This past summer, the city of New York passed new regulations that effectively ban short-term rentals, hurting companies like Airbnb and hosts who have rented rooms and apartments to supplement income.

New York City is not alone. Similar restrictions were also passed in Dallas, Philadelphia and New Orleans.

The Financial Impact on Individuals

For individual Americans, the financial impact of this growing trend will vary, depending upon where they live in the short-term rental ecosystem—as renter, traveler or host.

• Renters—For full-time city residents who rent, the expansion of short-term rental units and its attendant reduction in the supply of long-term rentals has been costly. One study by the New York City’s Office of the Comptroller found that between 2009 and 2016, rents rose 25% on average citywide, or $279 per month. During this same period, Airbnb listings rose from 1,000 in 2010 to over 43,000 in 2015. Rents in neighborhoods where such listings were most concentrated rose substantially more than the borough average. For example, monthly rent in Greenpoint and Williamsburg went up by 62.6% ($659/month) versus Brooklyn’s overall increase of 35%.¹
• Travelers—For travelers, the loss of short-term rentals may raise the cost of leisure travel. Even if hotel room rates are equivalent to short-term rental rates (not always the case), higher costs may be incurred by families who need to book multiple hotel rooms and eat out more often absent the convenience of a kitchen.

  Since travelers are not a political constituency, those additional costs concern a politician only to the extent that it harms the many voters tied to a city’s tourism industry. The impact on tourism may be minimal, however. Two surveys suggest that only 2-4% of those using Airbnb say they would not have taken the trip if Airbnb rentals were not available.²

• Hosts—For hosts, there is a clear financial impact. There are many stories of individuals using short-term rental income to meet their basic expenses, such as mortgage or rent. By one estimate, the largest gains accrued to younger, more educated households with no children and to low-income households who took advantage of peak demand. These households gained about $454 per year.³ That’s a significant loss in income.

The full burden of restricting short-term rentals is likely to become clearer as time goes on, but for individuals renting out their rooms or buying property for purposes of renting it on a short-term basis, they may want to prepare themselves if restrictions come to their town.

Sources:

1. https://www.dropbox.com/s/u4s1fcync2gseyl/AirBnB_Report%20FINAL.docx?dl=0
2. https://www.epi.org/publication/the-economic-costs-and-benefits-of-airbnb-no-reason-for-local-policymakers-to-let-airbnb-bypass-tax-or-regulatory-obligations/
3. https://www.jchs.harvard.edu/blog/winners-losers-effect-airbnb-new-york-renters

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