A City in Flux – Exploring Changes to the Rental Laws in NYC
A City in Flux – Exploring Changes to the Rental Laws in NYC
Whether it’s a studio apartment in Midtown or a brownstone in the Upper East Side, New York has long been known as a competitive marketplace for finding an apartment. With the proliferation of Airbnb accommodation in the last decade, and other changes affecting the market - amongst them Covid, and rising interest rates - to many the NYC marketplace has started to look unsustainable. Despite a brief respite in average rent during the pandemic, prices are back to near-record highs and look to continue heading up.
In response to these challenging conditions, the city passed Local Law 18, sometimes referred to as Chapter 31, in 2022. This is a law that requires short-term rental apartments to be registered and bans the renting of so-called ‘dwelling units’ unless the permanent resident is present. In this article, we are deep-diving into what the implications of these changes are, how they might affect you as a property owner or potential renter in the city, and how Rove Travel can help you navigate these changes.
New York City | Source: Tripadvisor
What is Local Law 18 and what does it mean for you?
Local Law 18, also referred to as The Short-Term Rental Registration Law is a law that was passed in January 2022, requiring that property owners register their apartments with The Office of Special Enforcement (OSE) before they can list it on major property platforms.
If this registration is accepted, the host is given a registration number which can be displayed on the listing to show they are compliant. The Law also restricts other aspects of renting such as guest numbers and in some cases entire buildings.
The changes have been justified as a way for the city to reduce the number of illegal short-term rentals, ensure the safety of guests exposed to risks in unregulated apartments, and ease the pressure on the rental market in general. The OSE themselves commented on local property conditions to give further context to the changes.
This is a law passed with a strong emphasis on protecting communities, and the safety of residents. Let’s look at Local Law 18 in more detail and explore the further implications it can have on those affected.
Understanding Local Law 18
The law applies to properties that are rented for less than 30 consecutive days in total and if not complied with, may result in fines for both property owners and booking platforms (Airbnb, booking.com, etc), but not guests.
It is also worth noting that the law will not apply to Class B dwellings – i.e. hotels and multiple occupancy dwellings designed for this purpose – but only to Class A residential dwellings.
The law also places restrictions on entire buildings, giving building owners the right to register their entire building as prohibited from short-term rentals, effectively taking the power away from individual apartment owners to rent out their accommodation. Once the building is registered the OSE will deny the application of any short-term apartments in these prohibited buildings.
Local Law 18 also imposes the following restrictions:
- A Limit on Guest Numbers: The changes in law place a limit on two guests staying in a short-term lease at one time. This is not affected by the property's size and effectively rules out properties that may accommodate larger numbers of guests.
- Hosts Must be Present: The law requires that hosts are physically at the property that is being rented. This strange restriction means that short-term apartment rentals will become a shared living experience, akin to living with a roommate.
- Open Doors: It is now obligatory for hosts and guests to leave internal doors in any dwelling unlocked, giving guests access to the entire unit. This has major privacy implications for short-term rentals.
Hosts that don’t adhere to this can face fines up to $1,000 for an initial offense, potentially rising to $5,000 for repeated violations.
The law has been justified by the city as a way to reduce the number of illegal short-term rentals, ensure the safety of guests exposed to risks in unregulated apartments, and ease the pressure on the rental market in general. But when part of the requirements includes the stipulation to leave all internal doors unlocked, it is hard to see how security can be front and center in their decision-making.
How Will the Short-Term Rental Registration Law be enforced?
This is the question that everyone is asking – is this likely to be properly enforced or is it just a scare tactic from the city?
Well, as of September 2023, the city has been working with booking platforms to implement the first phase, where they require property booking platforms – think booking.com and Airbnb - to register their properties using the city's verification system. This then enables OSE to get information from booking platforms to take enforcement action against individual landlords. In much the same way that Airbnb actively gives out information on earnings for tax purposes, they will now be doing the same for New York City’s Local Law 18. The penalties are real, with over $8m worth of penalties issued to businesses and individuals since the law change was implemented.
It certainly feels as though the changes are here to stay, but there are ways and means to navigate around them, so let’s explore some of these possibilities.
Managing Your Property Following the Change in Law
To many property owners and casual landlords, the change in law has had a serious impact on their lives. Early reports suggested that many apartments are no longer being rented through official channels, with Airbnb reporting as many as 38,000 non-active listings in New York following failure to register with the city.
Apart from the burden of engaging with the city’s cumbersome registration platform, many property owners have simply removed their property listings, seriously reducing the flexibility for guests in the city. With the requirement for owners to live in their properties with guests, some have simply abandoned rentals altogether. It's worth noting that the new initiative was delayed for months due to lawsuits from Airbnb, which gives you a sense of the impact it is expected to have on this type of business.
But what is the best strategy for those looking to stay in the rental game, and bypass Local Law 18, without breaking the law?
Tribeca, New York City | Source: Rove Travel
An Increase in 30-day plus rentals
For many, the answer is obvious. The Short-Term Rental Registration Law can be bypassed by simply increasing the length of stay. This may seem inconvenient at first, but it has many advantages for both travelers and property owners.
The Advantages of Longer-Term Rentals
If you’re a property owner looking to stay out of trouble with the new laws, then consider the following advantages of switching to a month lease plus. At Rove we’ve written on the subject before, but some points bear repeating.
- Lock in Bookings for Longer – instead of the admin associated with constant turnovers – property management, cleaning, the hassle of check-ins, and security – you can have a reliable, consistent guest staying for longer, securing your income and taking the hassle out of changeovers.
- Harmonious Relationships – Having longer-term renters has less of an impact on the building and its residents. Instead of the constant churn of guests, and the scratching and banging of luggage every few days, longer rental periods make for better relationships with the longer-term residents in the building.
- Reliable Guests – the fewer changeovers you have, the more value there is in background checks and feedback. If you know you’ve vetted your guests and you believe they’re trustworthy, what could be better than the peace of mind that comes from knowing they’re looking after your property longer term? Longer-term guests are also more likely to see a property as a home and treat it with respect.
Beyond the obvious, longer-term monthly rentals make sense for everyone. It feels like the city wants hotels to be the default for shorter stays – but is this such a bad thing? Let short-term guests stay in short-term accommodation, and deal with the high turnover of tourists. If you own a property in the city, pitch it at the calmer, more mature end of the market - long-term rentals with less stress and more security with a month lease.
Advantages for renters
As a renter in New York, there are times when you just need to be in the city for a couple of days. You’re stopping over for a meeting and you just need a simple hotel near the financial district. But for those with the flexibility, let’s look at the advantage of longer-term lets when it comes to getting under the skin of a city and living like a local.
- Better Value – it may be obvious but it’s worth saying – longer-term rentals give you better value. Instead of an inflexible corporate price range for a chain hotel, you have the option to negotiate a price and longer-term stays generally come with a discount. Airbnb encourages hosts to apply a 20% reduction for monthly stays meaning longer stays are in your interest.
- Be a Slowmad – when it’s possible, there’s nothing better than setting up a base in a city for a month or more. With the rise of digital nomads – freelancers working in tech with the flexibility and inclination to travel to different countries – there’s a temptation to always be on the move. Don’t fall into that trap – the best way to travel is as a slowmad – staying in places for a couple of months and taking away the stress of being constantly on the move.
- Secure your place – there’s nothing like the peace of mind you get from knowing you have a secure place to live for a while. Traveling is great, but it can take its toll on your health. The older you get, the more you want the longer-term security of knowing that you have a place to stay and having the time to book the next place without the stress of everything being last minute or scrabbling around for another sublet with a restricted move-in date.
Lenox Hill, New York City | Source: Rove Travel
Property Management Can Help You Navigate the New Laws
An alternative that many still haven’t explored is using a property management company to navigate these changes more seamlessly. Rove Travel has provided expert advice and guidance for renters and corners the market when it comes to finding luxury, boutique accommodation, lofts, and penthouses from the Bronx to Chelsea, and across the United States.
The Benefits of Rove Travel
If you’re currently stuck in a bind trying to map out how these changes to the law may affect you, let Rove step in and help. We offer an incredible array of high-end luxury properties and have spoken extensively on the advantages of longer-term, furnished properties in this changing marketplace.
For property owners, we offer a glossy, aesthetic marketplace that is a go-to alternative to Airbnb for many renters at the higher end of the market. If you want more detail about how Rove operate, we recently conducted a case study exploring the financial benefits enjoyed by one of our owners who renovated Empire House in Williamsburg, achieving a 29% increase in revenue following work with Rove Travel.
Rove have established a reputation based on good taste and excellence, where customers know that they will get a seamless, high-quality service from initial inquiries to completion. Unlike hotels or large chain booking agents, Rove are experts in longer-term rentals, and all of our growth is off the back of prioritizing high—quality longer-term furnished apartments for clients who value luxury and comfort. We offer a high standard of basic amenities with high-speed Wifi and washer and concierge services as standard.
Renting Mindfully
For renters, the change in law has taken some of the choice out of your hands, there is no doubt about that. What remains is the choice between traditional multiple occupancy accommodation for the short term – hotels and hostels – or considering a change of pace with higher quality accommodation intended for those with the time and the inclination to stay in one place for a while, soak up the rhythms and atmosphere of a city and find a new home away from home.
The Future Outlook of the New York Rental Market
We would certainly like to believe that the change in law came about in good faith - that it was motivated by safety and a desire to control spiraling average rents in the city.
Despite these good intentions, the impact of the change in law is perhaps not straightforward – with reports suggesting that rental prices are continuing to rise in Manhattan, Brooklyn, and Queens.
Security Concerns
It’s hard to ignore the impact of some of the finer points of Local Law 18 when it comes to security as well. For women especially, a stipulation that doors to bedrooms cannot be locked will impact how safe they feel both renting a place with a landlord and even renting out their apartments in line with the new laws.
A Global Pattern
The cynical would say that these new laws aren’t anything new – similar changes have come into effect in the UK with proposals to change full-house renting so that consent is required from local authorities, limiting the extent to which whole properties can be listed. Sound familiar? This feels like an attempt to limit the freelance economy that lets individuals profit from the property they’ve worked for and to drive tourism back into the hands of big business.
If the action taken in New York doesn’t get rents under control, then how can its continued use be justified? The alternative, of course, is to seek new options and embrace the future of longer-term rentals in the city.
Chelsea, New York City | Source: Rove Travel
Longer-Term Rentals with Rove Travel
The change to NYC rental laws in January 2022 saw a huge shift in market dynamics, with many property owners faced with the prospect of registering their property with the city and potentially living with guests. The failure to register alone led to Airbnb listings lying dormant in huge numbers.
For property owners, the future appears to lie more and more in longer-term rentals, over 30 days in length. The best way to navigate this changing market is with established properly agents like Rove Travel, who use local knowledge, established reputation amongst renters, and a large network of landlords offering quality furnished apartments, from one bedroom to penthouse, to ensure that whether you’re in New York City or further afield, your property is in safe hands. If you’re thinking of navigating NYC's rental changes then get in touch today and see how Rove Travel can help you out.