In a recent survey commissioned by Airbnb and conducted by Penta between November 17-22, 2023, results indicate that the implementation of Local Law 18, aimed at regulating short-term rentals, is having a significant impact on visitor behavior. While the survey sheds light on the deterrent effect of stringent regulations, there is a concurrent slowdown in New York City (NYC) rent growth, marking a notable shift since the pandemic.
Impact of Short-Term Rental Rules on NYC Tourism
The survey, covering more than 1,000 past and future visitors, reveals that 18% of respondents are now less likely to visit New York City due to the new restrictive short-term rental rules. The rising prices of hotels have further dissuaded 65% of travelers, leading many to consider alternative, potentially unregulated platforms (54%).
Additionally, 30% of respondents express a preference for staying with friends or family over hotels, potentially resulting in a loss of tax revenue for the city. The impact extends beyond Manhattan, with 33% of travelers indicating changes in their approach to staying in NYC, showing a reluctance to explore boroughs outside Manhattan and a tendency to seek unverified rental options.
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The U.S. Department of State reported that New York City attracted 56.7 million visitors in 2022, generating $6.2 billion in tax revenue and supporting 344,000 jobs. With a potential $1.1 billion loss in tax revenue looming, the city faces economic challenges at a crucial time when local government spending is tightening.
Theo Yedinsky, Global Director of Policy at Airbnb, highlights the negative consequences, stating, “This survey demonstrates Local Law 18 is bad for the local economy and visitors who are now faced with fewer places to stay and higher hotel prices.”
Impact on Short-Term Rental Market
The survey aligns with the observations made in the three months since Local Law 18 took effect. Short-term rental activity has shifted to unregulated third-party websites, leading to fewer options for travelers and a spike in hotel prices, as evidenced by the Trivago Hotel Price Index.
Hotel prices in NYC were nearly 5% higher year-over-year in December, and rental inventory decreased by 3.6% between August and November.
Despite this, NYC is experiencing the slowest year-over-year rent growth since August 2021, with the median asking rent at $3,500, up 2.9% from November 2022. Rental concessions hit a two-year high in November 2023, indicating a cooling rental market and suggesting a further slowdown in rent growth for the upcoming year.
Manhattan leads the five boroughs in inventory growth, with a decline in median asking rent by 1.1% to $4,150 in November. This trend is expected to continue in 2024, with improved affordability in the borough likely to attract more renters prioritizing quick commutes.
Brooklyn, on the other hand, experienced a 3.1% slip in median asking rents to $3,293 in November, while Queens stood out as the only borough where rent growth is not slowing, up 11.5% from November 2022.
Outlook for 2024
Renters in Brooklyn can expect relief in 2024, with more units entering the market and an increase in rental concessions. In Queens, limited inventory relative to strong demand has allowed landlords to hold back on concessions, but with rising inventory, renters may find a less challenging market in the coming year. Despite these trends, the overall citywide rental market remains competitive.
Information for this briefing was found via StreetEasy and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
