Manhattan should probably just admit that it's going to become the Venice of America: a playground for tourists and the ultra-rich, with virtually no residents.
There's nothing wrong with that. They can tax the hell out of it and use it to fund services in the rest of the city where real people live.
I didn't say it would happen overnight. That real estate is apparently more valuable as hotels and vacant investment properties than it is as housing stock. New York should embrace and exploit the fact that billionaires will pay high property taxes on empty condos, not try to fight it.
In 2011 there were 34000 homes in Manhattan that were absentee owned or rented. That's a lot, but not in comparison with the size of the city.
Also, the population in Manhattan has been going up since 1980, so it can simultaneously be true that there are more people living here and more vacant investment properties and hotel rooms.
I doubt we're in any danger of Manhattan emptying out in the next few hundred years from anything other than a nuclear attack or climate change.
And add about 25% in taxes to that. Plus I can assure you that barring unusual circumstances cheap hotels (and $200 isn't exactly "cheap" in my book) in Manhattan are probably best avoided. Mind you, in my experience as a business traveler, hotel prices in San Francisco are often higher than Manhattan in any case.
I just stayed in a Fairfield Inn & Suites on 58th last month for 4 nights (including Friday / Saturday) at $590 total ($147.50 per night). It wasn't luxury by any means, but it was perfectly nice. Also, the taxes were $90 of that, so 15%, not 25%.
Fair enough. This is probably sort of an off-season (to the degree there is such a thing) for Manhattan and I tend to stay in somewhat more expensive hotels. (And there are a lot of real fleabags at the lower end but I wouldn't expect a Marriott brand to be one.) Of course it varies depending upon what's going on in a given week, but I find it's harder to get a "deal" in SF, among other cities.
Definitely agree on SF prices being worse than Manhattan (ceteris paribus).
As someone who stays in hotels regularly for work (mainly capital cities in Western Europe), I don't find Manhattan prices to be any worse than London, Paris or similar.
We try to keep overnight-accom. expenses to under $100/person/night at my startup and SF is the only place we couldn't find a comfortable, clean and well-located hotel room at that price point.
That's pretty normal throughout much of Manhattan. Depending upon how they face and how high you are some rooms will be quieter than others. But, yeah, much of Manhattan is a pretty noisy city.
Lived in Manhattan for 6 years 2011-2017 in The East Village. Made about half that. 1 roommate. 2 bedroom. Occasionally worked a side job (tutoring) but was for extra cash more than necessity. I was working in the live music industry so I had free access to a lot of live shows around town which allowed me to save money but still do the things that make living in NYC Great.
It’s very possible.
Was kind to my landlord, and tried to fix whatever I could rather than calling her when I needed something. The goal was to have her forget I existed. Rent was raised $50 every other year which was completely manageable.
> "Lived in Manhattan for 6 years 2011-2017 in The East Village. Made about half that. 1 roommate. 2 bedroom." "It’s very possible."
Did you pay the rent yourself on that ~75k? Of course not. You paid half and your roomate the other half. Your answer is not really valid as you proved your income at the time was not enough to afford the apartment.
The formula in actuality is your annual income should be 40x the monthly rent. So if your rent is $2k, you should make $80k a year pre-tax. There are a lot of studios and Jr. 1 beds for < $2k/mo. in Manhattan. Most people have roommates though, and your average 2 bdrm is like $3,200/mo., which means you only need to make around $65k/yr. This is very doable.
Have you spent any time in Manhattan? It’s more than just Midtown. And the whole idea is smart growth that keeps cities accessible to everyone. So, no, it shouldn’t be left to become a “Venice for the super rich” or whatever.
Easy to blame lack of affordable housing on AirBnB and not, say, rent control laws or the difficulty of building new housing stock in the city.
I get not throwing grandma out of the $250/month 4BR she’s been living in for 50 years, but it means something like 200,000 rent-controlled/rent-stabilized units are also raising everyone else’s rent by decreasing inventory.
The endless red tape in new construction makes non-luxury bulidings unprofitable. Want cheaper rents? Fast-track approval for new apt buildings.
I've said this before, and I'll say it again. AirBNB is a blight on rural areas (I can speak to this because I reside in rural Scotland) where affordable rental properties are simply disappearing from the market. These properties are barely fully booked during the summer months or holiday/peak seasons, and are empty for weeks at a time in the winter and off-seasons.
This is such a waste and hugely frustrating for folks who live and work in these communities trying to find accomodation.
I want to point out that expensive rent in a rural area is different than expensive rent in an urban one. In a rural area, if it really comes down to it, people buy or rent a plot of land and throw a prefab home or trailer on it. In an urban area, you don't have a lot of options when rent goes up other than moving to a dangerous neighborhood or commuting from an inhumane distance.
> expensive rent in a rural area is different than expensive rent in an urban one
I fail to see the difference, maybe you could expand?
> In a rural area, if it really comes down to it, people buy
Folks are seeking affordable rents because affordable (and habitable) property to buy is pretty much non-existent.
> or rent a plot of land and throw a prefab home or trailer on it.
Perhaps in your country, good luck with getting away with that in the UK. We've got some fairly strict planning rules that make that kinda thing more or less impossible. Also "renting a plot of land" for this type of use isn't really a thing here.
Bah, UK is so small it’s easy to see how it can be a problem. America has so much land available out there, some of it is incredibly cheap the farther you are from civilization, even almost free. I think I could buy several rolling acres of land for a couple thousand bucks right now.
I can really only speak with experience with regards to Scotland here. The problem isn't that we don't have enough land to build on. The problem is that there are vast tracts of land owned by a few large estates (many of them owned by off-shored companies in the usual Caribbean tax havens) that will never normally be available for sale. The land is wasted and misused for the benefit of a few very rich folks who want to turn up and blow away pheasants and grouse with their shotguns.
The remaining available/eligible land is held by large house builders in their "land banks". Some of these tracts of land have been off the market for years and years, yet nothing ever gets built on them until the house builder decides the time is right to screw the maximum price out of buyers.
I'm kinda hoping that when Scotland does finally become independent we will solve these problems with radical land ownership reform.
Waiting for independence is like waiting for Monday or New Year or whatever else. Problems need to be tackled now, otherwise they won't go away regardless if you become an independent country or not.
Sounds like the situation is similar than to what a poster here is describing about NYC: AirBnB is taking away a tiny portion of housing, it matters a lot though because the government is making it hard to build because of zoning or similar constraints. We conclude it's easier to get rid of Airbnb than change what the government is doing although it's supposed to reorder us the people.
Do you guys have value based property tax, or is it a situation like California with prop 13? I've heard in the UK you just have council tax, which is more about the cost of providing services than the value of the piece of land.
Usually you deal with bad 'land hoarding' with a high enough property tax rate. And if you want to avoid effecting the old and the middle class, you add exemptions for primary residences.
Council Tax - a tax on residential properties. Properties fall into one of eight bands, A to H, where A is the least expensive and H is the most expensive. Your council tax bill is made up of the council tax itself which is the largest portion (goes to the council to pay for schools, libraries, street lights, etc). The remaining portion pays for water and sewerage.
Non Domestic Rates - businesses pay these. Water and sewerage are payable in addition. I don't know the ins and outs of how they're calculated.
Unfortunately land hoarding is an unresolved issue in the UK, there isn't as far as I know any penalty or charge - much of this land has no services or business activity so can't be taxed. There have been suggestions by some UK members of parliament that house builders should be forced into a "use it or lose it", thus far there's not been any official position from the government. I suspect the issue will be swept under the table until the next time the media hoves round and puts this back in the spotlight again.
Yeah in the US, almost all property tax is charged on a valuation basis. You pay %1-%2 per year based on the assessed value of your property. If you have a $10 million empty lot, you'll be paying $100k per year, and land hoarding tends to take care of itself fairly quickly in that situation.
> Bah, UK is so small it’s easy to see how it can be a problem.
It's considerably less built up than most people think [1-2]. The problem is that our planning laws do not realise that farmland is an ecological desert, and so we're not allowed to build on most of the UK, pushing the value of the little land that can be built on through the roof.
A couple thousand dollars isnt going to get you anything but a couple acres of desert wasteland in the US. You might get a nicer piece of land for $20,000 but the sort of places where land is that cheap are often very rural. 45 minute drives to the nearest medical care or supermarket, and if you're lucky, maybe electric utility hookups (water, sewer, internet? good luck).
Yes. That's what I was explaining. You can just do that in many rural areas of the U.S.
That's the big difference compared to urban development. You don't need billion dollar loans and a lobbying firm to add solve the problem on the supply side. It's very common for semi-retired middle class people to buy undeveloped land with good highway access, subdivide it, add some housing, and flip it.
We have Irish Travellers in the US, too, you know. They mainly stick to the east coast. Local police will publish warnings when they're coming through. They are likely the primary motivator for anti-caravan laws, the other being that caravans and trailer homes generally have negative curb appeal and depress nearby property values.
But "rural" in the US and "rural" in the UK are orders of magnitude apart. There are individual ranches in Texas larger than whole counties in the UK. The kinds of nomadic people that provoke anti-camping laws require a certain population density to support their lifestyle, so in the US, it's usually the NIMBYs that try to ban certain kinds of dwellings on other people's land. It's a question of how many people would even know something is there. If you never even see your mail carrier, you're not going to have a problem erecting any sort of building you want. But if you have neighbors that can see your dwelling from theirs, they will be interested in your private business.
So if you're in the middle of the wind farms and corn farms in northern Indiana, no one cares if you have a manufactured home on your land. If you're on undeveloped land just east of Denver, you can't even pitch a tent on your own property without a permit.
Nooo. Trailers are the country ghetto. Unlike houses they are depreciating assets. So if you are fortunate enough to own your land and dwelling, unlike a home the value curve trends towards zero. The land value is the only asset, and doesn’t build much wealth.
Expensive rent in a rural area means people get pushed further away. In the medical practice that my mom worked at, employees commuted as far as 100 miles.
Housing structures don't (rarely) appreciate. In fact the opposite is true, as witnessed by my tax return each year.
The land as you state is a different story. I love the idea of a disposable trailer home I could replace every 20-30 years with new technology, unfortunately due to social attitudes prefab homes are almost exclusively marketed and built for lower incomes.
There are always exceptions, but houses generally do not appreciate. Much like a car, they become outdated and wear out. With enough time and use, they even become completely uninhabitable. Each passing day sees less and less value in the home as it requires more and more cost to bring back up to pristine condition and costs start to compete with the value of a brand new home.
Of course, if you keep your home in good repair and updated to modern standards, that will help retain value. But you're effectively selling a new home at that point, and the costs you have sunk into keeping in that way extend well beyond the original value.
Land value is where you normally find the appreciation. The trouble with trailers in a trailer park is that you do not own the land, so what you bear is entirely structure depreciation.
In saying property you're presumably looking at the land value combined with the remaining value of the structure, not the value of structure alone? Typically they are not separate line items in a sale even though if you did separate them you would see that the land is generally appreciating and the house generally depreciating.
There are exceptions. Markets can do funny things from time to time, form irrational bubbles and whatnot. Even cars sometimes appreciate without any major repair or refurbishment costs. Tulips were once an appreciating asset, as the story goes. But as a rule, things that become outdated, wear out, and die lose value over time.
In the UK buyers generally just see the structure and pay for what they think its worth, they tend not to think about the land (and whatever value it might also have) it sits on. Perhaps the exception to this would be garden size if the property isn't a flat (apartment).
The reason for this is that it's pretty damned difficult to separate the two, especially physically. Planning laws generally discourage complete demolition of dwellings unless they're pretty much near collapse or there's been a fire that's gutted the place or in more extreme circumstances perhaps all or part of the house has fallen into a sink hole.
In the UK, residential property (the structure bit) is, and has for a long time now been seen as an appreciating asset/investment. As I already said earlier, property here, if lived in and sensibly maintained, isn't considered something that "wears out" like a car body.
It sounds like you're not from the UK so maybe all this is an alien concept.
Edit: I forgot to mention that things get a wee bit more complex, especially in England and Wales because whilst you might own the structure, it's quite common that don't own the land it sits on. This is known as a leasehold, as opposed to a freehold where you the purchaser own the land as well as the building. Buyers of properties that are leasehold purchase their dwelling (typically with a mortgage) but also pay an annual ground rent to the leaseholder by way of a very long term lease (say 99+ years). Once upon a time the ground rent on the lease hold used to be a nominal amount of money, say GBP100/year. However...capitalism being capitalism, it's becoming more common for leasehold ground rent to be seen by certain investment houses as a nifty way of getting paid for doing bugger all. This can and has caused annual ground rents to increase to quite piss-taking levels.
There are some attempts to get parliament to reform this leasehold situation after it was found that new-build housing estates were being sold to buyers on a leasehold basis but the leasehold condition is not made clear to purchasers. It's sneaky, and another way for house builders to extract another bundle of cash by selling off new-build estate leaseholds to some offshored company for a tidy sum leaving the buyers high and dry. It's often possible to buy out the leasehold, but even in the first year of ownership the cost can be prohibitive, especially after shelling out for your new house. It's not unheard of for leaseholders to charge say GBP5000-7000 in the first year and then double the cost each year afterwards, often locking buyers into the leasehold until they're able to sell the property. Then there's also problems and costs associated with renewing a leasehold, but that's a whole other expensive and morale sapping thing.
> It sounds like you're not from the UK so maybe all this is an alien concept.
You are right that I am not from the UK, so perhaps things are different (lots of room for local exceptions, as detailed in previous comments), but where I am from people compare the cost of a home against the cost of other homes, including the cost of buying vacant land and building a new home. The value of the land is implicitly considered because they see the actual value of land when looking at vacant lots and weigh their options.
Wear isn't the only consideration. An old home with low-amperage electricity service and nob and tube wiring that could burn down your home at any minute is less valuable than a home that is up to modern building standards. An old home with virtually no insulation is less valuable than a modern home that is airtight. These older features are more expensive to live with (higher insurance costs, higher energy costs, etc.) and the price has to reflect that. Same reason why a pristine car from the 80s is, in most cases (unless it has special collector value), still going to be worth less than a brand new model of equal original value in constant dollars.
To put it another way, I live in a rural area. The value of my property would be worth almost ten times more if the identical house was situated on land in the nearest major city. The value is the land and where that land is located, not the structure. The structure itself is, in this hypothetical example, identical. If we tore down the houses in both spots, the vacant lot in the major city would still be worth almost ten times more than my now-vacant lot. Houses can be moved – location is the value.
> As I already said earlier, property here, if lived in and sensibly maintained, isn't considered something that "wears out" like a car body.
Even on the timescale of centuries? I don't see many century homes that haven't required major and costly updates to be still usable today. I don't think anyone is suggesting that houses deprecate as quickly as cars.
There are exceptions. Price, of course, is still bound by supply and demand. There are reasons why used home structures may become scarce, while new homes are impossible to build, forcing people to compete for used homes. But this is not exactly typical.
Well....centuries depends on how many centuries and what revolutions, unrest and discord might arise :)
The village I live in (as were a few around this area), was completely razed to the ground during the 1715 Jacobite rebellion. So things kinda hard to start again and many of the houses in the core of the village were rebuilt between 1730'ish to the early 1800's. These old houses are highly valued, also the core village is also an architectural conservation area.
I could discuss this stuff forever but I need to get stuff done today :)
Value is not the same as appreciation, which is what we're talking about. The value in a structure is the use one can expect to get from it over the next twenty years, or however long it takes to completely depreciate. GP is correct, especially so for 90% of homes built in rural areas in USA. These stick & drywall homes will have major problems within 50 years of construction, period. Many will require major fixes before then. Some homes in urban areas are built better.
Maybe we should build/design houses more like commercial construction. Build the structural components of the house to last a long, calculated amount of time, then build the other pieces with the expectation that they'll be modified to keep the usability current.
I'd rather live in a proper house. But it's pretty common for working class rural Americans to live in mobile or prefab homes on nice properties with gardens, fruit trees, hiking trails, sheds for four wheelers, etc.
Trailer parks, which are dense neighborhoods of mobile homes or tailers, tend to be less nice and inhabited by people in poverty. Though they often have other options, like absolute run-down shacks way outside town.
Point being, there's some distinction in practice and I won't begrudge people living within their means.
If the price has gone up so much, there's a financial incentive to build more until supply matches demand and prices drop to previous levels.
> These properties are barely fully booked during the summer months or holiday/peak seasons, and are empty for weeks at a time in the winter and off-seasons.
> This is such a waste and hugely frustrating for folks who live and work in these communities trying to find accomodation.
A lot of people get a lot of joy out of holidaying somewhere like Scotland in the summer. When there are limited houses and a lot of people who want to use them, there will always be winners and losers. Is it really so implausible that for a house in a scenic rural area, a succession of people renting it for a week or two each over the summer might end up getting more out of it (between them) than someone wanting to live and work in it for a whole year?
The end state of your efficient market fetish is that the lower classes will only be able to live in the least desirable areas, everywhere else will be reserved for the use of the richer classes.
> Is it really so implausible that for a house in a scenic rural area, a succession of people renting it for a week or two each over the summer might end up getting more out of it (between them) than someone wanting to live and work in it for a whole year?
Are you really suggesting that just because you live and work in your local (scenic) rural community you couldn't possibly enjoy the surroundings just as much, if not more, than as a few fleeting transient warm bodies with suitcases could? As residents, we're quite proud of our village and surrounding rural lot and deeply care about and appreciate what we have.
Also, and ultimately, it's the local permanent residents that sustain, year round, the two pub/restaurants, the village shop and the assortment of plumber, electrician, carpenters (all of which also provide substantial local employment), not infrequent visitors occupying holiday homes that lie empty for 50% or more of the year.
> Are you really suggesting that just because you live and work in your local (scenic) rural community you couldn't possibly enjoy the surroundings just as much, if not more, than as a few fleeting transient warm bodies with suitcases could?
There's got to be diminishing returns on beautiful surroundings, surely - seeing a mountain for the hundredth or thousandth time can't compete with seeing it for the first time. So better to give dozens of people a chance to see it once than have a few people see it over and over again. (Or if someone really does want to see it over and over again, they can pay what it costs).
> Also, and ultimately, it's the local permanent residents that sustain, year round, the two pub/restaurants, the village shop and the assortment of plumber, electrician, carpenters (all of which also provide substantial local employment), not infrequent visitors occupying holiday homes that lie empty for 50% or more of the year.
Well if tourists are able to pay more for housing than permanent residents then they're probably also going to be spending more on meals out, more likely to want upgraded plumbing or electrics (or damage those in an unfamiliar house).... But assuming you're right, employment is a means to an end, not a goal in itself. If someone has their heart set on a career as a chef or shopkeeper or plumber or electrician or carpenter, good for them, but that doesn't mean they're entitled to do that job in a particularly picturesque place.
>There's got to be diminishing returns on beautiful surroundings, surely - seeing a mountain for the hundredth or thousandth time can't compete with seeing it for the first time. So better to give dozens of people a chance to see it once than have a few people see it over and over again. (Or if someone really does want to see it over and over again, they can pay what it costs).
Assuming we're still talking about free markets, there are two solutions:
1) Build enough housing for everyone, tourists and locals alike.
2) Ban short-term rentals entirely.
Option 1 might alter the surroundings or vibes, but option 2 will destroy the tourist-dependent component of the local economy, which for many places IS the economy.
>> Is it really so implausible that for a house in a scenic rural area, a succession of people renting it for a week or two each over the summer might end up getting more out of it (between them) than someone wanting to live and work in it for a whole year?
"upon completing the work, rented the place out for $2,900/month."
Oh my god, how is it possible for anyone to pay that much?
2800$ is about the general income / month here.
To be fair the potential to earn a high salary is much higher in NYC than many other places. All those huge towers are full of executives, VP's and highly skilled workers. There are many hundreds of thousands of people making 6-figure salaries here and tens of thousands making over a million.
However, many people in NYC do not make big money and it comes down to living further away from Manhattan and having roommates. Depending on the industry you're in you can have a huge range in salaries based on experience, your reputation and simple luck.
Actually, a pretty significant portion of the luxury development is purchased by non-residents as a place to park their money. This makes up a high percentage of AirBNBs here.
> Easy to blame lack of affordable housing on AirBnB and not, say, rent control laws or the difficulty of building new housing stock in the city.
None of this seems relevant to the article. Did you read it before posting?
These are the topics the article covers:
- what percentage of AirBNB hosts are commercial operators that are likely breaking the NYC laws? (12%)
- how is renting income distributed? 10% of hosts account for 50% of rentals & revenue.
- where are AirBNBs contributed?
- how many "ghost hotels" are there in NYC?
I don't think there was a single sentence in the article about affordable housing. There were maybe three or four sentences on rent and each time they reiterated that rents were only up 1.4% due to AirBNB.
> I don't think there was a single sentence in the article about affordable housing.
I'm guessing you missed the entire section on "The gentrification factor".
The study, and others, claim AirBnB pushes out poor black people from neighborhoods because white owners decrease housing stock by renting out to AirBnb instead of locals.
E.g. "Wachsmuth and his team estimate that the platform raised rents by 1.42 percent in north-central Brooklyn neighborhoods such as Bed-Stuy and Crown Heights." In other words, rents are going up in black neighborhoods. Another quote: "According to the Cox report, black New Yorkers are also the most likely to face housing loss due to Airbnb."
As I said, it's easy to blame AirBnB for this problem and not look at how crazy rent laws distort the market. I don't want to see low-income renters forced out of their homes but AirBnB is only one factor.
Rent control/stabilization laws also remove units from the market, and building new units for anything other than rich people is prohibitively expensive because of red tape, bureaucracy and overpriced cost of NYC-area construction.
So yes, I've read the article. The question is: have you?
And pushing up prices for the rest of the neighborhood. You have a good deal, but you are exactly the problem. Not sure you can complain about what you are bragging about contributing to.
This is always such a stupid argument. Zoning and regulations are not about what is there, its about what you WANT to be there. If you had supply issue in an area full of flats, and you said "all buildings from now on have to be at least 2 stories high", 100% of buildings could not be built today. But you're trying to make things better.
(I realize that's not the point of the article you linked, and that it's usually the other way around, but the "X% of buildings could not be built today" on its own is just stupid).
I live in a condo that could not be built again under current zoning laws and regulations. And you wouldn't want it to: its not safe anymore (thus new code) and the current sewer is at capacity (until there's a major overhaul there, you can't build anything else).
Sometimes its not as simple as "build whatever!!!". We should be allowed to learn from our mistake and make things better.
> This is always such a stupid argument. Zoning and regulations are not about what is there, its about what you WANT to be there. If you had supply issue in an area full of flats, and you said "all buildings from now on have to be at least 2 stories high", 100% of buildings could not be built today. But you're trying to make things better.
If what you have now is worse than you think it should be then the argument isn't valid, agreed. But if you think the way the place is now is pretty good - if the things that are now illegal are the same things that set this place apart from other cities - then the argument makes sense.
The density of NY is the cause of the high costs of living, making it even denser is unlikely to bring costs down long term. It would make more sense just to accept that living centrally is a luxury not everyone can afford, and instead channel the revenue away from the rent-seekers and into the hands of the public (i.e. by increasing property taxes).
From Crown Heights and Bed Stuy (two of the neighborhoods singled out in the article) it's about a 45-60 minute commute into Manhattan via the subway -- not exactly "living centrally." Are people supposed to live 2 hours out?
> instead channel the revenue away from the rent-seekers and into the hands of the public (i.e. by increasing property taxes)
> Raise taxes on them enough and they move to NJ or CT and it's actually a net loss for the city.
Theoretically, increased taxes shouldn't affect the cost of living, because the supply is fixed, and the market price is way above maintenance costs. The revenue will simply shift from the banks and landowners to the public. At least that's the theory, but it should work for a gradual tax increase.
Money for schools, roads, subways, police etc has to come from somewhere, and if high-income earners flee (because of being overtaxed) to nearby low-tax areas then taxes go up on everyone else to cover the shortfall, or services are cut.
I favor a tax increase on the wealthy but I'm just saying implementing such a policy is more difficult than it sounds, especially because NJ and CT are so close by.
That makes no sense, high earners are the least sensitive to (fixed) costs and are more likely to choose location based on attractiveness. Who would move in if a high earner moved out? Supply and demand have a way of taking care of these things.
They aren't that far out (especially when the subway ran in a more timely fashion).
My commute from Nostrand to lower Manhattan was under 30 minutes even including the 10 minute walk to the subway. That's exactly why that area is gentrifying.
People who can afford to live in NYC generally are tax-insensitive, and mostly would ignore the type of tax increase we're discussing. It would take a double-digit increase in the tax rate to even trigger a noticeable dip in the number of high-wealth individuals.
Source: Me. I used to represent high-wealth individuals.
By taking residential units out of the market, affects of short term rentals are affecting rents in other boroughs as well.
NYC isn’t San Francisco. Rent control is a known quantity that has been around forever, as has been the lack of space in the NY Metro area. AirBnb and similar services bend the supply curve, hurting hotels and renters alike.
Short term rental growth didn’t create all problems, but it makes many worse.
Yes, but AirBnB poses a completely different kind of threat. If it's allowed to operate with impunity and turn the entire residential housing market into de-facto hotels, then landlords are going to start to ask why they should put up with tenants acting as their middlemen who reap all of the profit, tenants who are protected by strict and very generous regulations that make eviction and raising the rent difficult in the first place, not to mention the need for people to handle the paperwork, constant maintenance complaints, etc.
Let's say a one bedroom apartment in Manhattan can be found for as little as $2500 (likely very low), and that AirBnB going rate is $200/night for that same apartment (likely quite a bit higher in reality). They only need to rent the place for 12 nights a month to break even, and they're then free of the hassle of tenant law.
You're right, it does pose a new kind of threat. And it shouldn't be able to operate with impunity.
Renters can't sublet their place on AirBnB, only owners can. And you'd select long-term tenants over short-term AirBnB'ers b/c it's less work (or should be). But your point is still valid: the presence of AirBnB can disincentivize a slice of owners to rent to locals.
I'm just saying any study on the negative effects of AirBnB on housing is myopic if it doesn't include arcane rent stabilization/control laws and the obscene price of new construction.
Operating AirBnB in a place like NYC is far more profitable than renting out long term for multiple reasons. For one, AirBnB charges have to only beat hotel prices to be an attractive alternative and that is easy because hotels are subjected to various extra fees, taxes and regulations. Also, one has higher budget while traveling for per-night accommodation compared to monthly rents (compare 150$ hotel room vs 4500$ monthly rental apartment). Third, you have to "tolerate" even the worst of AirBnB guests only for a few days and AirBnB covers insurance for truly worst cases, whereas once you are locked into a tenant in a tenant-friendly city like NYC (or SF), you are screwed for longer term.
The problem is much deeper than Airbnb. As a 27 year NYer, I appreciate the shake-up caused by Airbnb. Landlords of market rate apartments can charge whatever they want for a security deposit, so we now get landlords asking 6 months to a year of up-front security on a 2000-plus rental AND then asking for 1st and last months' rent on top of all that. This effectively turns renters into owners without the benefits of being owners. (i.e. they can't legally rent out their apartment on Airbnb at all without the landlords' consent- and the landlord will NEVER consent to even a 30 day+ sublet. Even if they do rent out their place legally on AIrbnb, an Airbnb guest can squat after 29 days,a nd the actual resident would have to take them to court to get them evicted- this is a very long process, meanwhile...) Yes, there are so-called tenant protecting laws, but it is very very difficult to get these laws enforced (basic repairs needed, mold mitigated, Certificate of Occupancy registered, leaks fixed, water provided, fire code observed, electrical emergencies addressed, and on and on) So these landlords get away with stealing from tenants, making their lives a living hell, making the tenants pay for common area heating bills when the LL chooses to use very expensive electric units without insulating the building.
Airbnb is drawing attention to these legal issues, because now, the city has to pretend it cares about legality and enforcement since the power structure has shifted under Airbnb. This seems healthy to me. Our Housing Court in NYC is a joke. On the one had, it allows tenants to represent themselves, which is actually easy to do since it operates more like a community high school principal's office. On the other hand, housing court is a slow, slow process- it is ineffective at providing timely relief to abused tenants, and entirely ineffective at helping with certain types of landlord perpetrated swindling/lying/harassment that's rampant in NYC. The reason it is ineffective for this, is that these issues aren't handled by housing court.(for example if a landlord is rerouting the heating system so that tenants pay for the heating of common areas--a landlord responsibility--that is costing each tenant on average an extra $200 a month-- these tenants can't address this issue in housing court, because housing court doesn't handle this problem. They can't represent themselves. In order for the court to order an inspection by the electric company, these tenants must hire an attorney on retainer in order to force that inspection- otherwise, the landlord will not allow the electric company to inspect.) I'm happy that Airbnb is calling the city's bluff. Hopefully, it will challenge the city to beef up its legal system in all ways. Currently, the landlords are the ones favored by the city, while the tenants are the ones "favored" on unenforceable paper.
Wait, what? How can the landlords in NY be asking for 6 months of security deposit? Who the hell has 10k lying around just to rent a place? I don't even have that much in savings!
I know. It is a wholly unreported outrage. I'm still trying to figure out if there is any worth to writing an article about it, at least to just 'raise awareness' for whatever that's worth these days, in the face of many uncomfortable truths being shouted down because they are so uncomfortable. But this goes way beyond uncomfortable. It changes the employment landscape in NYC. I've been trying to figure out what is going on that this is even possible. I live in a building like this. I happened to talk the landlord down to three months plus first and last months' rent due to the fact that I understood the law and could point to several violations of it by his company, right out of the gate at the lease signing. One might ask why I signed such a lease, and one would be wise to do so. The reason is that this is all there is in NYC anymore (I spent several months looking for a clean, upkept, affordable, market-rate apartment) and I'm an experienced renter of NYC apartments now. My building (and many many others I know of) is filled with young people with no or next-to-no employment. These new NYers can afford to take half-time work for years on end until they land an actual full-time job. This makes the future economic landscape hard to strategize for NYers who have already used up their savings trying to stay afloat in this time of underpaid underemployment. So much is hidden from view and it is difficult to get an accurate read on really any aspect of the employment-housing conundrum. I can only speculate about just how they are paying their rent, let alone their security deposits at this place. None of these young people are originally from NYC. After conversing with most of them, at least here in my building, and after meeting many of their parents as they drop them off and help them move in, I have learned that they came here because they felt there was no opportunity for work for them in their place of origin or education. A broader study needs to be undertaken as to what the real deal is. Security deposits need to be capped. My security deposit nearly wiped out my savings. So far, my landlord has not returned a single security deposit of those who have moved out without legal action on the tenants' part over the past four years. This is the usual thing. I know this because I've been in housing court and seen the equivalent of a river bottom sample of a square foot of the city's slimy underbelly. The exhaustion on the face of these judges at the sight of these landlords would be humorous if it were not tragic and deeply affecting to the lives of regular New Yorkers who are not among the city's richest. I've sat for hours (because one must to wait one's turn) and heard the judge yell at these landlords' representing attorneys for wasting her time again with this stuff. This is where we are at here. It is absolutely outrageous, and I really wish a study could be done and published and some legal protections could be made and some enforcement mechanisms could actually be available to tenants. I can tell you that these judges desperately wish the same. It would be great if there were some way for the housing market to reflect the actual job market's temporary or partial commitments. If the tenant housing could respond to this growing lack of stability and certainty with a complementary flexibility/financial lack-of-long-term-commitment, this would be a positive. A few of these temporary apartment complexes have sprung up for tech people, but the rents start at around 2500 a month for a shared space and studio room with a locked door. This is why Airbnb is helpful for some. But Airbnb is making moves to become more like a regular landlord. This is why we need better legislation and better enforcement.
and consider too, that when offered a 2 year lease, a tenant is apt to take it under these circumstances, so they know they have a place to live that won't be taken from them. (as the landlord can decide to not offer a lease again, especially to a tenant who reports a lack of services to an authority- yes there are harassment laws against retaliation, but good luck with getting them upheld-- so a tenant is forced to pay whatever for whatever and never open their mouth if they have no water, no heat, or if there is dangerous construction going on- unless said tenant is cool with being kicked out and not getting that deposit back) And remember too, that the LL can raise the rent to whatever at lease renewal even if the tenant is offered a renewal. The problem with this is: what if the tenant gets a job in another state and it actually pays well with benefits? Now, how does the tenant pay two rents at once? They won't be allowed to sublet - very few landlords even respond to such requests- and if they break the lease, they owe the remainder of it to the LL and won't get their security back. This is the kind of thing Airbnb's presence is challenging. But, I don't see these issues discussed at all.
It's basically an 'are you wealthy/old enough' filter. The wealthy enough usually do not miss rent payments, are less likely to destroy units, will not make your life hell in eviction court because they have jobs to do, make them into party houses, have a bank account you can take money from in judgements from large damages and so on.
> How can the landlords in NY be asking for 6 months of security deposit?
Landlords can ask for whatever they want within the law, and people can either accept it or go elsewhere. New York, apparently, has no law limiting security deposits. [0]
> Who the hell has 10k lying around just to rent a place?
People (or, perhaps, e.g., their parents) renting in (at least certain parts of) New York City, apparently.
[0] Several other jurisdictions do; California, for instance, limits them two months rent for unfurnished units, three months for furnished units, and increases the limit by half of a months rent for if the tenant brings in a waterbed -- and note that "last months rent" is treated as part of the security deposit limit, so if you break it into "first, last, plus deposit" the deposit part is limited to one months rent for an unfurnished unit, etc.
By law, my state strictly limits the amount of security deposit a landlord can charge. And none of this calling it "last month's rent" nonsense - legally any monies collected beyond the first month's rent that the landlord is hanging onto is a security deposit no matter what the landlord wants to call it.
I thought this was par for the course.
I just checked and NY has no statutory limit on security deposits. Wow! That seems like a problem.
Yeah, they can charge literally whatever they want- and it keeps rising. You are right about first and last month rent. But there is no point in trying to have that law work for you, because the LL will just take you to court and you will have to pay legal fees, especially if you are then working at all especially in another city-- you will absolutely not have time to fight this in court (even though you might win it eventually) unless you are unemployed. If you are unemployed after handing over your savings, you are homeless and have much more desperate concerns.
forgot to mention that whatever you agree to in the lease re:first and last months' rent will bind you. And you have to agree if you want a place to live.
Maybe extend the a hassle of tenant law to short term rentals? Or eliminate some of the hassle, if it is unnecessary. But even without any changes, there is only so much of a market for short term rentals. At some point, the market will balance out, so long as supply is not artificially constrained.
Supply is naturally constrained. New York is a coastal island city with decades old infrastructure: no room to build out, can't support much more by building up. The population density if NYC much higher than any other city of comparable size in the U.S. There's no reason to keep straining capacity.
Rent control and difficulty of new development are problems that need to be addressed. However, AirBnB is absolutely part of the problem. The existence of multiple causes is no reason to dismiss an individual cause.
> I get not throwing grandma out of the $250/month 4BR she’s been living in for 50 years
Sorry, but not when the 2BR across the hall is renting for $4,000/mo and is on the market for 4 hours before someone gets it. Grandma doesn't have a right to live in the exact same apartment for the rest of her life at the expense of everyone else.
Well, that's kind of the point - if the possibility to live in a particular place is scarce and so desirable that it costs $4000/month, then you either can afford that or don't live in that place - and this mechanism is useful; it allows people who really value living in that particular spot to pay the premium and do so; and the money flowing in provides a strong incentive to increase supply.
Part of the problem with talking about some policies is differing visibilities of suffering. Yes, the old grandma who has lived in the same apartment for 50 years has very visible suffering if you make her apartment market rate. However, what about the people who were never able to move to NY to start their career and family because of the policy? Or a family that had to leave the city and everyone they knew because they couldn't afford it, and the grandma monopolized all of the 'affordable housing' benefit?
If Grandma needs subsidized housing, that is something that should be separately agreed upon and implemented, presumably from tax revenue. The idea of forcing landlords to pay that subsidy basically at random seems ridiculous to me, the kind of thing that results in discrimination and legal fights.
To me, that's like saying grandma doesn't deserve to keep $2 million house she bought many years ago for $20 thousand because someone with $2 million wants her property.
Because the landlord knew exactly what they were doing when they rented the apartment to Grandma. If the landlord didn't want to enter into a contract the involving rent control, they shouldn't have been in the business of renting NYC apartments.
Contract law usually doesn't allow for lifetime contracts because people can't consider such a long timespan logically. Rent control is the same thing. It forces a contract with on going payments and services with no end date. Is there any escape clause?
As far as I'm aware, people occupying rent controlled apartments (in NYC) can opt to be bought out by their landlord. I've heard a number of stories of people using that windfall (generally buyouts are on the order of $10^4-10^5) to improve their general living situation, and I've also heard stories (including someone I knew personally) of people squandering that windfall and ending up living out of their car.
Apartment rental is explicitly not a sale. We should probably keep talking about the same thing and not keep moving the goalposts to suit our argument.
I believe the landlord is bound by the language of the law, not the contract. If the law enabling grandma's rent control were fully repealed, there'd be no rent control-related reason the landlord couldn't raise Grandma's rent to market rent. Basically, Grandma AND the landlord both needed to know what they were getting in to.
Grandma: "I want this apartment."
Landlord: "OK, it's $250/month with rent control. But just so you know, if they ever repeal that law, and market rate is more than the $250/month you're paying, I'm raising you rent."
Grandma: "Understood. If I were the landlord, I'd raise the rent on the grandma renting my apartment, too."
And to people who view "sale" and "rent" as interchangeable, that might make some sense. A better argument might have been to go the property tax route but that's still not very convincing.
How much sympathy should we have for Grandma McMoneybags here when people making in situations just like hers are helping drive a housing crisis?
In California, this isn't a hypothetical. Especially because she pays property taxes as if the thing is worth a number much closer to $20k than $20mil.
I love this lie that everyone believes about rent control in NY where everyone is getting huge posh apartments for cheap.
Almost all "rent stabilized" apartments in Manhattan are within spitting distance or throwing distance of market rate. Once a significant number of them cross the $2700/mo threshold in a building, the rent destabilizes.
"Rent controlled" units account for less than 30,000 units in all of NYC. That number is never going up and that number is half of what it was 15 years ago. They are not 4BR apartments for $250 a month. This is a wonderful lie that middle class people believe because they don't actually know anyone with a rent controlled apartment -- they're kind of unicorns in the city.
The rent control board in NYC has approved the maximum increase after every single 2 year freeze since about 1990. Then landlords do improvements to get MCI increases as well. The median rent controlled unit in NYC rents for $1040 and is a studio.
The rent controlled 1BR that I live in has not ever been $250/mo and hasn't been under $1000/mo since maybe 1992.
You're ignoring the OPs point. Rent controlled apartments are a rounding error in the grand scheme of making NYC apartments affordable. It's also been around for a very long time, so its effects are well known. As the article outlines, Airbnb is something new.
If that's accurate, it's a little bit more than a rounding error.
Ultimately there has to be a balance. Throwing out long-time renters isn't a great idea but nor is capping prices to decrease inventory.
Personally I favor construction reform -- I mean, look how expensive that 1 mile of the 2nd Ave subway was. It shouldn't be that expensive to build in NYC.
To expound a little; from the actual data source linked in that article:
> According to the 2014 NYC Housing and Vacancy Survey, there are about 27,000 rent controlled apartments vs. about 1,030,000 rent stabilized apartments.
Like you say, rent control is very different than rent stabilization. Rent control limits the actual rent. Rent stabilization limits the annual rent increase.
Rent stabilization doesn't really account for extra stickiness in the housing market (in other words, it doesn't meaningfully decrease housing supply). Rent control does but again, since there are so few of those it's basically a non-factor.
Really? Because rent control certainly myself and everyone I knew in a similar situation with a chance at class mobility.
Rent control allowed my mom to stop being a cab driver and go to nursing school. Rent control facilitated me getting a really great education and career.
I grew up needing food stamps, handmedown clothes and even shoes. How can you, with a straight face, tell me that bullshit?
Because to the kind of people who leap to the defense of businesses like Airbnb and slag off rent control, this is just an abstraction. They don’t know or care about the poor people who these policies helped, and think they’ll find some measure of safety by aligning themselves with the Capital class.
They won’t in the long run, but that’s where we are now.
It's a really good rhetorical trick they pull. "The Market" is making things more expensive because you pulled something off the market! Supply and demand buddy! Of course, if pulling some units off the market is good, why not pulling all of them off? The insane speculation has to stop, it literally destroyed the economy in 2008.
Or people only living where they can afford to. Lots of people might like to live in New York, London, or Sydney (just a few examples). The big problem with housing subsidies is, who gets them? You cant just give them to everyone, or the price of housing will quickly correct to balance supply with the artificially increased demand.
Because you benefited at the cost of others. For everyone that has your success story, rent control causes a number of others to have even less access to affordable housing.
Not wage stagnation or cost of living increases, or AirBNB (oh wait)
Just rent control
So let’s screw the people relying on it because in some narrow context about screwing others (that never happens otherwise in the economy!) rent control is bad
There are hacks and patches all over “the system”. That’s called free market making agreements as needed when needed, IMO
Just because when quantified some story is told that seems off to external players doesn’t mean it’s anyone’s concern but the parties directly involced
The cost disproportionately affects the wealthy. Due to the marginal utility of money (your first $10,000 a year has a lot more utility than your 100th), that means even a zero-sum benefit was likely a huge net positive measured in utility.
Sorry. There's a better way that I could have phrased that, but I pretty clearly did not criticize the person or call them names but rather their argument. I know you're a busy guy but maybe could you correct my misunderstanding here?
This is absolutely language that I would use face to face with someone.
It's pretty simple. First, that sentence combined personal language with aggressive language. That crosses into personal attack almost by definition. Second, it adds no information.
The fix is simple too: edit it out. Signal/noise ratio goes up and the comment gets better.
One of the unmentioned goals of rent control at the time was to stop the mass exodus of people out of New York starting at the tail end of the 60s.
I live not far from The Deuce and my neighborhood was plagued with drug use, prostitution, muggings and homelessness. We stayed in our apartments in an extremely dangerous city while hordes of people left. My landlord wouldn't have her building still if not for rent regulation.
>"... or the difficulty of building new housing stock in the city."
What difficulty? I'm guessing you haven't visited NYC in quite some tie. New York City has experienced an almost continuous building boom for the last 20 years. See the NYC Construction Dashboard:
Note the the graph for "NYC Employment: Construction of Buildings (2000 - 2016)"
>"The endless red tape in new construction makes non-luxury bulidings unprofitable."
"Luxury" has become little more than a cliche marketing term used in promotional material. Almost all new construction has things like a roof deck or Amazon lockers and so is termed as "luxury."
Please provide a citation or any evidence that demonstrates the existence of "endless red tape" in NYC as a barrier to new construction.
Most of the new buildings that go up are luxury condos, out of reach for mere mortals like myself.
I actually purchased a condo in a new building in one of the neighborhoods this article mentioned about a decade ago but I was never able to move in, even after signing the contract, because the city wouldn't grant a certificate of housing occupancy to the builder (long story). But yes, I've personally lived the red tape issue.
It's not exactly parallel but check out this NYT article from December about why the 2nd Ave Subway was so outrageously over-priced -- while most people aren't tunnelling under Manhattan the issue of overpriced construction applies to all 5 boros: https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-...
Why would you expect that apartments in NYC will be available for mere mortals? There's 7 bln people on the planet and let's say 1% of them would move in if prices were affordable. It's an alpha plus plus city, only two of these, both biting expensive.
NYC is our city. It's for everyone. If the wealth is too concentrated there, split it up. You'd want to turn my hometown into some kind of apartheid disneyland for the rich.
So because of the accident of your birth, you have more right to live there than I do? I worked hard (and was fortunate in various ways and was supported by the social system) to earn what I have, but my money isn't good enough?
It's pretty easy to turn that around and say that people with cash can displace and kick around anyone they want. I don't think you have less right to live there, I just think it shouldn't be money that is determinate. For instance, you could apply for placement that is need-blind.
This does preference people that already live there, but that seems elementary that the economic system should not have an inherent tendency to split up communities. People should be able to move when they want to, not when they are forced to. The reason everyone wants to move to NYC is for economic reasons. Maybe if more places weren't destitute, fewer people would need to move around as much.
> It's pretty easy to turn that around and say that people with cash can displace and kick around anyone they want. I don't think you have less right to live there, I just think it shouldn't be money that is determinate. For instance, you could apply for placement that is need-blind.
The bottom line is that there aren't enough homes for everyone who wants to live there, so it comes down to how we allocate what there is. "Auction it to the highest bidder" has its issues but has a lot to recommend it: it's transparent, understandable, nondiscriminatory in a lot of respects, gives people a way to care more or less strongly, and means we get a market price for homes in that area that tells us where we should be building more homes.
We could use something like a lottery but that would mean a) houses would go to some random set of people who wanted to live in NYC, not the people for whom it makes the biggest difference b) we create a bunch of incentives for corruption - both the lottery itself and then people doing sublets/fake family transfers/... if they find someone who wants the place more than they do. Of course it's possible to fight that kind of corruption and for some things the principle is important enough to be worth it, but it's better if we can design the system so that it naturally doesn't happen c) we wouldn't be incentivising developers to build the homes that people most want.
(All that said I do think there should be a land/property value tax, to ensure that people only buy expensive land/buildings if they're going to actually use them, and to compensate the rest of the country who's priced out)
> This does preference people that already live there, but that seems elementary that the economic system should not have an inherent tendency to split up communities.
I did not fit in the "community" of the town I grew up in, and was very unhappy there. The city I moved to has been a lot better for me. So I feel quite strongly that everyone should get a fair chance at that, regardless of where they happened to be born.
> People should be able to move when they want to, not when they are forced to. The reason everyone wants to move to NYC is for economic reasons. Maybe if more places weren't destitute, fewer people would need to move around as much.
True as far as it goes, and I'm all for e.g. building much denser (NYC-like) neighbourhoods in other cities to help them gain the same advantages. But in the meantime we still have the question of who gets to live in the city that a lot of people want to live in.
You can get preferred treatment for preexisting apartments, but how would you manage that for newly built ones? USSR tried to, they failed and made lifes miserable. China tries and it's not helping.
I'm not saying I have the exact solution but it would look something like a democratic process that has representation for both community members and new entrants. People that want to move into the city can participate in decision making. Once your in, your interests change so then you're eligible to be on the community side.
> Luxury condos reduce demand on other buildings, helping keep rents down. Without them you'd have more rich people bidding on regular stuff.
Luxury condos attract rich people that otherwise might not be in the local market, both directly (to live in the condos) and indirectly (by stimulating a local increase in services catering to a rich clientele, making the area, not just the condos themselves, more attractive to the rich.) This can make the net effect an increase in demand for other existing housing from the rich, rather than relief of such demand.
Attract rich people from where? If the presence of rich people is a problem then solving the "problem" by keeping your neighborhood shitty just means the problem becomes someone else's to bear. It doesn't actually solve it. And notice that if they "solve" it too then you get rich people in your neighborhood driving up your rent and you live in a shitty neighborhood.
That dashboard is misleading. NYC has one of the lowest rates of building permits per population of any area in the US[0]. We're building more, but the population is growing as well. Supply is not able to meet demand.
No, whats misleading is using "population per permit" as the sole metric.
Do you really think that NYC and Sacramento, CA are even remotely comparable in terms of the available land, logistics and population density? That's absurd.
Personal experience and this has nothing to do with New York City but I can understand the article POV.
I recently moved to an island in Greece. The small town am living in, has the exact same issue that the article is describing, yet even worse.
Everyone, literally EVERYONE, has their apartments/houses/properties that they don't live in, turned into Airbnb's. Doesn't matter if its in the town center or 30 miles out of the town center. Government only just now sort of regulated airbnb renting. (Average rent per month is 300 euros. During the busy period which starts at April and ends November someone can make 100euros a day from that apartment)
Up to now the town I am living in and every single village in its radius, had a massive housing issue. You couldn't find anything to rent. I had an issue with renting as well, and I was well willing to pay way above the normal to get something as I do work for a foreign company that pays me the salary of a western country.
I don't know how much of this applies to New York and if the article is going the right way with it, but I can most definitely reflect my own experience to that article.
I think Airbnb and anything that is similar should get regulated. I think Airbnb came in at a time where laws/regulations weren't in place for such a thing, or were very light, and it made sense for people to rent out their 2nd homes for it.
Although it has created a massive issue with finding a home. As I mentioned above someone can make 3 times or more the money that he'd be making in a year of rent from 3-4 months of renting to airbnb.
Another massive issue that Airbnb and similar sites have also created in the area I live in is that the small hotel owners and family hotel owners are getting slowly out of business. That is happening because obviously the massive hotels can offer full packages and whatever and will always be profitable, but smaller ones still have to pay a lot of money on tax, licences and offer some sort of services that an airbnb owner didn't have to up until now in my area. Even now that its sort of regulated, airbnb owners are still going to have a better time than the small hotel owners.
So yes all in all, airbnb and similar sites, create a massive issue and I feel like something should be done about it.
That's part of it, but there is also a genuine issue of AirBnB owners running unlicensed hotels that impose negative externalities on the community (e.g. not being checked for bedbugs as frequently as a hotel should, providing a place that wanted criminals can hide out without having their IDs checked, evading taxes...)
> I get not throwing grandma out of the $250/month 4BR she’s been living in for 50 years, but it means something like 200,000 rent-controlled/rent-stabilized units are also raising everyone else’s rent by decreasing inventory.
So you're saying that affordable housing is preventing housing from being affordable? LOL.
> The endless red tape in new construction makes non-luxury bulidings unprofitable. Want cheaper rents? Fast-track approval for new apt buildings.
Luxury buildings are more profitable because rooms are more spacious (literally requires less construction), you need to make fewer sales to make the same revenue (in a 10 story building you sell 40 condos instead of 80) and buyers are more financially stable (each sale is easier). Removing red tape has nothing to do with that.
There's certainly lots of red tape in NYC construction, but I see zero evidence that there is more red tape with non-luxury construction. This is just a ridiculous HN meme at this point: every problem is caused by regulation and the only tool we're allowed to use to solve problems is incentives. I, for one, am deeply skeptical that making things cheaper for rich people is a good place to look for solutions to the problems of the poor.
More to the point: none of what you've said means that AirBnB isn't to blame for the lack of affordable housing in NYC. NYC housing is a complex market, and a lack of affordable housing has more than one cause. The article presents its evidence why they think AirBnB caused the problem. Simply presenting alternate causes doesn't mean AirBnB isn't a cause, because I think we can agree there is more than one reason that housing prices are high in NYC.
> So you're saying that affordable housing is preventing housing from being affordable? LOL.
I think you're conflating 2 types of 'affordable housing.'
People say 'affordable housing' when they mean 'government legally forcing landlords to underprice their units' versus what the term should actually mean, 'a reasonable price range of rents'.
> there's certainly lots of red tape in NYC construction, but I see zero evidence that there is more red tape with non-luxury construction.
There isn't necessarily more but there should be less to incentivize builders. No point in going through all the bureaucracy if your margins are going to be super low.
> Simply presenting alternate causes doesn't mean AirBnB isn't a cause
It's a factor, for sure. I'm not defending Airbnb as a nonentity, my point is that it's easy to blame Airbnb because they're a new player whereas academics and state politicians seem less enthused about taking a cold, hard look at housing laws, while well-intentioned at protecting low-income renters, probably play a far larger role in increasing housing costs.
> People say 'affordable housing' when they mean 'government legally forcing landlords to underprice their units' versus what the term should actually mean, 'a reasonable price range of rents'.
Huh? No, "affordable housing" means "rents people can pay" (an extreme example being a $250/month apartment). This isn't complicated.
> There isn't necessarily more but there should be less to incentivize builders. No point in going through all the bureaucracy if your margins are going to be super low.
Or, you could take steps that actually address the problem with the lack of affordable housing. Given that you just admitted red tape isn't necessarily more for affordable housing, removing red tape doesn't address the problem with the lack of affordable housing.
Red tape is a problem, but it's hardly the most pressing problem. Builders are making plenty of money in NYC. So when we're discussing real pressing problems like the lack of affordable housing I would appreciate it if you stayed on topic and didn't bring up the irrelevant problem of red tape. I'm not worried about builders having to fill out more paperwork when people are literally homeless in the snow right now.
> I'm not defending Airbnb as a nonentity
Your previous post was definitely defending AirBnB, even if it was just so you could bring up your pet issue of giving already-rich people incentives.
> academics and state politicians seem less enthused about taking a cold, hard look at housing laws, while well-intentioned at protecting low-income renters, probably play a far larger role in increasing housing costs.
Plenty of people are looking at housing laws. It's just that if you look at housing laws without the myopic lens of "incentives are the only way we can do anything", it's pretty obvious that laws which prevent owners from raising rents on affordable housing don't cause the shortage of affordable housing.
I'm just not sure how one can be so confused that they think allowing raising rents is the solution to rents being too high.
I realize I'm being hostile here, but your viewpoint is hostile to the poor and homeless of NYC.
> This is just a ridiculous HN meme at this point: every problem is caused by regulation and the only tool we're allowed to use to solve problems is incentives.
A data point amplifying this assertion is the situation in St. Louis, where tax incentives are handed out like candy to almost exclusively luxury developments. The city has seen several credit downgrades since 2015, with weak revenue raising ability cited in the most recent instance. The higher interest rates the city now pays on its financing are part of the reason why growth in tax revenue (including several sales tax hikes) has been fully nullified by cost increases, with the result being a net loss. Affordable housing development is sparse, since it's obvious to builders where they get the most favorable discounts.
In our local town, the old warehouse district development was 'incentivised' with rent subsidies for new construction. So luxury construction was done, and the rents are exactly the same as everywhere else. The landlords sucked it up for themselves. Strangely, they stand mostly empty.
>> The endless red tape in new construction makes non-luxury bulidings unprofitable. Want cheaper rents? Fast-track approval for new apt buildings.
> Luxury buildings are more profitable because rooms are more spacious (literally requires less construction), you need to make fewer sales to make the same revenue (in a 10 story building you sell 40 condos instead of 80) and buyers are more financially stable (each sale is easier). Removing red tape has nothing to do with that.
You're misunderstanding the GP's point. They're saying that heightened building costs make it irrational to choose to build lower-margin projects like non-luxury housing, because you don't have the margin to absorb those costs.
I understand the problem, I'm saying cutting red tape doesn't solve that problem.
It's always going to be irrational to choose lower-margin projects. Let's say there's a 30% margin on luxury housing and a -10% margin on low-income housing, and you cut red tape, increasing margins by 20%. It doesn't suddenly become rational to build low-income housing. Margins are now 50% on luxury housing and 10% on low-income housing. All this has achieved is that builders make more money when they build luxury housing.
The problem is that space in NYC is limited, and income inequality is such that the wealthy can and do pay orders of magnitude more for housing than the poor can. This means that, instead of dividing up the space in NYC between the wealthy and the poor, it's more profitable to divide up the space in NYC between the wealthy and not serve the poor at all. This incentive structure will always exist as long as the demand for luxury housing is greater than the total amount of housing available.
There's no reason to believe we've hit the ceiling on what the demand for luxury housing. So even if we were to selectively cut red tape only on low-income housing, the wealthy could simply pay more for luxury housing to ensure that it remains most profitable to give them what they want. And meanwhile you're giving these incentives to the wealthy construction and real estate companies, increasing the income inequality that caused the problem in the first place.
I've said before that HN would rather incentivize nails than use a hammer, and this is another case of this. If we want affordable housing, we need to require companies to build affordable housing as a condition of being able to build anything in NYC. Giving more money to already-wealthy people isn't going to solve this problem.
If anyone is interested, I recommend the nearly 18-hr PBS documentary on New York City [1], especially the latter parts (6 & 7) which focus on the building boom and the obsessions of Robert Moses [2].
Air BnB is terrible for smaller, more touristy towns as well, like Traverse City, MI where housing prices and rents have skyrocketed. Used to be able to rent a granny flat as a service worker...those are all Air BnB'd now.
Actually, they have stopped offering tenants money to move out unless they get a crop of tenants who know their rights and have some kind of leverage to enforce them (these are usually more affluent tenants who hung onto stabilized lease who band together). Instead, they silently declare war on existing tenants by demolishing their homes while they live in them. Then, tenants who understand this to be classic slum lord harassment begin the assembly of an endless paper trail to get them to pay them to leave. By the time tenants get landlords to pay, the money offered is a piddling sum which covers only property damage and health care costs of tenants they have made sick or injured with dangerous, dust-filled construction air, and falling bricks from their ceilings. They break tenants down until the tenant will take a few thousand bucks just to get to leave and not be charged for the remaining months on their leases. I know this because these practices swept my and my friends' Brooklyn neighborhoods absolutely clean of long-term renters beginning about seven years ago. Another key development signaling that this problem is rampant is the fact that De Blasio has instituted a new initiative to punish landlords for harassing tenants in this and other ways because it had become such an epidemic. Unfortunately, the problem is so widespread that only the absolute worst of the worst are punished for treating tenants like this.
But treating tenants like this at every level of the NYC market is really just part of the codified MDL landlord playbook in NYC. It isn't just for slum lords anymore. Market rate rental tenants are harassed, asked to provide 6 months' security (often not returned) and the landlords make no repairs until they are taken to court. This used to be the domain of the slum lords and a few ultra-shady landlords. These days, you can't pay for a rental unit and a landlord who offers a product you signed-up to pay for. (this basically applies to landlords under the MDL, not rich people who rent out a floor of their brownstone- they are not "career landlords") As a tenant, you need to keep filing HP actions in Housing Court in order to get basic services like heat and hot water, even in so-called "luxury" buildings. In this climate of unaffordable "luxury" rentals that are run like slums by the landlords (but look "nice" to a casual observer) a tenant's only option in many cases is to find a way to double up with a friend or to leave the city and Airbnb when they can. The tenant protection laws that are constantly trumpeted are only as good as the mechanism to enforce them, and while the city pays lip service to the idea of protecting tenants from harassment, injury, or swindle, their interest is really with the landlord. Housing court doesn't offer solutions to major tenant problems beyond what is listed in "The Warranty of Habitability". If a tenant wants the parking space they paid for so they can have a car to get to work while they live out in the boonies 1.5 hour commute on congested and failing public transport, they will have to put down a $20,000 retainer to have that case tried in Supreme Court. Housing court doesn't handle such matters.
edited to: make a distinction between landlords who own large buildings and the wealthy folks who make extra money by renting out an unused floor of their brownstone. I'm speaking about the former here.
I have no problem with anyone down-voting my comment. I would really welcome some substantive critique. I'm offering my perspective of what is going on in NYC in order that it might help someone who is going through something similar, or that it might cause someone to offer a possible plan to make things better. So please, down-vote, but could you then actually offer a critique? I would like to learn why this is grating whomever it is grating.
> they silently declare war on existing tenants by demolishing their homes while they live in them
That's nonsense. You're clearly speaking with hyperbole but other people can't argue against hyperbole. You spent the whole paragraph detailing clever ways landlords mess with tenants to get them to leave because the tenants know their rights. Those rights are the problem. The rentee/render relationship should be mutually beneficial. At the end of a lease, perhaps with 3 to 6 months of warning, the person should have to move out. With weaker tenants rights laws, those tenants would have an easy time finding and getting approved for another apartment.
Your second paragraph details how market rate renters are harassed with lack-of-services which I just don't believe. I bet others don't either which is why which is another reason you are being downvoted.
I think 8 articles demonstrates my point, but there are dozens of others.
Thank you, though, that helps me understand. I want engineers and others who think of moving to NYC to at least be prepped for reality, because I was not. While our situation isn’t as bad as the horrifying homelessness in tech cities in California, it is a close second, with problems that date back before the tech boom, and growing homelessness that will sadly soon rival the problems on the west coast. We were speaking about Airbnb in relation to this situation, and I see it as a force that could bring about real legal change through the process of legal sparring that might benefit tenants. It has that power because it threatens the current power. Tenants can’t do that- only huge financial giants can, if they work with tenants. Landlords have a powerful lobby here. The tech boom in NYC is only one of many new pressures on an already failing housing system here. The very long history of landlord tenant relations in NYC can seem like operatic exaggeration to someone who has not lived here as a renter who is doing well but isn't uber-wealthy. I can tell you that the declaration of war from a LL to a tenant is just as often not silent. It isn't subtle, and threatens life and safety. I lived in a rent stabilized building during the upscaling of what used to be a regular, family-oriented residential area of of Brooklyn. That area and many others in Brooklyn became ultra-luxe-hip and glittering faster than I've seen any previous gentrification move here. (Bed-Stuy happened very very quickly but not as fast as my previous neighborhood). And it can't rightly be called "gentrification", because unlike Bed_stuy, the area was too much of a well-maintained destination to begin with. Some of these landlords (mine included) held rent-stabilized p...
by the way, a landlord must notify the tenant of an opportunity to renew (or not) within 90 days of the sign date on the new lease. This isn't the issue at all. And I agree, the relationship should be mutually beneficial. It should definitely NOT be one where a tenant pays security and rent for an apartment and doesn't get a habitable place. Tenants just want what they pay for and sign a lease to that effect. How would you feel if you bought a new car that didn't have working breaks or a working engine after a month? Now what if the car dealer said, "Tough! See what you can do about it!" You would have to take them to court, right? Or at least seek relief. Or would you just take it and call it "mutually beneficial"? I don't know what a car owner would do in that case as I don't own a car, but you get my drift.
Imagine there's a place on Earth that is somehow truly amazing and fills you with happiness for a long time for just visiting it.
Obviously, it makes sense to have as many different people as possible be able to appreciate it, which requires having them visit only one or a few nights.
Clearly, people should not be able to monopolize a flat there for 365 days a year, and if they do they should pay a fortune since they are denying other 364 people access to the place.
This also works for less amazing but still touristically interesting places.
Also the best solution would be to have enough housing to meet needs both from one-day-per-year demand and for 365-day-per-year demand, but if that's impossible tourists should definitely be the priority over wanna-be residents.
lost you at obviously. you’re saying that cities should be ghost towns where nobody lives and every single place is an airbnb...
because obviously we would like to have as many people see this amazing place
cities aren't tourist destinations, people live and work there. skyrocketing rent just so tourists can frolic is a disservice to the people who live there day-to-day
> cities aren't tourist destinations, people live and work there.
Cities are both in various ratios. Those cities that tourists particularly value should probably allocate a large proportion of their limited housing to tourists, those cities that people particularly value living and working in should probably allocate a large proportion of their houses to homes. Fortunately the market can sort this out.
AirBNB and Uber are the least racist companies on the face of the earth. No other companies on earth have opened up the avenues for direct social interactions across race and class lines the way these two companies have.
Before Uber and AirBNB, how many opportuinities could you name for white Americans to do the following:
1. Get in a car with a black person for an hour and have a conversation about the election
2. Go into a racially diverse neighborhood and have a black family open their home to you and spend the weekend together
3. Have a black person come and rent a room in your own home and stay with your family for a weekend
4. Allow people of color who own property in predominantly black communities to profit from their own home
The only ones who benefit from these hit pieces on AirBNB are hotel groups who want to regulate these arrangements out of existence and drive up costs for hotels.
Who do you think is harmed the most when hotel prices rise? It is the same people of color (and everyone else), who have to pay more to stay downtown in major metropolitan cities.
Any study of AirBNB that does not take into consideration social mobility and prices of affordable overnight rentals is a BS study, they are comparing bananas to coconuts.
Yet we only see half of the story told in the media. Why is that? It’s almkst as though the authors of these studies have a distinct agenda.
How are the effects any less racist than the rising home prices, which could easily be explained by...uh...the massive stock market rally we just had?
Where are the studies about how people of color who own the buildings and units being rented out in ethnically black neighborhoods can now afford to send their children to college?
Reading the comments here: Too many people ask too few questions and have too little understanding about the free market. Freedom of personal property is GOOD for Black People. It is the ONLY way black people improve their situation.
All 4 happened with regularity before uber. Are you literally 12? And how did mentioning that minorities were disproportionately affected become calling either company racist? The only racisim i see is buried in the assumptions made in your comment.
I think the grandparent poster was right - AirBnb opens up a way for people to see life in communities that were difficult to access before. That's what I appreciate most about it - how natural it feels to live like a local person. Living in a hotel while travelling feels artificial now.
you’re saying that cities should be ghost towns where nobody lives and every single place is an airbnb... because obviously we would like to have as many people see this amazing community uh?
This is not quite Pareto distributed but it's getting there:
"half of all Airbnb rentals that are conducted by only 10 percent of hosts, who earned a full 48 percent of all the revenue earned in the city last year. That’s some 5,000-people earning a combined $318 million. In contrast, the bottom 80 percent of New York’s hosts—the city’s 40,400 true home sharers—earned just 32 percent of all revenue, or $209 million, in 2017."
While I like the exploration of facts like this, I don't really believe AirBnB is important to rents in New York City. In spatial statistics it is difficult to really prove anything rigorously, and this study doesn't even try to go the distance.
"Applying Barron et al.’s national average ratio of exogeneity to New York City, this implies that, city-wide, Airbnb drove up rents by 0.8% in 2015, 0.4% in 2016, and 0.2% in 2017 (all for years ending in August). This is a cumulative 1.4% increase in rents over these three
years attributable to Airbnb’s presence in the city."
So while it might seem like the study looked statistically at AirBnB's impact on NYC, in fact it did not. They just used a sort of rough rule-of-thumb from a national average. But the rule-of-thumb is useless in particular cities (suppose a city had one unit on AirBnB; would adding one more increase rents?), and isn't even from published work. The authors of this study are not economists or econometricians, and it isn't peer-reviewed and never will be.
Moreoever, you can use common sense:
"Airbnb has removed between"
(Dr. Evil voice)
"7,000 and 13,500 units."
New York City has 3.4 million housing units. While year to year housing production varies a lot, on average it produces that number of new units every few months:
https://imgur.com/a/gnzUf The report also notes that these units are concentrated in the most expensive neighborhoods anyway. And NYC is only part of a much larger housing regional housing market. It simply strains credulity to think even the upper bound of 13K units has any impact---especially when you consider some of the people occupying such units would have letted or subletted in NYC anyway (the report notes many are long term rentals).
Of course, the real action is in zoning. NYC has seen some upzonings, but mainly massive, consistent downzonings over the past few decades. It is funny people worry about about supply when a private firm removes a tiny bit of it, but nonchalant when the government removes lots of it. Construction costs have also soared, and are now sure to get worse thanks to Trump's tariffs on steel, aluminum and canadian timber.
> sure to get worse thanks to Trump's tariffs on steel, aluminum and canadian timber.
this[1] suggests that most New York City construction uses US steel and will be minimally affected by Trump's policy. Admittedly, basically all new construction is concrete and steel so it will undoubtedly be affected in some way by changes in the steel market.
It does not matter what particular country produces one one's steel. What matters is the price of steel. US mills will be able to charge higher prices, so the cost of NYC construction will rise; although in the short run builders have probably locked into certain contracts. That is the whole point of the tariffs: to raise steel prices.
AirBnb not just hikes rent prices, it hikes real estate prices as well because it is a way to offset mortgage payments. It effectively brings down mortgage interest rate. Have some free money? Get a mortgage and put the property on AirBnb. We know what happens when this type of thinking scales out.
tl;dr: The underlying product - properties - were actually more useful than was widely recognized. Given new demand, expecting anything other than price increases is unreasonable… but so is treating current prices like they're written in stone.
Here's one way to think about Airbnb: prior to Airbnb (and VRBO and…), housing values - both rents and asset prices - didn't incorporate all of the legal and zone-permissible demand for them.
Imagine if, until now, the only way to rent an apartment was by pre-paying for a year. Instead of $1,500/month or $2,000/month, every landlord quoted and charged a price per year, like $18,000/year.
A company or business model then introduces the idea of only charging by the month (ie, what the US market is now based on) rather than requiring pre-paying for a year. 2 things would happen:
1. Demand would increase (and prices would probably go up), because someone would be serving previously un-met demand. (From the article: "over the last three years, Airbnb has increased long-term rents in the city by 1.4 percent")
2. The customer base would change, since the demographics of those able to come up with 1 month's rent are very different from those who can front 1 year's rent. Some of these newcomers would be non-residents or short-term residents.
If this sounds a lot like what Airbnb has done, you see the challenge. There's nothing inherently permanent about current rents or asset prices, nor the current customer base. They're just reflections of the ways that a property can be used at one point in time – and there's nothing special about those ways. People got used to the current demand because the product mix changed so little for so long.
Whether that's good, bad, or some of both is a reasonable question, but in any other industry (even with other supply-constrained assets), society almost always considers it good. The underlying product was actually more useful than was widely recognized.
(If the yearly vs. monthly rent example sounds outlandish, here's another that's actually happened: 10%-15% mortgage interest rates, as existed for most of the early 1980s. 13% mortgages could change the supply of housing enough to meaningfully impact asset prices and rents, that is, create a new normal price.)
I agree with the article's sub-point that this has little or nothing to do with home sharing. The core change is that it's now possible to use an existing product to serve a market that was previously not served well.
(Note that I'm ignoring housing where short-term rentals were not legal prior to Airbnb - say, before 2013 - or were legal but not permissible under zoning. While those are important considerations, many or most short-term rental limits were passed in response to Airbnb.)
As an apartment owner in Manhattan, I find one part of the study surprising. Most Co-ops and Condos (two types of apartment financial structuring that is common in NYC), explicitly ban AirBnB rental. The apartment I own, in a fancy part of the city (Upper East Side), penalises the owner $350 for first infraction, and the fines escalate for each subsequent infraction. Most Co-ops even prohibit non-owners living in the building (they cannot rent it out). I wonder who these people are, that are able to buy AirBnB'able apartments.
I also looked at the data-source in the Citylab article (Airdna.com) and I see that I would earn 10% more by Airbnb'ing my apartment than finding a tenant. For me this 10% is not worth optimising for, considering the tenants go through a credit evaluation process, I don't risk any vacancy and I do not have to change the sheets every other week.
You do not want to mess with a co-op board in NYC. You'll have neighbors who will rat you out whenever they can, the doormen/supers will be on the lookout for sketchy behavior, and the board will be draconian in it's enforcement. It sounds silly but people take co-op rules very seriously.
The article should have mentioned this at the very top: "It’s also worth noting that Wachsmuth’s research was funded in part by some avowed foes of home sharing—the New York City Hotel Trades Council—and was cosponsored by housing and tenant advocacy organizations."
You need big money to fight big money. So as long as they are not lying, I am fine with it. If they are lying (or even "selectively telling the truth"), AirBnB should fund research to expose them.
My take, after living in NYC Airbnbs for around a year, is the effects are most dramatic in non-white areas. And it's not lower income people who are renting their place out on Airbnb; it's typically commercial renters and hipsters/professionals looking to supplement their income. So it certainly feels like the main effect is to accelerate gentrification.
After living there for 10 years I moved on from NYC at the end of last year. My last apartment was in a neighborhood in Brooklyn that is still heavily African American but will probably look significantly different in 5 year. The number of European tourists that just show up and come and go on the subway platform there was wild. I have lived in post-gentrification neighborhoods mostly and had not seen anything like this. The only reasonable explanation was AirBnB.
Slightly of topic,
but I always find it funny/sad that all over the world:
Driving a car you (and also partially others not owning a car) indirectly pay non market land cost, construction and maintenance costs.
Whereas getting a roof over your head requires directly paying market rates for land, construction and maintenance costs PLUS profit on capital.
In my opinion having a roof over your head is a more fundamental human right than driving around in an vehicle. But obviously those two are related as those unable to afford market rents/house prices have to live in the boondocks and then are forced to use a car.
239 comments
[ 2.7 ms ] story [ 178 ms ] threadThere's nothing wrong with that. They can tax the hell out of it and use it to fund services in the rest of the city where real people live.
Seeing as how there are 1.6 million of those now that would be quite a turn of events.
https://www.citylab.com/equity/2015/05/why-billionaires-dont...
Also, the population in Manhattan has been going up since 1980, so it can simultaneously be true that there are more people living here and more vacant investment properties and hotel rooms.
I doubt we're in any danger of Manhattan emptying out in the next few hundred years from anything other than a nuclear attack or climate change.
I'm also amazed by the average night price at Manhattan hotels. Even during normal weeks, the cheapest is well above 300$/night.
As someone who stays in hotels regularly for work (mainly capital cities in Western Europe), I don't find Manhattan prices to be any worse than London, Paris or similar.
We try to keep overnight-accom. expenses to under $100/person/night at my startup and SF is the only place we couldn't find a comfortable, clean and well-located hotel room at that price point.
Nothing fancy, but a surprisingly big room at a prime location.
It’s very possible.
Was kind to my landlord, and tried to fix whatever I could rather than calling her when I needed something. The goal was to have her forget I existed. Rent was raised $50 every other year which was completely manageable.
Of course that is not where people usually associate with Manhanttan..
http://www.tenement.org
It turned into a talk about housing, and housing prices (we had a california developer on the walk and some english people adding perspective).
Did you pay the rent yourself on that ~75k? Of course not. You paid half and your roomate the other half. Your answer is not really valid as you proved your income at the time was not enough to afford the apartment.
Wait a second....
Why not? Because you like living there?
I get not throwing grandma out of the $250/month 4BR she’s been living in for 50 years, but it means something like 200,000 rent-controlled/rent-stabilized units are also raising everyone else’s rent by decreasing inventory.
The endless red tape in new construction makes non-luxury bulidings unprofitable. Want cheaper rents? Fast-track approval for new apt buildings.
This is such a waste and hugely frustrating for folks who live and work in these communities trying to find accomodation.
I fail to see the difference, maybe you could expand?
> In a rural area, if it really comes down to it, people buy
Folks are seeking affordable rents because affordable (and habitable) property to buy is pretty much non-existent.
> or rent a plot of land and throw a prefab home or trailer on it.
Perhaps in your country, good luck with getting away with that in the UK. We've got some fairly strict planning rules that make that kinda thing more or less impossible. Also "renting a plot of land" for this type of use isn't really a thing here.
The remaining available/eligible land is held by large house builders in their "land banks". Some of these tracts of land have been off the market for years and years, yet nothing ever gets built on them until the house builder decides the time is right to screw the maximum price out of buyers.
I'm kinda hoping that when Scotland does finally become independent we will solve these problems with radical land ownership reform.
Usually you deal with bad 'land hoarding' with a high enough property tax rate. And if you want to avoid effecting the old and the middle class, you add exemptions for primary residences.
Council Tax - a tax on residential properties. Properties fall into one of eight bands, A to H, where A is the least expensive and H is the most expensive. Your council tax bill is made up of the council tax itself which is the largest portion (goes to the council to pay for schools, libraries, street lights, etc). The remaining portion pays for water and sewerage.
Non Domestic Rates - businesses pay these. Water and sewerage are payable in addition. I don't know the ins and outs of how they're calculated.
Unfortunately land hoarding is an unresolved issue in the UK, there isn't as far as I know any penalty or charge - much of this land has no services or business activity so can't be taxed. There have been suggestions by some UK members of parliament that house builders should be forced into a "use it or lose it", thus far there's not been any official position from the government. I suspect the issue will be swept under the table until the next time the media hoves round and puts this back in the spotlight again.
It's considerably less built up than most people think [1-2]. The problem is that our planning laws do not realise that farmland is an ecological desert, and so we're not allowed to build on most of the UK, pushing the value of the little land that can be built on through the roof.
[1] http://www.bbc.co.uk/news/uk-18623096
[2] https://www.telegraph.co.uk/finance/newsbysector/constructio...
Yes. That's what I was explaining. You can just do that in many rural areas of the U.S.
That's the big difference compared to urban development. You don't need billion dollar loans and a lobbying firm to add solve the problem on the supply side. It's very common for semi-retired middle class people to buy undeveloped land with good highway access, subdivide it, add some housing, and flip it.
But "rural" in the US and "rural" in the UK are orders of magnitude apart. There are individual ranches in Texas larger than whole counties in the UK. The kinds of nomadic people that provoke anti-camping laws require a certain population density to support their lifestyle, so in the US, it's usually the NIMBYs that try to ban certain kinds of dwellings on other people's land. It's a question of how many people would even know something is there. If you never even see your mail carrier, you're not going to have a problem erecting any sort of building you want. But if you have neighbors that can see your dwelling from theirs, they will be interested in your private business.
So if you're in the middle of the wind farms and corn farms in northern Indiana, no one cares if you have a manufactured home on your land. If you're on undeveloped land just east of Denver, you can't even pitch a tent on your own property without a permit.
Expensive rent in a rural area means people get pushed further away. In the medical practice that my mom worked at, employees commuted as far as 100 miles.
The land as you state is a different story. I love the idea of a disposable trailer home I could replace every 20-30 years with new technology, unfortunately due to social attitudes prefab homes are almost exclusively marketed and built for lower incomes.
Sorry my comment was ambiguous
The land itself does.
Of course, if you keep your home in good repair and updated to modern standards, that will help retain value. But you're effectively selling a new home at that point, and the costs you have sunk into keeping in that way extend well beyond the original value.
Land value is where you normally find the appreciation. The trouble with trailers in a trailer park is that you do not own the land, so what you bear is entirely structure depreciation.
Erm....have you seen what the property market is like in the UK. Most, if not all, property appreciates with little or no major expenditure.
There are exceptions. Markets can do funny things from time to time, form irrational bubbles and whatnot. Even cars sometimes appreciate without any major repair or refurbishment costs. Tulips were once an appreciating asset, as the story goes. But as a rule, things that become outdated, wear out, and die lose value over time.
The reason for this is that it's pretty damned difficult to separate the two, especially physically. Planning laws generally discourage complete demolition of dwellings unless they're pretty much near collapse or there's been a fire that's gutted the place or in more extreme circumstances perhaps all or part of the house has fallen into a sink hole.
In the UK, residential property (the structure bit) is, and has for a long time now been seen as an appreciating asset/investment. As I already said earlier, property here, if lived in and sensibly maintained, isn't considered something that "wears out" like a car body.
It sounds like you're not from the UK so maybe all this is an alien concept.
Edit: I forgot to mention that things get a wee bit more complex, especially in England and Wales because whilst you might own the structure, it's quite common that don't own the land it sits on. This is known as a leasehold, as opposed to a freehold where you the purchaser own the land as well as the building. Buyers of properties that are leasehold purchase their dwelling (typically with a mortgage) but also pay an annual ground rent to the leaseholder by way of a very long term lease (say 99+ years). Once upon a time the ground rent on the lease hold used to be a nominal amount of money, say GBP100/year. However...capitalism being capitalism, it's becoming more common for leasehold ground rent to be seen by certain investment houses as a nifty way of getting paid for doing bugger all. This can and has caused annual ground rents to increase to quite piss-taking levels.
There are some attempts to get parliament to reform this leasehold situation after it was found that new-build housing estates were being sold to buyers on a leasehold basis but the leasehold condition is not made clear to purchasers. It's sneaky, and another way for house builders to extract another bundle of cash by selling off new-build estate leaseholds to some offshored company for a tidy sum leaving the buyers high and dry. It's often possible to buy out the leasehold, but even in the first year of ownership the cost can be prohibitive, especially after shelling out for your new house. It's not unheard of for leaseholders to charge say GBP5000-7000 in the first year and then double the cost each year afterwards, often locking buyers into the leasehold until they're able to sell the property. Then there's also problems and costs associated with renewing a leasehold, but that's a whole other expensive and morale sapping thing.
You are right that I am not from the UK, so perhaps things are different (lots of room for local exceptions, as detailed in previous comments), but where I am from people compare the cost of a home against the cost of other homes, including the cost of buying vacant land and building a new home. The value of the land is implicitly considered because they see the actual value of land when looking at vacant lots and weigh their options.
Wear isn't the only consideration. An old home with low-amperage electricity service and nob and tube wiring that could burn down your home at any minute is less valuable than a home that is up to modern building standards. An old home with virtually no insulation is less valuable than a modern home that is airtight. These older features are more expensive to live with (higher insurance costs, higher energy costs, etc.) and the price has to reflect that. Same reason why a pristine car from the 80s is, in most cases (unless it has special collector value), still going to be worth less than a brand new model of equal original value in constant dollars.
To put it another way, I live in a rural area. The value of my property would be worth almost ten times more if the identical house was situated on land in the nearest major city. The value is the land and where that land is located, not the structure. The structure itself is, in this hypothetical example, identical. If we tore down the houses in both spots, the vacant lot in the major city would still be worth almost ten times more than my now-vacant lot. Houses can be moved – location is the value.
> As I already said earlier, property here, if lived in and sensibly maintained, isn't considered something that "wears out" like a car body.
Even on the timescale of centuries? I don't see many century homes that haven't required major and costly updates to be still usable today. I don't think anyone is suggesting that houses deprecate as quickly as cars.
There are exceptions. Price, of course, is still bound by supply and demand. There are reasons why used home structures may become scarce, while new homes are impossible to build, forcing people to compete for used homes. But this is not exactly typical.
Well....centuries depends on how many centuries and what revolutions, unrest and discord might arise :)
The village I live in (as were a few around this area), was completely razed to the ground during the 1715 Jacobite rebellion. So things kinda hard to start again and many of the houses in the core of the village were rebuilt between 1730'ish to the early 1800's. These old houses are highly valued, also the core village is also an architectural conservation area.
I could discuss this stuff forever but I need to get stuff done today :)
Most value of residential property is in the structure. $/sqft of space is the metric, not the land plot.
I'd rather live in a proper house. But it's pretty common for working class rural Americans to live in mobile or prefab homes on nice properties with gardens, fruit trees, hiking trails, sheds for four wheelers, etc.
Trailer parks, which are dense neighborhoods of mobile homes or tailers, tend to be less nice and inhabited by people in poverty. Though they often have other options, like absolute run-down shacks way outside town.
Point being, there's some distinction in practice and I won't begrudge people living within their means.
No innovation, just exploitation. Silicon valley.
> These properties are barely fully booked during the summer months or holiday/peak seasons, and are empty for weeks at a time in the winter and off-seasons.
> This is such a waste and hugely frustrating for folks who live and work in these communities trying to find accomodation.
A lot of people get a lot of joy out of holidaying somewhere like Scotland in the summer. When there are limited houses and a lot of people who want to use them, there will always be winners and losers. Is it really so implausible that for a house in a scenic rural area, a succession of people renting it for a week or two each over the summer might end up getting more out of it (between them) than someone wanting to live and work in it for a whole year?
Are you really suggesting that just because you live and work in your local (scenic) rural community you couldn't possibly enjoy the surroundings just as much, if not more, than as a few fleeting transient warm bodies with suitcases could? As residents, we're quite proud of our village and surrounding rural lot and deeply care about and appreciate what we have.
Also, and ultimately, it's the local permanent residents that sustain, year round, the two pub/restaurants, the village shop and the assortment of plumber, electrician, carpenters (all of which also provide substantial local employment), not infrequent visitors occupying holiday homes that lie empty for 50% or more of the year.
Obviously not, if all your neighbors are renting out their homes
Assuming you mean AirBNB lets, so of course not all my neighbours are renting out their homes as holiday lets.
If not, then why wouldn't medium to long term tenants also appreciate their village and local surroundings.
There's got to be diminishing returns on beautiful surroundings, surely - seeing a mountain for the hundredth or thousandth time can't compete with seeing it for the first time. So better to give dozens of people a chance to see it once than have a few people see it over and over again. (Or if someone really does want to see it over and over again, they can pay what it costs).
> Also, and ultimately, it's the local permanent residents that sustain, year round, the two pub/restaurants, the village shop and the assortment of plumber, electrician, carpenters (all of which also provide substantial local employment), not infrequent visitors occupying holiday homes that lie empty for 50% or more of the year.
Well if tourists are able to pay more for housing than permanent residents then they're probably also going to be spending more on meals out, more likely to want upgraded plumbing or electrics (or damage those in an unfamiliar house).... But assuming you're right, employment is a means to an end, not a goal in itself. If someone has their heart set on a career as a chef or shopkeeper or plumber or electrician or carpenter, good for them, but that doesn't mean they're entitled to do that job in a particularly picturesque place.
lol Who let in the robot?
1) Build enough housing for everyone, tourists and locals alike. 2) Ban short-term rentals entirely.
Option 1 might alter the surroundings or vibes, but option 2 will destroy the tourist-dependent component of the local economy, which for many places IS the economy.
Yes.
However, many people in NYC do not make big money and it comes down to living further away from Manhattan and having roommates. Depending on the industry you're in you can have a huge range in salaries based on experience, your reputation and simple luck.
Multiply that number by at least 5.
None of this seems relevant to the article. Did you read it before posting?
These are the topics the article covers:
- what percentage of AirBNB hosts are commercial operators that are likely breaking the NYC laws? (12%) - how is renting income distributed? 10% of hosts account for 50% of rentals & revenue. - where are AirBNBs contributed? - how many "ghost hotels" are there in NYC?
I don't think there was a single sentence in the article about affordable housing. There were maybe three or four sentences on rent and each time they reiterated that rents were only up 1.4% due to AirBNB.
I'm guessing you missed the entire section on "The gentrification factor".
The study, and others, claim AirBnB pushes out poor black people from neighborhoods because white owners decrease housing stock by renting out to AirBnb instead of locals.
E.g. "Wachsmuth and his team estimate that the platform raised rents by 1.42 percent in north-central Brooklyn neighborhoods such as Bed-Stuy and Crown Heights." In other words, rents are going up in black neighborhoods. Another quote: "According to the Cox report, black New Yorkers are also the most likely to face housing loss due to Airbnb."
As I said, it's easy to blame AirBnB for this problem and not look at how crazy rent laws distort the market. I don't want to see low-income renters forced out of their homes but AirBnB is only one factor.
Rent control/stabilization laws also remove units from the market, and building new units for anything other than rich people is prohibitively expensive because of red tape, bureaucracy and overpriced cost of NYC-area construction.
So yes, I've read the article. The question is: have you?
Again I don’t think we should evict granny but there are 1 million rent stabilized units in the city. Great deal...unless you’re looking to rent.
https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...
(I realize that's not the point of the article you linked, and that it's usually the other way around, but the "X% of buildings could not be built today" on its own is just stupid).
I live in a condo that could not be built again under current zoning laws and regulations. And you wouldn't want it to: its not safe anymore (thus new code) and the current sewer is at capacity (until there's a major overhaul there, you can't build anything else).
Sometimes its not as simple as "build whatever!!!". We should be allowed to learn from our mistake and make things better.
If what you have now is worse than you think it should be then the argument isn't valid, agreed. But if you think the way the place is now is pretty good - if the things that are now illegal are the same things that set this place apart from other cities - then the argument makes sense.
> instead channel the revenue away from the rent-seekers and into the hands of the public (i.e. by increasing property taxes)
Good luck getting that passed. And while I'm in favor of higher taxes on the land-owning elite almost half of NYC's income tax revenue is made up from 1% of its residents (https://nypost.com/2014/04/15/citys-one-percent-pay-larger-i...), about 35K people making > 600K. And income tax is about 2/3 of how NYS collects revenue (https://www.tax.ny.gov/research/collections/fy_collections_s...).
Raise taxes on them enough and they move to NJ or CT and it's actually a net loss for the city.
Theoretically, increased taxes shouldn't affect the cost of living, because the supply is fixed, and the market price is way above maintenance costs. The revenue will simply shift from the banks and landowners to the public. At least that's the theory, but it should work for a gradual tax increase.
I favor a tax increase on the wealthy but I'm just saying implementing such a policy is more difficult than it sounds, especially because NJ and CT are so close by.
My commute from Nostrand to lower Manhattan was under 30 minutes even including the 10 minute walk to the subway. That's exactly why that area is gentrifying.
I used to commute from Nostrand to the UES and it involved taking the G train to the E train to the 6 train plus lots of walking. Easily over an hour.
Source: Me. I used to represent high-wealth individuals.
By taking residential units out of the market, affects of short term rentals are affecting rents in other boroughs as well.
NYC isn’t San Francisco. Rent control is a known quantity that has been around forever, as has been the lack of space in the NY Metro area. AirBnb and similar services bend the supply curve, hurting hotels and renters alike.
Short term rental growth didn’t create all problems, but it makes many worse.
Let's say a one bedroom apartment in Manhattan can be found for as little as $2500 (likely very low), and that AirBnB going rate is $200/night for that same apartment (likely quite a bit higher in reality). They only need to rent the place for 12 nights a month to break even, and they're then free of the hassle of tenant law.
Renters can't sublet their place on AirBnB, only owners can. And you'd select long-term tenants over short-term AirBnB'ers b/c it's less work (or should be). But your point is still valid: the presence of AirBnB can disincentivize a slice of owners to rent to locals.
I'm just saying any study on the negative effects of AirBnB on housing is myopic if it doesn't include arcane rent stabilization/control laws and the obscene price of new construction.
Airbnb is drawing attention to these legal issues, because now, the city has to pretend it cares about legality and enforcement since the power structure has shifted under Airbnb. This seems healthy to me. Our Housing Court in NYC is a joke. On the one had, it allows tenants to represent themselves, which is actually easy to do since it operates more like a community high school principal's office. On the other hand, housing court is a slow, slow process- it is ineffective at providing timely relief to abused tenants, and entirely ineffective at helping with certain types of landlord perpetrated swindling/lying/harassment that's rampant in NYC. The reason it is ineffective for this, is that these issues aren't handled by housing court.(for example if a landlord is rerouting the heating system so that tenants pay for the heating of common areas--a landlord responsibility--that is costing each tenant on average an extra $200 a month-- these tenants can't address this issue in housing court, because housing court doesn't handle this problem. They can't represent themselves. In order for the court to order an inspection by the electric company, these tenants must hire an attorney on retainer in order to force that inspection- otherwise, the landlord will not allow the electric company to inspect.) I'm happy that Airbnb is calling the city's bluff. Hopefully, it will challenge the city to beef up its legal system in all ways. Currently, the landlords are the ones favored by the city, while the tenants are the ones "favored" on unenforceable paper.
Landlords can ask for whatever they want within the law, and people can either accept it or go elsewhere. New York, apparently, has no law limiting security deposits. [0]
> Who the hell has 10k lying around just to rent a place?
People (or, perhaps, e.g., their parents) renting in (at least certain parts of) New York City, apparently.
[0] Several other jurisdictions do; California, for instance, limits them two months rent for unfurnished units, three months for furnished units, and increases the limit by half of a months rent for if the tenant brings in a waterbed -- and note that "last months rent" is treated as part of the security deposit limit, so if you break it into "first, last, plus deposit" the deposit part is limited to one months rent for an unfurnished unit, etc.
By law, my state strictly limits the amount of security deposit a landlord can charge. And none of this calling it "last month's rent" nonsense - legally any monies collected beyond the first month's rent that the landlord is hanging onto is a security deposit no matter what the landlord wants to call it.
I thought this was par for the course.
I just checked and NY has no statutory limit on security deposits. Wow! That seems like a problem.
Sorry, but not when the 2BR across the hall is renting for $4,000/mo and is on the market for 4 hours before someone gets it. Grandma doesn't have a right to live in the exact same apartment for the rest of her life at the expense of everyone else.
I'd be OK w/it if you have a humane way to implement it but I doubt voters in the city would ever sign off on it.
I believe the landlord is bound by the language of the law, not the contract. If the law enabling grandma's rent control were fully repealed, there'd be no rent control-related reason the landlord couldn't raise Grandma's rent to market rent. Basically, Grandma AND the landlord both needed to know what they were getting in to.
Grandma: "I want this apartment."
Landlord: "OK, it's $250/month with rent control. But just so you know, if they ever repeal that law, and market rate is more than the $250/month you're paying, I'm raising you rent."
Grandma: "Understood. If I were the landlord, I'd raise the rent on the grandma renting my apartment, too."
https://ag.ny.gov/sites/default/files/tenants_rights.pdf
In California, this isn't a hypothetical. Especially because she pays property taxes as if the thing is worth a number much closer to $20k than $20mil.
Almost all "rent stabilized" apartments in Manhattan are within spitting distance or throwing distance of market rate. Once a significant number of them cross the $2700/mo threshold in a building, the rent destabilizes.
"Rent controlled" units account for less than 30,000 units in all of NYC. That number is never going up and that number is half of what it was 15 years ago. They are not 4BR apartments for $250 a month. This is a wonderful lie that middle class people believe because they don't actually know anyone with a rent controlled apartment -- they're kind of unicorns in the city.
The rent control board in NYC has approved the maximum increase after every single 2 year freeze since about 1990. Then landlords do improvements to get MCI increases as well. The median rent controlled unit in NYC rents for $1040 and is a studio.
The rent controlled 1BR that I live in has not ever been $250/mo and hasn't been under $1000/mo since maybe 1992.
https://www.economist.com/blogs/economist-explains/2015/08/e...
According to this there are 1 million rent stabilized (not controlled) units in NYC: https://ny.curbed.com/2017/4/13/15264890/nyc-apartments-guid...
If that's accurate, it's a little bit more than a rounding error.
Ultimately there has to be a balance. Throwing out long-time renters isn't a great idea but nor is capping prices to decrease inventory.
Personally I favor construction reform -- I mean, look how expensive that 1 mile of the 2nd Ave subway was. It shouldn't be that expensive to build in NYC.
> According to the 2014 NYC Housing and Vacancy Survey, there are about 27,000 rent controlled apartments vs. about 1,030,000 rent stabilized apartments.
Like you say, rent control is very different than rent stabilization. Rent control limits the actual rent. Rent stabilization limits the annual rent increase.
Rent stabilization doesn't really account for extra stickiness in the housing market (in other words, it doesn't meaningfully decrease housing supply). Rent control does but again, since there are so few of those it's basically a non-factor.
If you are concerned about affordability, the focus should be almost entirely on barriers to housing development.
Rent control allowed my mom to stop being a cab driver and go to nursing school. Rent control facilitated me getting a really great education and career.
I grew up needing food stamps, handmedown clothes and even shoes. How can you, with a straight face, tell me that bullshit?
They won’t in the long run, but that’s where we are now.
Not wage stagnation or cost of living increases, or AirBNB (oh wait)
Just rent control
So let’s screw the people relying on it because in some narrow context about screwing others (that never happens otherwise in the economy!) rent control is bad
There are hacks and patches all over “the system”. That’s called free market making agreements as needed when needed, IMO
Just because when quantified some story is told that seems off to external players doesn’t mean it’s anyone’s concern but the parties directly involced
The cost disproportionately affects the wealthy. Due to the marginal utility of money (your first $10,000 a year has a lot more utility than your 100th), that means even a zero-sum benefit was likely a huge net positive measured in utility.
That breaks the site guidelines and you can't do it here, regardless of how wrong someone is. Please read https://news.ycombinator.com/newsguidelines.html.
This is absolutely language that I would use face to face with someone.
The fix is simple too: edit it out. Signal/noise ratio goes up and the comment gets better.
I live not far from The Deuce and my neighborhood was plagued with drug use, prostitution, muggings and homelessness. We stayed in our apartments in an extremely dangerous city while hordes of people left. My landlord wouldn't have her building still if not for rent regulation.
What difficulty? I'm guessing you haven't visited NYC in quite some tie. New York City has experienced an almost continuous building boom for the last 20 years. See the NYC Construction Dashboard:
http://www1.nyc.gov/assets/buildings/html/dob-development-re...
Note the the graph for "NYC Employment: Construction of Buildings (2000 - 2016)"
>"The endless red tape in new construction makes non-luxury bulidings unprofitable."
"Luxury" has become little more than a cliche marketing term used in promotional material. Almost all new construction has things like a roof deck or Amazon lockers and so is termed as "luxury."
Please provide a citation or any evidence that demonstrates the existence of "endless red tape" in NYC as a barrier to new construction.
Most of the new buildings that go up are luxury condos, out of reach for mere mortals like myself.
I actually purchased a condo in a new building in one of the neighborhoods this article mentioned about a decade ago but I was never able to move in, even after signing the contract, because the city wouldn't grant a certificate of housing occupancy to the builder (long story). But yes, I've personally lived the red tape issue.
It's not exactly parallel but check out this NYT article from December about why the 2nd Ave Subway was so outrageously over-priced -- while most people aren't tunnelling under Manhattan the issue of overpriced construction applies to all 5 boros: https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-...
This does preference people that already live there, but that seems elementary that the economic system should not have an inherent tendency to split up communities. People should be able to move when they want to, not when they are forced to. The reason everyone wants to move to NYC is for economic reasons. Maybe if more places weren't destitute, fewer people would need to move around as much.
The bottom line is that there aren't enough homes for everyone who wants to live there, so it comes down to how we allocate what there is. "Auction it to the highest bidder" has its issues but has a lot to recommend it: it's transparent, understandable, nondiscriminatory in a lot of respects, gives people a way to care more or less strongly, and means we get a market price for homes in that area that tells us where we should be building more homes.
We could use something like a lottery but that would mean a) houses would go to some random set of people who wanted to live in NYC, not the people for whom it makes the biggest difference b) we create a bunch of incentives for corruption - both the lottery itself and then people doing sublets/fake family transfers/... if they find someone who wants the place more than they do. Of course it's possible to fight that kind of corruption and for some things the principle is important enough to be worth it, but it's better if we can design the system so that it naturally doesn't happen c) we wouldn't be incentivising developers to build the homes that people most want.
(All that said I do think there should be a land/property value tax, to ensure that people only buy expensive land/buildings if they're going to actually use them, and to compensate the rest of the country who's priced out)
> This does preference people that already live there, but that seems elementary that the economic system should not have an inherent tendency to split up communities.
I did not fit in the "community" of the town I grew up in, and was very unhappy there. The city I moved to has been a lot better for me. So I feel quite strongly that everyone should get a fair chance at that, regardless of where they happened to be born.
> People should be able to move when they want to, not when they are forced to. The reason everyone wants to move to NYC is for economic reasons. Maybe if more places weren't destitute, fewer people would need to move around as much.
True as far as it goes, and I'm all for e.g. building much denser (NYC-like) neighbourhoods in other cities to help them gain the same advantages. But in the meantime we still have the question of who gets to live in the city that a lot of people want to live in.
https://news.ycombinator.com/newsguidelines.html
EDIT: I do mean this sincerely, not in a sarcastic asshole way.
You can get preferred treatment for preexisting apartments, but how would you manage that for newly built ones? USSR tried to, they failed and made lifes miserable. China tries and it's not helping.
Are there NYC-specific REITs for doing this in < 1 "house sticker price" increments?
"Hometown REITs" could help renters avoid being priced out, around the margins, at least.
That said, if the new buildings are less dense than what they replace, it would raise rents.
Luxury condos attract rich people that otherwise might not be in the local market, both directly (to live in the condos) and indirectly (by stimulating a local increase in services catering to a rich clientele, making the area, not just the condos themselves, more attractive to the rich.) This can make the net effect an increase in demand for other existing housing from the rich, rather than relief of such demand.
[0] https://www.renthop.com/studies/national/heres-why-rents-are...
Do you really think that NYC and Sacramento, CA are even remotely comparable in terms of the available land, logistics and population density? That's absurd.
I recently moved to an island in Greece. The small town am living in, has the exact same issue that the article is describing, yet even worse.
Everyone, literally EVERYONE, has their apartments/houses/properties that they don't live in, turned into Airbnb's. Doesn't matter if its in the town center or 30 miles out of the town center. Government only just now sort of regulated airbnb renting. (Average rent per month is 300 euros. During the busy period which starts at April and ends November someone can make 100euros a day from that apartment)
Up to now the town I am living in and every single village in its radius, had a massive housing issue. You couldn't find anything to rent. I had an issue with renting as well, and I was well willing to pay way above the normal to get something as I do work for a foreign company that pays me the salary of a western country.
I don't know how much of this applies to New York and if the article is going the right way with it, but I can most definitely reflect my own experience to that article.
I think Airbnb and anything that is similar should get regulated. I think Airbnb came in at a time where laws/regulations weren't in place for such a thing, or were very light, and it made sense for people to rent out their 2nd homes for it. Although it has created a massive issue with finding a home. As I mentioned above someone can make 3 times or more the money that he'd be making in a year of rent from 3-4 months of renting to airbnb.
Another massive issue that Airbnb and similar sites have also created in the area I live in is that the small hotel owners and family hotel owners are getting slowly out of business. That is happening because obviously the massive hotels can offer full packages and whatever and will always be profitable, but smaller ones still have to pay a lot of money on tax, licences and offer some sort of services that an airbnb owner didn't have to up until now in my area. Even now that its sort of regulated, airbnb owners are still going to have a better time than the small hotel owners.
So yes all in all, airbnb and similar sites, create a massive issue and I feel like something should be done about it.
It seems like the issue is a massive housing shortage and the solution is to build more housing.
So you're saying that affordable housing is preventing housing from being affordable? LOL.
> The endless red tape in new construction makes non-luxury bulidings unprofitable. Want cheaper rents? Fast-track approval for new apt buildings.
Luxury buildings are more profitable because rooms are more spacious (literally requires less construction), you need to make fewer sales to make the same revenue (in a 10 story building you sell 40 condos instead of 80) and buyers are more financially stable (each sale is easier). Removing red tape has nothing to do with that.
There's certainly lots of red tape in NYC construction, but I see zero evidence that there is more red tape with non-luxury construction. This is just a ridiculous HN meme at this point: every problem is caused by regulation and the only tool we're allowed to use to solve problems is incentives. I, for one, am deeply skeptical that making things cheaper for rich people is a good place to look for solutions to the problems of the poor.
More to the point: none of what you've said means that AirBnB isn't to blame for the lack of affordable housing in NYC. NYC housing is a complex market, and a lack of affordable housing has more than one cause. The article presents its evidence why they think AirBnB caused the problem. Simply presenting alternate causes doesn't mean AirBnB isn't a cause, because I think we can agree there is more than one reason that housing prices are high in NYC.
I think you're conflating 2 types of 'affordable housing.'
People say 'affordable housing' when they mean 'government legally forcing landlords to underprice their units' versus what the term should actually mean, 'a reasonable price range of rents'.
> there's certainly lots of red tape in NYC construction, but I see zero evidence that there is more red tape with non-luxury construction.
There isn't necessarily more but there should be less to incentivize builders. No point in going through all the bureaucracy if your margins are going to be super low.
> Simply presenting alternate causes doesn't mean AirBnB isn't a cause
It's a factor, for sure. I'm not defending Airbnb as a nonentity, my point is that it's easy to blame Airbnb because they're a new player whereas academics and state politicians seem less enthused about taking a cold, hard look at housing laws, while well-intentioned at protecting low-income renters, probably play a far larger role in increasing housing costs.
Huh? No, "affordable housing" means "rents people can pay" (an extreme example being a $250/month apartment). This isn't complicated.
> There isn't necessarily more but there should be less to incentivize builders. No point in going through all the bureaucracy if your margins are going to be super low.
Or, you could take steps that actually address the problem with the lack of affordable housing. Given that you just admitted red tape isn't necessarily more for affordable housing, removing red tape doesn't address the problem with the lack of affordable housing.
Red tape is a problem, but it's hardly the most pressing problem. Builders are making plenty of money in NYC. So when we're discussing real pressing problems like the lack of affordable housing I would appreciate it if you stayed on topic and didn't bring up the irrelevant problem of red tape. I'm not worried about builders having to fill out more paperwork when people are literally homeless in the snow right now.
> I'm not defending Airbnb as a nonentity
Your previous post was definitely defending AirBnB, even if it was just so you could bring up your pet issue of giving already-rich people incentives.
> academics and state politicians seem less enthused about taking a cold, hard look at housing laws, while well-intentioned at protecting low-income renters, probably play a far larger role in increasing housing costs.
Plenty of people are looking at housing laws. It's just that if you look at housing laws without the myopic lens of "incentives are the only way we can do anything", it's pretty obvious that laws which prevent owners from raising rents on affordable housing don't cause the shortage of affordable housing.
I'm just not sure how one can be so confused that they think allowing raising rents is the solution to rents being too high.
I realize I'm being hostile here, but your viewpoint is hostile to the poor and homeless of NYC.
I recognize that you feel passionate about this issue, but hostility is counterproductive in this kind of discussion. https://www.sonyaellenmann.com/2016/05/hostility-online-disc...
A data point amplifying this assertion is the situation in St. Louis, where tax incentives are handed out like candy to almost exclusively luxury developments. The city has seen several credit downgrades since 2015, with weak revenue raising ability cited in the most recent instance. The higher interest rates the city now pays on its financing are part of the reason why growth in tax revenue (including several sales tax hikes) has been fully nullified by cost increases, with the result being a net loss. Affordable housing development is sparse, since it's obvious to builders where they get the most favorable discounts.
> Luxury buildings are more profitable because rooms are more spacious (literally requires less construction), you need to make fewer sales to make the same revenue (in a 10 story building you sell 40 condos instead of 80) and buyers are more financially stable (each sale is easier). Removing red tape has nothing to do with that.
You're misunderstanding the GP's point. They're saying that heightened building costs make it irrational to choose to build lower-margin projects like non-luxury housing, because you don't have the margin to absorb those costs.
It's always going to be irrational to choose lower-margin projects. Let's say there's a 30% margin on luxury housing and a -10% margin on low-income housing, and you cut red tape, increasing margins by 20%. It doesn't suddenly become rational to build low-income housing. Margins are now 50% on luxury housing and 10% on low-income housing. All this has achieved is that builders make more money when they build luxury housing.
The problem is that space in NYC is limited, and income inequality is such that the wealthy can and do pay orders of magnitude more for housing than the poor can. This means that, instead of dividing up the space in NYC between the wealthy and the poor, it's more profitable to divide up the space in NYC between the wealthy and not serve the poor at all. This incentive structure will always exist as long as the demand for luxury housing is greater than the total amount of housing available.
There's no reason to believe we've hit the ceiling on what the demand for luxury housing. So even if we were to selectively cut red tape only on low-income housing, the wealthy could simply pay more for luxury housing to ensure that it remains most profitable to give them what they want. And meanwhile you're giving these incentives to the wealthy construction and real estate companies, increasing the income inequality that caused the problem in the first place.
I've said before that HN would rather incentivize nails than use a hammer, and this is another case of this. If we want affordable housing, we need to require companies to build affordable housing as a condition of being able to build anything in NYC. Giving more money to already-wealthy people isn't going to solve this problem.
Part 7 in particular (57 min) https://www.youtube.com/watch?v=GaLSRTNT5fw
https://en.wikipedia.org/wiki/New_York:_A_Documentary_Film
https://en.wikipedia.org/wiki/Robert_Moses
But treating tenants like this at every level of the NYC market is really just part of the codified MDL landlord playbook in NYC. It isn't just for slum lords anymore. Market rate rental tenants are harassed, asked to provide 6 months' security (often not returned) and the landlords make no repairs until they are taken to court. This used to be the domain of the slum lords and a few ultra-shady landlords. These days, you can't pay for a rental unit and a landlord who offers a product you signed-up to pay for. (this basically applies to landlords under the MDL, not rich people who rent out a floor of their brownstone- they are not "career landlords") As a tenant, you need to keep filing HP actions in Housing Court in order to get basic services like heat and hot water, even in so-called "luxury" buildings. In this climate of unaffordable "luxury" rentals that are run like slums by the landlords (but look "nice" to a casual observer) a tenant's only option in many cases is to find a way to double up with a friend or to leave the city and Airbnb when they can. The tenant protection laws that are constantly trumpeted are only as good as the mechanism to enforce them, and while the city pays lip service to the idea of protecting tenants from harassment, injury, or swindle, their interest is really with the landlord. Housing court doesn't offer solutions to major tenant problems beyond what is listed in "The Warranty of Habitability". If a tenant wants the parking space they paid for so they can have a car to get to work while they live out in the boonies 1.5 hour commute on congested and failing public transport, they will have to put down a $20,000 retainer to have that case tried in Supreme Court. Housing court doesn't handle such matters.
edited to: make a distinction between landlords who own large buildings and the wealthy folks who make extra money by renting out an unused floor of their brownstone. I'm speaking about the former here.
> they silently declare war on existing tenants by demolishing their homes while they live in them
That's nonsense. You're clearly speaking with hyperbole but other people can't argue against hyperbole. You spent the whole paragraph detailing clever ways landlords mess with tenants to get them to leave because the tenants know their rights. Those rights are the problem. The rentee/render relationship should be mutually beneficial. At the end of a lease, perhaps with 3 to 6 months of warning, the person should have to move out. With weaker tenants rights laws, those tenants would have an easy time finding and getting approved for another apartment.
Your second paragraph details how market rate renters are harassed with lack-of-services which I just don't believe. I bet others don't either which is why which is another reason you are being downvoted.
you said, "That's nonsense”. Sadly, I’m afraid it isn’t. Here are some articles that might show you as much:
https://ny.curbed.com/2017/11/17/16670180/rent-regulation-la... http://www.nydailynews.com/new-york/nyc-crime/bklyn-slumlord... https://ny.curbed.com/2017/8/31/16233332/office-of-tenant-ad... https://www.dnainfo.com/new-york/20120506/chelsea/chelsea-ho... https://www.amny.com/news/tenant-harassment-brooklyn-1.14746... http://www.nydailynews.com/new-york/brooklyn/landlords-haras... https://patch.com/new-york/bed-stuy/landlord-fakes-burglary-... https://www.nytimes.com/2016/07/27/nyregion/new-york-landlor...
I think 8 articles demonstrates my point, but there are dozens of others.
Thank you, though, that helps me understand. I want engineers and others who think of moving to NYC to at least be prepped for reality, because I was not. While our situation isn’t as bad as the horrifying homelessness in tech cities in California, it is a close second, with problems that date back before the tech boom, and growing homelessness that will sadly soon rival the problems on the west coast. We were speaking about Airbnb in relation to this situation, and I see it as a force that could bring about real legal change through the process of legal sparring that might benefit tenants. It has that power because it threatens the current power. Tenants can’t do that- only huge financial giants can, if they work with tenants. Landlords have a powerful lobby here. The tech boom in NYC is only one of many new pressures on an already failing housing system here. The very long history of landlord tenant relations in NYC can seem like operatic exaggeration to someone who has not lived here as a renter who is doing well but isn't uber-wealthy. I can tell you that the declaration of war from a LL to a tenant is just as often not silent. It isn't subtle, and threatens life and safety. I lived in a rent stabilized building during the upscaling of what used to be a regular, family-oriented residential area of of Brooklyn. That area and many others in Brooklyn became ultra-luxe-hip and glittering faster than I've seen any previous gentrification move here. (Bed-Stuy happened very very quickly but not as fast as my previous neighborhood). And it can't rightly be called "gentrification", because unlike Bed_stuy, the area was too much of a well-maintained destination to begin with. Some of these landlords (mine included) held rent-stabilized p...
Imagine there's a place on Earth that is somehow truly amazing and fills you with happiness for a long time for just visiting it.
Obviously, it makes sense to have as many different people as possible be able to appreciate it, which requires having them visit only one or a few nights.
Clearly, people should not be able to monopolize a flat there for 365 days a year, and if they do they should pay a fortune since they are denying other 364 people access to the place.
This also works for less amazing but still touristically interesting places.
Also the best solution would be to have enough housing to meet needs both from one-day-per-year demand and for 365-day-per-year demand, but if that's impossible tourists should definitely be the priority over wanna-be residents.
Cities are both in various ratios. Those cities that tourists particularly value should probably allocate a large proportion of their limited housing to tourists, those cities that people particularly value living and working in should probably allocate a large proportion of their houses to homes. Fortunately the market can sort this out.
Before Uber and AirBNB, how many opportuinities could you name for white Americans to do the following:
1. Get in a car with a black person for an hour and have a conversation about the election
2. Go into a racially diverse neighborhood and have a black family open their home to you and spend the weekend together
3. Have a black person come and rent a room in your own home and stay with your family for a weekend
4. Allow people of color who own property in predominantly black communities to profit from their own home
The only ones who benefit from these hit pieces on AirBNB are hotel groups who want to regulate these arrangements out of existence and drive up costs for hotels.
Who do you think is harmed the most when hotel prices rise? It is the same people of color (and everyone else), who have to pay more to stay downtown in major metropolitan cities.
Any study of AirBNB that does not take into consideration social mobility and prices of affordable overnight rentals is a BS study, they are comparing bananas to coconuts.
Yet we only see half of the story told in the media. Why is that? It’s almkst as though the authors of these studies have a distinct agenda.
How are the effects any less racist than the rising home prices, which could easily be explained by...uh...the massive stock market rally we just had?
Where are the studies about how people of color who own the buildings and units being rented out in ethnically black neighborhoods can now afford to send their children to college?
Reading the comments here: Too many people ask too few questions and have too little understanding about the free market. Freedom of personal property is GOOD for Black People. It is the ONLY way black people improve their situation.
"half of all Airbnb rentals that are conducted by only 10 percent of hosts, who earned a full 48 percent of all the revenue earned in the city last year. That’s some 5,000-people earning a combined $318 million. In contrast, the bottom 80 percent of New York’s hosts—the city’s 40,400 true home sharers—earned just 32 percent of all revenue, or $209 million, in 2017."
While I like the exploration of facts like this, I don't really believe AirBnB is important to rents in New York City. In spatial statistics it is difficult to really prove anything rigorously, and this study doesn't even try to go the distance.
"Applying Barron et al.’s national average ratio of exogeneity to New York City, this implies that, city-wide, Airbnb drove up rents by 0.8% in 2015, 0.4% in 2016, and 0.2% in 2017 (all for years ending in August). This is a cumulative 1.4% increase in rents over these three years attributable to Airbnb’s presence in the city."
So while it might seem like the study looked statistically at AirBnB's impact on NYC, in fact it did not. They just used a sort of rough rule-of-thumb from a national average. But the rule-of-thumb is useless in particular cities (suppose a city had one unit on AirBnB; would adding one more increase rents?), and isn't even from published work. The authors of this study are not economists or econometricians, and it isn't peer-reviewed and never will be.
Moreoever, you can use common sense:
"Airbnb has removed between"
(Dr. Evil voice)
"7,000 and 13,500 units."
New York City has 3.4 million housing units. While year to year housing production varies a lot, on average it produces that number of new units every few months: https://imgur.com/a/gnzUf The report also notes that these units are concentrated in the most expensive neighborhoods anyway. And NYC is only part of a much larger housing regional housing market. It simply strains credulity to think even the upper bound of 13K units has any impact---especially when you consider some of the people occupying such units would have letted or subletted in NYC anyway (the report notes many are long term rentals).
Of course, the real action is in zoning. NYC has seen some upzonings, but mainly massive, consistent downzonings over the past few decades. It is funny people worry about about supply when a private firm removes a tiny bit of it, but nonchalant when the government removes lots of it. Construction costs have also soared, and are now sure to get worse thanks to Trump's tariffs on steel, aluminum and canadian timber.
this[1] suggests that most New York City construction uses US steel and will be minimally affected by Trump's policy. Admittedly, basically all new construction is concrete and steel so it will undoubtedly be affected in some way by changes in the steel market.
1) http://www.crainsnewyork.com/article/20180306/REAL_ESTATE/18...
Here's one way to think about Airbnb: prior to Airbnb (and VRBO and…), housing values - both rents and asset prices - didn't incorporate all of the legal and zone-permissible demand for them.
Imagine if, until now, the only way to rent an apartment was by pre-paying for a year. Instead of $1,500/month or $2,000/month, every landlord quoted and charged a price per year, like $18,000/year.
A company or business model then introduces the idea of only charging by the month (ie, what the US market is now based on) rather than requiring pre-paying for a year. 2 things would happen:
1. Demand would increase (and prices would probably go up), because someone would be serving previously un-met demand. (From the article: "over the last three years, Airbnb has increased long-term rents in the city by 1.4 percent")
2. The customer base would change, since the demographics of those able to come up with 1 month's rent are very different from those who can front 1 year's rent. Some of these newcomers would be non-residents or short-term residents.
If this sounds a lot like what Airbnb has done, you see the challenge. There's nothing inherently permanent about current rents or asset prices, nor the current customer base. They're just reflections of the ways that a property can be used at one point in time – and there's nothing special about those ways. People got used to the current demand because the product mix changed so little for so long.
Whether that's good, bad, or some of both is a reasonable question, but in any other industry (even with other supply-constrained assets), society almost always considers it good. The underlying product was actually more useful than was widely recognized.
(If the yearly vs. monthly rent example sounds outlandish, here's another that's actually happened: 10%-15% mortgage interest rates, as existed for most of the early 1980s. 13% mortgages could change the supply of housing enough to meaningfully impact asset prices and rents, that is, create a new normal price.)
I agree with the article's sub-point that this has little or nothing to do with home sharing. The core change is that it's now possible to use an existing product to serve a market that was previously not served well.
(Note that I'm ignoring housing where short-term rentals were not legal prior to Airbnb - say, before 2013 - or were legal but not permissible under zoning. While those are important considerations, many or most short-term rental limits were passed in response to Airbnb.)
I just searched Streeteasy.com, a popular NYC real estate listing site for Airbnb and I was not able find any listings (Query: https://streeteasy.com/search?utf8=%E2%9C%93&search=airbnb&c...).
I also looked at the data-source in the Citylab article (Airdna.com) and I see that I would earn 10% more by Airbnb'ing my apartment than finding a tenant. For me this 10% is not worth optimising for, considering the tenants go through a credit evaluation process, I don't risk any vacancy and I do not have to change the sheets every other week.
Driving a car you (and also partially others not owning a car) indirectly pay non market land cost, construction and maintenance costs.
Whereas getting a roof over your head requires directly paying market rates for land, construction and maintenance costs PLUS profit on capital.
In my opinion having a roof over your head is a more fundamental human right than driving around in an vehicle. But obviously those two are related as those unable to afford market rents/house prices have to live in the boondocks and then are forced to use a car.