New York City officials blame everyone but themselves for housing unaffordability

By implementing onerous requirements on Airbnb hosts, New York City is attempting to scapegoat short-term rental (STR) sites for the city’s own failings. Rather than accounting for city policies that continue to drive its housing and hotel room shortage, officials have decided to target the city’s 40,000 active listings, operated by—mostly smalltime—Airbnb hosts. In the end, the city will get neither the housing affordability nor housing supply it purports to be seeking, but it has handed yet another political win to the hotel workers’ unions.

While the city has followed the examples of Dallas, Philadelphia, New Orleans, Los Angeles, and Boston, the backstory to the passage of NYC’s STR law, which requires STR hosts to register with the city and to be present during the guest’s stay, is particularly egregious.

Consider that in 2010, the city, at the behest of the hotel workers’ union, began its assault on hotels. The goal was to limit the construction of new, generally nonunion, hotels, to increase hotel room prices, which would particularly bolster higher-end union hotels. The city first banned and closed 55 youth hostels, before later imposing stringent requirements on building new hotels. Even the city predicted a hotel room shortage, and indeed not a single hotel permit has been issued since.

While the union certainly got its way with the city, it did not foresee the ingenuity of the free market. Once hotel rooms became scarce, STRs, with no union workers, started to fill the void. The hotel union needed to avoid the fate of NYC cabs, which had been dealt a near-fatal blow by the emergence of ride-sharing apps such as Uber and Lyft. Remember when in 2013 NYC taxi medallions were worth as much as $1 million? Today, they sell for about a tenth.

It should come as no surprise that the hotel unions, true to form, would be the driving force behind the STR crackdown. After all, the roughly 40,000 STR residential listings may only represent 1 percent of NYC’s total housing stock — too small to have a significant impact on housing affordability (as studies have shown) — but they present a significant threat to the city’s roughly 120,000 hotel rooms.

In its quest to rein in STRs, the union’s effort was assisted by citizens concerned about loud noises and other disturbances from STRs, which supposedly justified sweeping action. If true, these legitimate concerns could and should be dealt with through nuisance laws, rather than outright bans. After all, homes are private, not communal, property.

However, elected officials were once again happy to do the bidding of the union and NIMBYs by falsely adopting housing affordability as the rallying cry. Of course, the inconvenient truth is that housing in high-cost places such as NYC was unaffordable long before STRs emerged about 15 years ago. Furthermore, housing cost rose 25-30 percent in the New York metropolitan area since the onset of the pandemic, while STR listings fell by about half.

The ban will also not free up many units. Most STR hosts share their homes infrequently, rather than full-time. On average, NYC’s STR listings were rented out for 19 days and provided about $2,200 of income per year. It used to be that cash-strapped residents could turn to STRs for a modicum of supplemental income. No more. Preliminary data indicate that after the ban, STR listings have dropped by almost 80 percent in New York City, boosting the profits of the city’s hotels, which already charge among the highest rates in the country.

While NYC’s sledgehammer approach may play well with local unions and NIMBYs, in reality, the root cause for housing unaffordability is government regulatory failure. Home prices and rents are high because state and local laws have prevented more supply from being built while federal lending and monetary policies have juiced demand for this inadequate supply.

Ironically, it was NYC that pioneered the nation’s first zoning law. Today, its zoning regime has morphed into a bureaucratic monstrosity: the names of the various zoning districts alone run 16 pages long, the residential district regulations 283 pages, and the entire document 3448 pages. It is easy to see why building new housing has become so complex, costly, and rare. But rather than repeal laws that shackle the market, NYC’s bureaucrats now want to bribe 55 homeowners with $400,000 each to build tiny houses in their backyard — as if that would make any difference.

The example of NYC’s STR ban shows that the laws of supply, demand, and unintended consequences cannot be ignored. Yet, city officials in many places will embrace every opportunity to divert attention from their own policy failures by doubling down on yet more market distortions. Instead, the path to affordability and prosperity for all starts by cutting red tape and unleashing the free market system.

Tobias Peter is an American Enterprise Institute senior fellow and co-director of the AEI Housing Center.