The Silent Disruptor

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What’s the one thing that can bring your business to its knees overnight, without warning, and without a chance to fight back? It’s not your competitors. It’s not even the market. It’s politics. Yet, so many leaders are blind to this silent disruptor.

When we think of disruptions, we think of disruptors—companies like Uber and Airbnb. However, disrupters often see their businesses disrupted by regulators.

Take a look at Airbnb.

This time last year, Airbnb hosts—many small business owners—woke up to the news that tens of thousands of listings would be outlawed.

It had a name: Local Law 18. Sounds pretty benign, right? Not quite. Local Law 18:

• Requires Airbnb hosts to register their property with the Mayor’s Office.
• Limits stays of fewer than 30 days to two guests
• Requires hosts to be physically present during the reservation
• Prohibits locks on internal doors.

You can imagine the impact, right?

• Within one month, Airbnb listings for stays of less than 30 days plummeted from 22,246 to 8,039.
• Airbnb listings for stays of less than 30 nights fell by 83% from July 2023 to July 2024
• As of June 2024, there were just 2,276 legal short-term rentals, according to the city. Down from 21,900 in 2023. The city rejected 4,119 applications.

Bad for Airbnb hosts.

Bad for Airbnb.

Great for hotels.

• The hotel industry has seen a surge in revenue, with occupancy rates reaching 82% last year.
• The average hotel room price increased to a record $301 per night

Why did the City pass such strict laws?

You guessed it: to tackle housing affordability.

This is how politics works.

Politicians react to the heat. To the pressure. And what pressure are they feeling the most right now? Pocketbook issues and housing affordability. It’s a game of whack-a-mole.

And it’s all emotional.

The theory that short-term rentals are a big cause of booming housing prices? That sounds emotionally compelling. The bad guy is easy to visualize.

And that’s the other thing about politics. Emotions wins over facts 100 times out of 100.

A year later, with fewer short-term listings, what’s the state of housing affordability in New York City?

The conversion of short-term rentals to long-term leases has not significantly affected the overall housing inventory, as these conversions make up only a small portion of the total housing stock.

If you look at one-bedroom apartments, the median rent in September rose 12.8% year-over-year to a record $4,500 per month.

Housing supply remains tight.

Is anyone better off? It's tough to tell—a harsh lesson in politics: rational public policy is hard to come by.