and Hoboken, demand has increased 45 and 32 percent, respectively.”

The Big Apple imposed chaos for very little return. In sum, according to the Harvard Business Review, “Airbnb contributed to about 1% of aggregate rent growth.” This in a city whose average monthly rent in 2021 surpassed $1,800. Moreover, Airbnb’s meager price impacts centered not in low-income neighborhoods — where shortages and high prices can do the most harm — but “in touristy, centrally located areas where higher-income residents live.”

Politicians’ innate tendency to solve system problems through myopic, scapegoating, donor-driven, politically convenient, property-rights-violative policies likely will never disappear. Prosecuting a new and innovative market entrant like Airbnb has an ease and a simplicity that pursuing true reform — like a zoning overhaul — lacks.

But politicians who choose the easy path over the right path deserve accountability after their policies inevitably go wrong.