Unraveling the Airbnb Ban: A Flourishing Underground Market Emerges in New York

In the wake of the recent Airbnb ban in New York, a clandestine market for short-term rentals is quietly flourishing. Since the implementation of a stringent law in early September, outlawing the majority of short-term rentals on Airbnb, only a mere 2% of the 22,000 listings in New York have officially registered with the city. However, numerous illicit short-term rental ads are now surfacing on social media and less prominent platforms, with some even persisting on Airbnb's own platform.

The once-thriving landscape of short-term rentals in New York is undergoing a seismic shift, with an 80% drop in Airbnb listings, dwindling from 22,434 in August to a mere 3,227 by October 1, according to Inside Airbnb, a monitoring group. Yet, only 417 properties have completed the city's registration process, indicating that a minuscule fraction of the city's short-term rentals has managed to secure official approval.

A Nascent Black Market

The regulatory crackdown in New York has birthed a burgeoning "black market" for short-term rentals, asserts Lisa Grossman, spokesperson for Restore Homeowner Autonomy and Rights (RHOAR), a local group that opposed the law. Grossman claims that since the prohibition, the short-term rental market has gained momentum on platforms like Facebook. "People are going underground," she explains.

New York's robust measures against short-term rentals have drastically reshaped the landscape, propelling users towards alternative platforms. Craigslist, Facebook, Houfy, and others have become havens for those seeking guests or places to book without the checks and balances of mainstream reservation platforms like Airbnb. As the demand for short-term rentals surges, hotel prices are expected to rise in response.

For a prospective short stay on Airbnb, a scattered few listings dot the map. Many of these former listings have transitioned into 30-day or longer stays, thus circumventing the need for registration.

AirDNA, a short-term rental intelligence firm, identified a mere 2,300 short-term rentals on Airbnb in New York City by late September. Stays advertised as long-term rentals now constitute 94% of Airbnb listings in the city, according to AirDNA data. Hosts must adhere to stringent requirements to be approved as short-term rentals—they can only accommodate two guests, and the host must be present on the premises during the stay. This shift has effectively prohibited many entire apartment listings, except those falling under the category of Class B dwellings, such as hotels, inns, and clubs.

Navigating the Regulatory Maze

Despite stringent regulations, people are finding ways to circumvent the rules. Many Airbnb listings now include a space in the property description for hosts to enter a registration number or declare an exemption. We have discovered several short-term rentals in New York on Airbnb that claim exemptions from the city's registration rules. Some still offer entire units for short stays that don't appear to be hotels or exempt units.

In an ad marked as exempt, the host asks guests to avoid interacting with the building concierge. In another listing, a host claims to have once lived in the apartment but has since moved to New Jersey and is now renting it out. One appears to be a townhouse in a mostly residential neighborhood in Brooklyn. Airbnb uses the city's verification system to flag unregistered units.

Nathan Rotman, Airbnb's Regional Head of Public Policy, assures that the company is "working closely" with the city to enforce the new registration law.

Inside Airbnb data reveals that around 2,300 short-term rental properties have claimed exemptions on Airbnb. There are a few hundred more that don't disclose whether they are exempt or registered, according to the data. Another 35,000 are long-term rentals. Airbnb did not confirm the figures from Inside Airbnb's data. The Mayor's Office of Special Enforcement, which manages the registration program, did not provide updated information on the total number of short-term rentals registered or if fines have been issued for illegal listings.

A War on Short-Term Rentals

New York's law is just one striking example of cities combatting short-term rentals. Advocates argued that the regulation would free up apartments for New Yorkers facing high rents and housing shortages. However, critics, including small property owners, contended that it would strip them of a flexible source of extra income without alleviating the housing supply crisis.

These small property owners continue to lobby New York City council members to alter the regulation and allow them to legally rent their homes on a short-term basis. RHOAR comprises individuals who own one or two homes and want to rent them short-term. These hosts feel unfairly lumped together with larger property owners. Grossman states that RHOAR has met with city council members in the hope of amending the law to permit small hosts to continue legally renting short-term.

Beyond Airbnb: Exploring Alternative Platforms

Outside of Airbnb, people post ads and seek short-term rentals in Facebook groups. Craigslist ads have weekly or nightly rates: found a Craigslist ad with a weekly and nightly rate that also appears on Airbnb but can only be booked for 30 days or more on Airbnb. These off-platform rentals pose risks for both guests and hosts, who might be scammed without the protection of larger companies like Airbnb.

If not New York, then Paris. Craigslist did not respond to requests for comments. Meta, Facebook's parent company, did not comment on specific ads highlighted, but the company's policies require buyers and sellers on Facebook Marketplace to comply with local laws, and the company prohibits people from promoting illegal activities on Facebook pages and groups.

Then there's Houfy, another short-term rental website. We have found that many ads come from guests who joined the site in September, the same month New York's new registration rules came into effect. The intention is for guests to book directly with hosts, much like Airbnb, but without commissions. The site compares prices for the same property on Airbnb and Houfy and promises to show how much people can save by avoiding Airbnb fees.

Houfy has received a notice from New York City about the new rule and is "reviewing how to comply with its rules," says Thijs Aaftink, CEO of Houfy. Aaftink argues that Houfy, unlike Airbnb and other rental websites, does not charge commissions for transactions between hosts and guests, and contends that the company "is not part of the transaction,"