The housing issue in New York City has never been more dire than it is in 2018, with a vacancy rate of 3.6% according to the New York City Rent Guidelines Board 2018 Housing Supply Report. Rental listing analytics from Reis state that as of Q2 2018, the average asking rent for an apartment in New York was $3,653. The city currently has a rent rate much higher than the national average (roughly $1,064, collected by averaging the one-bedroom and two-bedroom rates) caused by a number of factors, including unit supply-to-population ratios. However, affordable housing advocates have pointed the finger at short-term rental companies like Airbnb.
The New York City Council and Airbnb have been locked in a judicial conflict for some time. As it stands, New York City prohibits rental properties that operate on 30-day rental periods if the property is a zoned apartment and the tenant is not present. In early July, the council passed a bill that would require the company to disclose the names and addresses of all of its city hosts in an attempt to prevent illegal listings that are driving up the rental rate further, as they take permanent rental units off of the market for local citizens. This legislation could cut the total number of Airbnb’s New York City bookings in half and severely affect the company’s bottom line, an estimate stated by unidentified sources in the article who are familiar with the financial impact. The policy follows a 2011 set of laws that gave the city more power to crack down on illegal units and a 2016 law that increased fines directed at illegal listings to a maximum of $7,500. Based on these figures, the policy changes are well-advised.
Reports like The High Cost of Short-Term Rentals in New York City that McGill University released in January may have possibly informed the decision as it states the company’s impact on rents, finding that Airbnb’s business model has removed between 7,000 and 13,500 units from New York’s long-term rental market. The study also reported that the reduction in housing supply has caused a boost in rent rates over a three-year period (2014–2017) by 1.4% (or $380 New York-wide). Between 2011 and 2018, there was a steady rent rate increase (refer to Exhibit 1) averaging about 5.4% across all room types. This increase is much more aggressive than the trends that the rest of state experienced (3.2% between 2011 and 2018; refer to Exhibit 2). The only solace in the rental market is that landlords are offering more concessions in 2018 to create more affordable rental units.
One of these affordable housing advocates is a data-driven online resource called Inside Airbnb, a data analytics group that has been tracking Airbnb listings in major cities across the world. Based on the data collected on July 26, 2018, Inside Airbnb collected data on New York listings reported that there were currently 47,542 active listings renting at an average daily rate of $146. Of these listings, 23,870 encompassed entire homes and apartments (50.2% of all active Airbnb listings), 22,546 were private rooms (47.4%) and 1,126 were shared listings (2.4%). Some private room listings can be part of apartments that hold other private rooms listed on Airbnb. When analysts at DBRS looked through available Airbnb listings on July 25, 2018, they found that 295 non-repeat listings were available, with an average of two beds per listing and an average daily rate of approximately $82.90. DBRS’s findings were largely consistent with those of Inside Airbnb when analyzing the room types, finding that entire home/apartment/condo/loft listings as well as private room listings made up the majority of the room type breakdown at 50.8% and 48.5%, respectively (refer to Exhibit 3). The July report also explained that these listings were booked 110 nights a year on average. Some homeowners are creating something of a micro-monopoly, the website has found, with 27.3% of the stock being multi-listings. The issue with this, the analysts at Inside Airbnb state, is that “hosts with multiple listings are more likely to be running a business without a license and not paying taxes, and if they are renting out an entire home or apartment and aren’t present, are probably doing so illegally.” The city recently sued a property investment couple for their illegal Airbnb units.
DBRS-rated multifamily properties in New York City have also experienced higher occupancy and rent rates, with an average occupancy of roughly 98.1% across properties and an average rent of $4,150 across all room types (refer to Exhibit 4). The average unit count across properties stands at approximately 239 units.
While New York state’s rent rates have remained on a stable upward trajectory, Airbnb is having a severe impact on the amount of available housing units in New York, lending to the pre-existing affordability crisis. The harm that it does to the market, however, lies in landlords converting rent-stabilized housing units into illegal hotels using Airbnb as a platform. While some middle-income earners have relied on temporarily renting out their apartments and homes to make ends meet while they are not occupying these properties, research shows that other homeowners are taking advantage of the platform to create a micro-monopoly of small hotels.