Why a Hotel Room in New York Costs $500 a Night

Draconian regulations on short-term rentals are a tax on tourism and an insult to city homeowners

By Michael Salinger and Jon Leibowitz. Mr. Salinger is a professor of economics at the Boston University Questrom School of Business. Mr. Leibowitz was chairman of the Federal Trade Commission, 2009-13. Both are advisers to Airbnb. Excerpts:

"In the city that never sleeps, you can only rent out your home if you never leave it."

"New York started restricting short-term rentals more than a decade ago by making it illegal to rent an apartment for fewer than 30 days. But the city’s passage of Local Law 18, which took effect in fall 2023, put the final nail in the coffin by prohibiting short-term rentals even of privately owned homes unless the owner is present and there are no locks on doors. Not surprisingly, given these protectionist rules, hotel prices in the Big Apple soared to more than $500 a night. While the lost income to New Yorkers hoping to rent out their homes has been $200 million a year, the total cost to city businesses that provide goods and services to both hosts and their guests and the city itself has been far greater."

"Preventing someone from renting out a home temporarily doesn’t free up housing permanently."

"These restrictions also make housing less affordable to those who use the income from renting out their homes to make the city more affordable for themselves—for example, by paying the mortgage. Moreover, by providing surge capacity during periods of peak demand for lodging . . . short-term rentals supply accommodations without the need to devote additional land to hotels that are occupied for only part of the year."