Short-Term Renters Matter Too

Hotels and short-term rentals, like regular apartments, have become something of a pariah land use in cities. The latter are heavily regulated, but even the former are often put in a separate zoning category from apartments, which means that to convert apartments into hotels or vice versa requires government approval. (In fact, New York City recently made new hotels illegal without a special use permit, because the hotel workers union did not want any new nonunion hotels, and generously funded Mayor DeBlasio’s presidential campaign).

Even people who otherwise support new housing are sometimes hostile to hotels and short-term rentals, based on a simple assumption: the city’s real residents who deserve relatively affordable housing are part of the long-term rental market, and everyone else is a tourist who deserves to be squeezed by a government-induced shortage.*

And of course, for those of us who are able to get one-year leases with relative ease, this assumption might seem sensible. But in fact, several types of people may find it impractical to sign a long-term lease.

A typical lease requires a security deposit, a credit check, references from one or more prior landlords, and sometimes (in the most expensive markets such as New York) a broker’s fee.  So you might need to have quite a bit of cash on hand and good relations with former landlords and good credit in order to get a long-term lease.  Some people cannot meet all of these conditions, especially if they are not well-off.  

Even if you have a spotless credit rating and enough money to afford a traditional lease, a short-term lease might make sense if you need to get a place to live quickly. This is especially true for tight housing markets such as New York, where much of the housing market is tied up in co-ops and condominiums that will often spend a month checking out your finances before they decide that you are worthy to share their building.   Or if you are new to a city and don’t quite know what neighborhood makes sense for you,  you might want to try out a neighborhood for a month or two before you decide on a longer commitment.

So how can cities accommodate short-term tenants? Before zoning, there was no rigid distinction between hotels for short-term lodgers and apartments for long-term tenants. (Paul Groth's Living Downtown is an excellent guide to the rise and fall of residential hotels). As a result, Americans had a much wider range of housing options, and even the destitute could find a place to sleep. But today, urban hotels are often limited to just a few areas, which means that the housing supply for short-term tenants is even more limited than for everyone else (thus impoverishing tenants but enriching landlords and hotel owners, who benefit from the resulting supply/demand imbalance).

Has the rise of Airbnb alleviated this problem?  Based on the public debate about short-term rentals, one might think that short-term rentals are just for rich tourists. But actually, Airbnb rates for medium-term tenants overlap with existing rents. I ran a search on the Airbnb search engine for month-long  stays in New York City. Manhattan rentals were pretty sparse and mostly over $3,000,** but outer borough rents were more comparable to market rates for regular apartments. For example, I found a listing in working-class South Ozone Park for $1,807—cheaper than about 90 percent of Queens apartments listed on Streeteasy.   Similarly, in one Atlanta suburb I found an Airbnb listing for a little over $1,700- in a suburb (Smyrna) where the median one-bedroom apartment on Zillow.com rents for around $2,200. And presumably short-term rentals would be even more affordable if government allowed more of them.

So how can we make housing cheaper for everyone? One easy fix would be to treat apartments, hotels, and other forms of short-term lodging as identical for zoning purposes, so that people in both categories could have more choices and lower rents.

*Personally, I think at a time when downtowns are still suffering from the after-effects of COVID-19, cities should fight for tourist dollars rather than making tourism as expensive as possible.  But that argument is beyond the scope of this post.

**This may be because most Manhattanites live in apartments and have leases that limit the right to sublease or assign. Even if they own condo or co-op units, their association rules might similarly limit those rights.