Industry data indicates that cities considering short-term rental (STR) restrictions should look closely at New York City’s experience, where the main beneficiaries of the ban have been hotels and hotel unions rather than residents seeking affordable housing.

New York City’s near-total ban on STRs was launched with a clear goal: address the affordable housing shortage by converting tourist accommodations back into long-term rentals. But according to Emir Dukic, CEO of STR marketplace platform Rabbu, the outcome has not matched policymakers’ expectations – and should prompt other cities to reconsider similar measures.

“We’ve seen some extremes recently, including in New York City, where short-term rentals were completely outlawed due to the assumption that they directly cause housing unaffordability,” Dukic says. “But prices on homes and rents have actually skyrocketed by double digits since short-term rentals were banned.”

A Causal Link That Didn’t Materialize

The rationale for New York’s STR ban was straightforward: homes used for short-term rentals would return to the long-term market, increasing supply and reducing rents. Dukic explains, “It makes sense at first glance. People are using homes for short-term stays when those could house long-term tenants, and they make more profit doing it. So, the logic was that STRs must make things less affordable.”

However, Dukic points out that real-world results have not supported this assumption. “It’s become clear that STRs, while maybe a small part of the problem, are not the main reason for the lack of affordable housing,” he says.

According to Dukic, the groups that have benefited most from the ban are not residents. “The biggest winners from STR regulations and bans aren’t the people looking for affordable homes,” he says. “It’s local hotels and hotel unions. In New York City, hotel prices are at all-time highs because they face less competition.”

Reassessing Regulatory Risk

Dukic sees New York’s experience as a crucial case study for investors evaluating regulatory risk in the STR sector. “I think regulations are a little bit overrated,” he argues – a viewpoint that runs counter to the focus regulatory concerns receive in industry discussions.

He acknowledges that anyone entering the STR market must pay attention to local rules. Still, he believes New York’s example shows that the supposed link between STRs and housing affordability is overstated. “New York has served as an important lesson for other cities that what was thought to be a major problem isn’t actually the issue there,” he says.

Dukic notes that, in recent years, regulatory pressure on the STR industry appears to be easing. “Especially over the last few years, we’ve seen much less talk about regulations and much less actual risk from a regulatory perspective,” he says. This trend suggests that more cities are learning from New York’s experience and recognizing that banning STRs does not deliver the intended results.

The Grandfathering Effect

For investors worried about regulatory changes, Dukic highlights a consistent pattern in how new rules are typically enforced. “The best thing to do is always follow local regulations,” he advises. “If there are requirements, meet them.”

He explains that proper registration and compliance often protect existing operators even when regulations tighten. “In most cases, if you’ve been operating properly and following the rules, you’re grandfathered in when new regulations are imposed, and the rules apply less strictly to you,” he says.

This approach gives operators a clear roadmap: register with the city, obtain necessary licenses, and run properties according to local guidelines. “It’s something to consider when making a purchase, but I don’t think it’s as big a risk anymore – especially if you set things up properly from the start,” Dukic says.

Industry Growth Continues

Dukic’s argument that regulatory risk is overstated ties into a broader point about the health of the STR industry. “A lot of people think the short-term rental industry is slowing down or shrinking,” he says. “That’s just not true.”

He points to Airbnb’s recent performance as evidence. “Airbnb’s Q3 earnings report showed that their revenue, supply, and demand were all up double digits,” Dukic notes. “People are staying at these properties more than ever, because they offer an experience that’s hard to find elsewhere.”

Rather than a decline, Dukic says the industry is maturing. “The asset class isn’t shrinking. It’s becoming more professional, with better operators stepping up and less effective ones leaving the market, but demand remains strong,” he says.

Looking Ahead

Whether other cities will follow New York’s regulatory path or draw lessons from its results remains to be seen. According to Dukic, the evidence now suggests that the harshest regulatory scenarios feared by investors are becoming less likely as cities realize STR bans do not address housing shortages as intended.

For professional operators who comply with local rules, Dukic argues the regulatory environment may be stabilizing or even improving. The New York case, he says, demonstrates the real-world outcome of banning STRs entirely – and the data shows it has driven up housing and hotel prices, benefiting hotels more than residents.

As cities across the country debate the future of STRs, New York’s experience stands as a warning: removing short-term rentals does not automatically create affordable housing. Instead, it can reduce options for travelers, push prices higher, and shift business to hotels. For investors and policymakers alike, the lesson is clear – effective solutions to housing affordability require a broader approach than simply banning STRs.