Earlier this month, I had the opportunity to stay in a unique Airbnb located in the Bedford-Stuyvesant neighborhood of Brooklyn. Over the past decade, this neighborhood has experienced a dramatic transformation due to the process of gentrification. Condos have nearly doubled in median sales price, and single-family home prices have more than tripled. The population dynamics have shifted as well, with the proportion of Black residents decreasing from 60 percent to 40 percent, and the proportion of white residents increasing from 15 percent to 33 percent. Bedford-Stuyvesant has become less diverse in terms of socioeconomic status, with fewer immigrants and families and more single individuals. In many ways, it has become more like affluent neighborhoods such as Greenwich or Short Hills, where wealth and connections are prerequisites for living.
While Airbnb is not solely responsible for the transformation of Bed-Stuy, it certainly played a role. The city’s severe housing shortage and extreme wealth inequality were already major contributors, but Airbnb’s entry into the real estate market exacerbated the situation. A recent analysis conducted by Inside Airbnb and Gothamist revealed that Bed-Stuy had the highest concentration of Airbnb listings compared to any other neighborhood in the city. In just a small area measuring six-by-four blocks, there were a staggering 87 Airbnbs. These properties, typically furnished with Ikea decor, were continuously rented out to transient guests who had no investment or attachment to the neighborhood. This meant that 87 families who could have lived, moved, or stayed in Bed-Stuy were displaced.
It is worth mentioning that some Airbnb listings in Bed-Stuy were owned by residents who were simply looking to offset their housing costs. However, the majority of Airbnb units in the city were full-time short-term rentals owned by investors rather than families. In fact, there were approximately 39,000 such units, displacing approximately 100,000 New Yorkers.
Now, however, the situation has changed. New York City has begun enforcing strict regulations on short-term rentals, effectively implementing a de facto ban on Airbnb. Hosts are now required to register with the city in order to receive payment, and apartments must be rented for a minimum of 30 days or comply with other specified conditions. As a result, only 405 units have been registered, significantly reducing the number of available listings. Intrigued by this development, I decided to rent one of the registered units to see if they were adhering to the new rules. Curiously, the unit claimed to be exempt from the regulations, although I couldn’t decipher the reason behind this.
Overall, the crackdown on Airbnb rentals in New York seems to be effective. There is now less of a gray or black market for these short-term leases, and the Airbnb phenomenon seems to be waning. The company, which inadvertently contributed to the housing crisis in places like Bed-Stuy, is now feeling the repercussions. While Airbnb was founded during a previous housing crisis, its original concept revolved around sharing rather than real estate or hospitality. It acted as a platform, similar to Uber, connecting sellers with supply (such as spare rooms) to buyers in need of accommodation. At first, it was uncertain whether these companies would succeed. However, the public embraced the concept wholeheartedly. In the early days of Airbnb, users often found themselves sharing a bed or a small room in someone else’s home. It was an intimate and sometimes nerve-wracking experience, where guests would water plants and wonder if the key hidden under a welcome mat would actually work.
Soon enough, Airbnb professionalized and evolved into a business that directly competed with hotels and traditional rental accommodations. Host management companies emerged, and the concept of “Airbnb arbitrage” became commonplace, with individuals renting apartments solely to list them on Airbnb and earn substantial profits. Consequently, Airbnb not only competed with hotels but also with local homeowners and renters.
Despite Airbnb’s claims to the contrary, it undeniably contributed to the housing shortage. By diverting units from the long-term rental market to the short-term rental market, Airbnb aggravated the crisis in cities like New York. A study even demonstrated that a 1 percent increase in Airbnb listings led to a 0.02 percent increase in rental prices and a 0.03 percent increase in sale prices. Although these percentages may seem insignificant, they accumulate over time and contribute to the overall affordability crisis. The New York City comptroller’s report confirmed that Airbnb had indeed driven up rent in neighborhoods like Bed-Stuy, and as of last year, there were more listings available for short-term rental on Airbnb than there were for long-term rental.
Interestingly, the laws already prohibited rental bookings for stays shorter than 30 days if the host was not present on the premises. However, these regulations were never strictly enforced. Many Airbnb units were noncompliant with various state and local statutes. Airbnb exemplifies what legal scholars Elizabeth Pollman and Jordan M. Barry refer to as “regulatory entrepreneurship” – a startup creates a business model that operates in a gray area of the law, subsequently disrupting the market and demanding legal clarity to legitimize its operations.
New York City has finally taken action to address the issue of Airbnb, although it was not the city government that brought about its downfall. In essence, Airbnb was crushed by the ongoing housing crisis. Will the end of Airbnb lower the cost of apartments in Bed-Stuy? Unlikely. Will it have a slight impact on tourism revenue? Perhaps. However, the regulations have resulted in thousands of apartments returning to the market, slightly easing the burden on New Yorkers in search of a place to live.
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