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What Really Took Down Airbnb

Earlier this month, I stayed in an Airbnb in the Bedford-Stuyvesant neighborhood of Brooklyn.

In the past decade or so, the neighborhood has undergone as dizzying a process of gentrification as a place can. The median sales price of a condo nearly doubled; the median sales price of a single-family home more than tripled. The share of Black residents dropped from 60 percent to 40 percent; the share of white residents increased from 15 percent to 33 percent. The neighborhood became less socioeconomically diverse, home to fewer immigrants, fewer families, and more single people. It became less like the old New York and more like the new New York, which is to say more like Greenwich or Short Hills—a place where family wealth or a job on Wall Street are table stakes.

Airbnb is not responsible for Bed-Stuy’s transformation; the city’s extreme housing shortage and sky-high wealth inequality are the central, obvious culprits. But the “sharing economy’s” entry into real estate did not exactly help. An analysis earlier this year by the advocacy and data group Inside Airbnb and the publication Gothamist found that Bed-Stuy had the highest concentration of Airbnb listings of any neighborhood in the city. In one six-by-four-block area, there were 87 Airbnbs. That’s 87 apartments decorated in Ikea and auctioned off night after night to people with no investment in the neighborhood. That’s 87 families that could have lived in Bed-Stuy, moved to Bed-Stuy, stayed in Bed-Stuy.

Some Airbnbs, to be fair, were owned and inhabited by people who were defraying their own housing costs. But many of the city’s Airbnbs were full-time short-stay units. They were hotel rooms, not homes, owned by investors, not families. And there were 39,000 of them, displacing 100,000 New Yorkers, give or take.

No more. Last month, New York started enforcing strict rules on short-term leases. Airbnb called it a “de facto ban.” And it is. Hosts have to register with the city to get paid. Apartments have to be rented for 30 days or more, or adhere to a few other conditions: The hosts have to be on site, residing in the same unit. Just 405 units have been registered, leaving a meager set of listings. I was curious to see what sort of places these were, and if they were indeed following the new rules, so I rented one. The spot described itself as “exempt” from the regulations. I couldn’t quite figure out why.

This unit aside, the crackdown seems to be working. There’s not much of a gray or black market for leases like these. The Airbnb apocalypse is here. The company helped to stoke the housing crisis in places such as Bed-Stuy. It benefited from the housing crisis. And now, in New York at least, it is getting crushed by it too.

Airbnb came into being during the last great American housing crisis, one very different from today’s. Millions of Americans had become homeowners, putting little money down on properties they could not really afford. When those homeowners started missing mortgage payments, real-estate values dropped and a global economic depression ensued. This housing cataclysm planted the seeds for the next: The real-estate crash depressed the building of new housing, which is, remarkably, still taking place at a lower level than it was during the Bush years, when there were 30 million fewer Americans.

Airbnb was not really a housing company or a hospitality company. It was a “sharing” company. And it was a platform—pioneering, alongside Uber, a business model that soon became ubiquitous in Silicon Valley. These firms created markets, connecting sellers who had supply (seats in cars, places in their home) with buyers who had demand (people needing a taxi ride, folks who wanted a kitchen along with a hotel room). Such firms handled the search and took care of the transaction.

It was not obvious at first that these companies would succeed. “Why would anyone need Airbnb?” my colleague Alexis Madrigal wrote back in 2010, noting the existence of, which at the time was not totally dissimilar. “Would thousands of people really want strangers staying with them?”

Indeed, they did. Using Airbnb in the early days, as I did often, generally meant taking an extra bed or a cramped bedroom in an occupied apartment. It was charming, if a little scary. You got to water other people’s plants and check out the kind of shampoo they used. You spent a lot of time wondering if the key would really be under the mat.

Quickly, the operation professionalized and the weird got squeezed out of the experience. It became less common to land in someone’s home with their stuff in it, and more common to open the door to a perma-sublet. Hosting companies took over management. “Airbnb arbitrage” started to become common: People would rent apartments, put them on Airbnb, and make thousands and thousands of dollars a month. Thus, Airbnb came to compete directly with hotels. And it came to compete with homeowners and renters too.

The company has long denied that it has anything to do with the housing shortage. But of course it does. It made the crisis in places such as New York worse by siphoning units off of the housing market and adding them to the market for hotel rooms. One major study found that a 1 percent increase in Airbnb listings led to a 0.02 percent increase in rental prices and a 0.03 percent increase in sale prices. That might not sound like much, but it adds up. A report from the New York City comptroller confirmed that Airbnb fueled rent increases in neighborhoods such as Bed-Stuy. And as of last year, there were more apartments available to rent on Airbnb in the city than there were available to rent long-term.

That should not have been the case. The New York State Multiple Dwelling Law already barred rental bookings for stays shorter than 30 days if the host was not on premises, but the rule was never thoroughly enforced. Many Airbnb units in many places were in violation of some state or local statute or another. The whole business was a prime example of something the legal scholars Elizabeth Pollman and Jordan M. Barry called “regulatory entrepreneurship.” A start-up creates a business in likely violation of the law. It disrupts! This disruption gives the company an unfair advantage over its rivals. (Airbnb hosts do not tend to offer the same disability access that hotels do, for instance.) The company grows and demands that politicians “clarify” the laws to make its business legal.

New York dithered on cracking down or clarifying, even as politicians inveighed against the company and the city punished hosts with fines. The situation became less and less tenable as the housing crisis got worse and worse. “Every illegal short-term rental in our city represents a unit of housing that is not available for real New Yorkers to live in,” State Senator Liz Krueger said in one statement, a sentiment echoed by many, many, many local politicians. “In the middle of an ongoing affordable housing crisis, every single unit matters.”

Before I lived in New York, I often visited, and I was glad to rent an Airbnb. In an utterly different housing market, it could have been a good idea. But not in this one. At last, Mayor Eric Adams’s administration took action. But it wasn’t the government that killed off Airbnb in the city; it was the housing crisis. Is the end of Airbnb going to bring down the cost of apartments in Bed-Stuy? No. Is it going to mean less tourism revenue for the city? Sure, on the margin. But thousands of apartments are going to trickle onto the market, making it a little bit easier for New Yorkers to find a place to live.

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