Inside Airbnb, NYC: Short-Term Rental Market Decimated in Advance of Data Sharing Law

February 16, 2021

A Report by Murray Cox of Inside Airbnb

BREAKING NEWS

In early December 2020, ahead of a new data sharing law, thousands of Airbnb homes, apartments and rooms in New York City were converted from short-term rentals (STRs) to long-term rentals (LTRs), only able to accept stays of 30 days or more. In addition, thousands of short-term rentals were deactivated or deleted from the Airbnb site.

In November 2020, there were 18,211 homes and apartments that could be rented for a stay of less than 30 days on Airbnb; while this number dropped to 5,995 homes in December 2020, a 67% decline, which has been largely maintained to February 2021.

Similarly the number of short-term rental rooms on Airbnb dropped from 18,042 in November 2020 to 5,350 in December, a drop of 70%.

The massive dismantling of Airbnb’s short-term rental business in New York City was done without a press release or public announcement from Airbnb, a newly public company, even as this report was being published more than 2 months later.

Figure 1. In December 2020, thousands of Airbnb's in New York City were converted to long term rentals ahead of the city's new data sharing law, only able to accept stays of 30 days or more, and avoiding data disclosure and enforcement. Source: Inside Airbnb

New York City's Data Sharing Law

Background

New York City's new data sharing law was more than two and a half years in the making, and until now, it was unclear how it would affect the large number of illegal short-term rentals in the city, estimated as many as 35,000.

The original data sharing law, which required platforms to provide monthly listing and activity data to the city, was passed unanimously by the city council in July 2018 and signed into law by the Mayor in August 2018.

In the same month, major short-term rental platforms, HomeAway and Airbnb separately sued the City with arguments citing the First and Fourth Amendments to the U.S. Constitution and the Federal Stored Communications Act (“SCA”).

Eventually, Airbnb and the City settled the case, and an adjusted law was passed in June 2020, signed by the mayor in July 2020, due to go into effect 180 days later on January 3, 2021.

The terms of the settlement and adjusted law left much of the original law intact, with a few small changes:

The city will be able to request data at the end of the first "reporting period" of 2021, ending March 31, and expects to receive it sometime in May 2021.

Host Consent: Required to Share Data, AND Required to Short-Term Rent

While Airbnb's terms of service with its hosts contain the right to take any action to follow applicable laws, the data sharing law makes it clear that a platform shall obtain consent from each host to provide the required information to the City:

A booking service shall obtain, from each host using such booking service to offer, manage or administer a short-term rental, lawful consent to provide the information

In an email to hosts on June 12, 2020, the day of the settlement, Airbnb's Chief Strategy Officer Nathan Blecharczyk stated that "hosts who do not consent [to provide data to the City] will not be able to list their home as a short-term rental."

In host forums, it appears that Airbnb further communicated that hosts had up until December 1, 2020, to decide if they wanted to continue to host short-term, by giving consent to share data; or be forced to host long-term.

It's almost certain then, that the listings that were removed from Airbnb, or were converted to long-term rentals belonged to hosts that failed to consent to share their data with the city via the imminent data sharing law.

Inside the Data

Hosts that would not give consent to share their data with the city, would most likely be either a) inactive and not bother to give consent; or b) breaking New York City or State housing laws, and would not want to expose their illegal activity to city enforcement.

To examine these assumptions, we look at the data and track listings from November 2020 through to December, and segment the November 2020 listings into 3 categories:

  1. short-term rentals that remained short-term rentals (we assume they gave their consent to share data)
  2. short-term rentals that were converted to long-term rentals
  3. short-term rentals that were removed from Airbnb (either deleted or made inactive)

The three figures below show these three segments, limited to just homes and apartments (excluding rooms) and shows the distribution of listings by how many reviews they received in the last 12 months (a proxy for bookings).

Figures 2,3,4: Distribution of short-term rental homes by activity (frequency of reviews in the 12 months to November 2020). Source: Inside Airbnb


It's clear from the data, that the most active segment were the homes and apartments that remained short-term rentals; and that the segments that were converted to long-term rentals or removed from Airbnb had a much higher proportion of listings with no reviews. So the regulatory event did do a "cleaning of house" of inactive short-term rentals.

That being said, if we aggregate the estimated revenue of the different segments we see that a significant proportion of revenue was removed from the short-term rental home and apartment market, with only 29% of listings and 54% of revenue remaining between November and December.

What happened to STR Homes/apts between November and December 2020?
Number of listings
Estimated Revenue
(12 months to 11/2020)
Remained STR
5,294
29.1%
$79.2M
54.3%
Converted to LTR
8,541
46.9%
$43.4M
29.8%
Removed from Airbnb
4,376
24.0%
$23.1M
15.9%

Table 1: Only 29% of November 2020's STR homes/apts stayed as STRs in December (54% of STR home/apt revenue). The remainder were converted to LTR (47% of listings; 30% of revenue), or removed from the site (24% of listings; 16% of revenue). Source: Inside Airbnb


Examples of Airbnb listings that were clearly engaging in short-term rentals prior to December 2020, but are now restricted to long-term rentals include: "Luxurious 2 bedroom home close to Airport and City"; "Incredible studio with private backyard" and "Modern Quiet Cozy Brooklyn Stay (Entire Apartment)".

The data for short-term rental rooms is similar to that for homes and apartments, and only the aggregates are shown below, where we find again, that a significant proportion of revenue was removed from the short-term rental room market, with only 26% of listings and 50% of revenue remaining between November and December.

What happened to STR Rooms between November and December 2020?
Number of listings
Estimated Revenue
(12 months to 11/2020)
Remained STR
4,631
25.7%
$25.2M
50.4%
Converted to LTR
8,579
47.6%
$15.1M
30.1%
Removed from Airbnb
4,832
26.8%
$9.8M
19.6%

Table 2: Only 26% of November 2020's STR rooms stayed as STRs in December (50% of STR room revenue). The remainder were converted to LTR (47% of listings; 30% of revenue), or removed from the site (27% of listings; 20% of revenue). Source: Inside Airbnb


Data Sharing Laws - An Effective Compliance Tool?

While New York City's data sharing law was expected to be an additional tool in the city's arsenal for combating illegal short-term rentals, in the years since it was: proposed, passed, fought in court, settled, and passed again with amendments; there was doubt that it would significantly affect the number of illegal short-term rentals in New York City.

Firstly, most other cities that have been progressively addressing the lack of compliance of short-term rental hosts and platforms, have adopted a mandatory registration system, with platform accountability and data sharing (read more about this here in "Short-Term Rentals: Data, Negotiation and Collaboration Strategies for Cities"). Without a mandatory registration system that identifies a host to the city, it was doubtful whether data alone would work.

Secondly, the city received a large amount of data on suspected illegal listings from short-term rental platforms in 2019 via subpoena, and to-date, there has not been a demonstrable large-scale enforcement effort based on that data. Data, in that case, hadn't proven to be the key to compliance.

Thirdly, some cities that have been receiving data for a number of years, for example Barcelona, report that 80% of the data they receive is useless - with addresses incomplete or incorrect. New York City has already reported there is widespread fraud on short-term rental platforms, and the concern is that scofflaw hosts would hide their identity and location of their properties in the data to avoid enforcement.

While the initial impact via the data sharing law is positive, the impact has only been on hosts that have refused, so far, to consent to sharing their data with the city.

Compliance with New York City and State Laws

Many of the short-term rentals that are active on Airbnb after the data sharing purge of December 2020, are still breaking New York City and State laws.

For years, it has been clear un-hosted short-term rentals in New York City apartment buildings were illegal, even despite there being thousands of unhosted listings in apartment dense Manhattan and parts of the outer Boroughs.

However, the question of unhosted short-term rentals in one and two family homes has been less clear.

If you visit the help page for New York City Airbnb hosts, or read the Airbnb S-1 filing for their IPO ("non-owner occupied short-term rentals are permitted in single and double family homes" ), you might be mistaken to believe that it is legal to list an entire apartment in a one or two family home.

The city disagrees and has been finding and fining unhosted short term rentals in one and two family homes for a number of years (e.g. reports in 2016 and 2019). This was further clarified with a January 2021 decision by the Supreme Court of the State of New York.

In February 2021, there were 6,217 unhosted homes and apartments remaining on Airbnb, presumably that have consented to share their data. Assuming they are all still breaking the NYC's law for unhosted stays, it remains to be seen, whether the city will be able to bring them into compliance once they start receiving data.

Similarly, for short-term rental rooms, there are a variety of additional compliance issues including: the city's "roomers, boarders and lodgment" law, rent regulation laws on profiteering, breaking leases or building by-laws, and these need to be brought into compliance too.

Converting to Long Term Rentals - The New Delisting

After many years of non-accountability, new short-term rental laws with platform accountability have historically involved platforms like Airbnb removing listings, "delisting", when required or requested by the city. It appears that Airbnb's new method of delisting is to convert short-term rentals to long-term rentals, thus avoiding the laws the host and the platforms are accountable for.

Recent examples of this in addition to the latest in New York City, are the City of Los Angeles and Toronto.

City of Los Angeles

The City of Los Angeles legalised home sharing by passing ordinances with a mandatory registration system with platform accountability in December 2018 that became effective on July 1, 2019. The city indicated that they would begin enforcement on or after November 1, 2019.

While there was some reduction in short-term rentals in and around November 2019, an LA Times analysis found that in early June 2020, "nearly 5,000 Airbnb listings for short-term rentals" lacked mandatory city registration numbers.

Further compliance followed in August 2020, with the introduction of an API used by the city to communicate illegal listings to Airbnb.

While many non-compliant listings were removed from the Airbnb site, by examining short-term vs long-term rental trends, we see much of the platform accountability involved simply converting short-term rentals to long-term rentals, especially around key regulatory and enforcement dates, November 2019 and again in September 2020.

Overall short-term rental homes and apartments dropped from a peak of 18,634 in June 2019 to 3,199 in February 2021 (an 83% drop), however during the same period, long-term rental homes and apartments rose from 1,194 to 9,264 (a greater than 600% increase).

Figure 5: The City of Los Angeles "Home-Sharing Ordinance" has reduced the number of short-term listings, however many are just being converted by the host or platform to long-term rentals. Short-term rental homes and apartments dropped from a peak of 18,634 in June 2019 to 3,199 in February 2021 (an 83% drop), however during the same period, long-term rental homes and apartments rose from 1,194 to 9,264 (a greater than 600% increase). Source: Inside Airbnb.

Toronto

Toronto, like the City of Los Angeles, also introduced a mandatory registration system with platform accountability. Registration started on September 10, 2020 and enforcement was to begin on January 1, 2021.

As the enforcement date approached, it was reported in December that less than 10% of short-term rental listings were registered, and Airbnb confirmed that "listings that aren't registered would be deregistered or blocked from hosting short-term stays" from January 8, 2021.

Data trends show that instead of deregistering the listings, Airbnb converted the unregistered short-term rental listings to long-term rentals. Between the first and second weeks of January 2021, short-term rental homes and apartments dropped from 8,362 to 2,483 (a 70% decline), while long-term rental homes and apartments jumped from 3,188 up to 7,668.

Figure 6: Unregistered short-term rental Airbnb listings in Toronto were converted to long-term rentals as enforcement started. Source: Inside Airbnb

Significant, Multiple Regulation Induced Impacts on Top Short-Term Markets: No Public Disclosure

While there was some limited disclosure about the possibility of impact from regulations in New York City in Airbnb's public disclosure to the SEC in advance of its IPO:

For example, listings in New York City generated approximately 2% of our revenue in 2019, and when new regulations requiring us to share host data with the city are implemented, our revenue from listings there may be substantially reduced due to the departure from our platform of hosts who do not wish to share their data with the city and related cancellations. A reduction in supply and cancellations could make our platform less attractive to guests, and any reduction in the number of guests could further reduce the number of hosts on our platform.

However by the time of Airbnb's IPO on December 9, 2020, this significant event had already taken place, and even more than 2 months later, there has been no acknowledgement that it occurred.

Likewise, there has also been none or very little acknowledgement from Airbnb about the deconstruction of its short-term rental markets in the Cities of Los Angeles and Toronto, which, along with New York City, are in Airbnb's top 10 cities by 2019 revenue.

Market Trend, or Regulatory Trend?

In an interview with Airbnb CEO Brian Chesky, published in USA Today on February 9, 2021, the headline states "As work and school can be done from anywhere, Airbnb sees more monthly stays", and includes such quotes from the CEO as: "We are seeing that length of stay is increasing"; "I think we're evolving from our original roots of short-term to really including monthly stays," and reports that while "Airbnb started as a short-term rental platform, and it remains one – to a degree. But Chesky said that's starting to change." and that "one of Airbnb's 'largest segments' is monthly rentals."

Chesky, or rather the article, reminds us about disclosure rules for public companies, but also tells us that "60% of longer-term stays were by guests who worked or studied while at their rentals" and that "during the third quarter of 2020, it saw more stays of 28 nights or longer than during the same period the year before".

Is it just a bad coincidence that Airbnb is disclosing to us the "trend" for monthly stays and longer lengths of stays, at the same time it fails to disclose that it was forced by regulations to (quietly?) shift tens of thousands of short-term rentals into that very same market?

Market or regulatory driven, what does it mean for housing?

The shift of short-term rentals to long-term rentals, whether it is driven by the market, or regulations, opens up many key questions for city's housing markets.

Will hosts that were formerly engaging in short-term rentals continue to do so, but outside of Airbnb, who is the obvious target of regulators and enforcement? Many cities have found that smaller platforms lack the scale to be successful or significantly impact the city's housing market.

Even during COVID, many Airbnb hosts continued to attempt to short-term rent; but will this latest blow force them to become traditional landlords again, give up their sub-leased tourist apartments; or find a long-term room-mate?

What does it mean when Airbnb becomes a middleman for longer stays? Guests suddenly become tenants and are typically covered by much stronger protective laws.

Some tenant advocates are already thinking about these trends that started to show themselves due to COVID's impact on the tourist economy. For example the Advocacy Centre for Tenants Ontario advises tenants of their legal rights when renting units through Airbnb.

In addition, cities like San Francisco, who have been arguably successful at regulating short-term rentals, have seen the market shift to extended stays over the last few years, and after many years of advocacy, housing activists were able to have the city pass new intermediate length housing laws that minimize the impact of longer-stays on the housing market and affordable housing.

About Inside Airbnb

Inside Airbnb is a mission driven project to provide free data that quantifies the impact of short-term rentals on housing and residential communities; and also provides a platform to support advocacy for appropriate and effective policies to protect our cities from the impacts of short-term rentals.

Get the Data

To access the Inside Airbnb data behind the report, download it here for your own analysis.