Short-Term Rentals in Co-ops and Condos Plunge as New Law Kicks In

Many co-op and condo advocates applauded when the city adopted Local Law 18 last year — a tool for ending illegal short-term apartment rentals. And since the law finally went into effect last month, the reason for the applause has become clear.

The law requires all hosts offering lodging for fewer than 30 days to apply to the Office of Special Enforcement (OSE) for a license to operate in New York City, to ensure they comply with the city’s strict housing rules. Above all, the apartment owner or renter must be present the entire time during a lease that runs for less than 30 days.

The city has received 4,794 applications as of Oct. 9 and has reviewed 1,697 of them, Crain's reports. Of those, 57% have been returned to hosts to provide additional information or to correct deficiencies, says Christian Klossner, executive director of the OSE. The agency has granted licenses to only 481 applicants, or 28%, who meet the occupancy regulations and building codes.

“People are still sending us applications for an entire home with six people or illegal basement apartments, or listings that make clear that they’re not going to be there,” Klossner says, adding that it “has taken a lot of one-on-one education” with hosts so they can come into compliance.

Local Law 18 also allows building owners, including co-op and condo boards, to sign onto a "prohibited buildings list" where all sublets are forbidden. As of March, some 1,500 building owners had signed onto the list.

The law has especially stung the short-term rental platform Airbnb. As of late September, listings available for booking for fewer than 30 days fell 89% compared with early August, to 2,322, according to market analytics firm AirDNA.

Airbnb has fought with the city for years over regulations. Critics say the platform has led to higher rents and limited availability in a notoriously tight real estate market, while many hosts argue that they need the extra income to help pay mortgages. By the time the enforcement kicked in in September, the company said New York accounted for only about 1% of its annual revenue.

Short-term rentals became an especially hot issue as inflation rose and the city's affordable-housing crunch worsened. Rising rents contributed to more than half of the inflation numbers in September, according to the Consumer Price Index. And and earlier report by the City Comptroller’s Office added that supply pressure from short-term rentals added more than $616 million to annual rent citywide — with 13,000 units of housing lost to short-term renting.

No wonder one co-op and condo advocate greeted Local Law 18 so enthusiastically last year. Stuart Saft, chairman of the Council of New York Cooperatives & Condominiums, said at the time, "I love Local Law 18!"