New York mulls banning vacation apartment rentals: Hotel chains reap the benefits

New York mulls banning vacation apartment rentals: Hotels reap the benefitsNew York State senators are about to vote on a bill that would ban homeowners or renters from renting out their places for periods of less than a month.

The new law, should it pass (it's being fast-tracked, so opposition is finding it difficult to catch up), is a blow for the budget traveler and a boon for the high-priced hotel-and-convention industry, which will of course be eager to host the refugees from the short-term apartment rental business.

The new law, says BudgetTravel.com, would be a blanket ban on the estimated 3,000 transient units available right now. It would no longer matter whether the rental went through a vacation-focused broker such as City Sonnet or NY Habitat, or through casual channels such as an ad on Craigslist.

I am a huge fan of renting apartments rather than using hotels. When you travel to a new place, you get much more out of it if you try to live like a local. If you avoid the cushy resorts and touristy attractions and really get to know what life is like there, your experience will usually be many times richer and more memorable than if you go the hotel route, where you have little contact with what's authentic about the city.

That's one reason apartment rentals are so popular amongst those budget travelers in the know, who can enjoy quiet, residential neighborhoods, buy food at local markets, and cook in their own kitchens.

There have been problems with unscrupulous brokers handing out bogus or substandard reservations. There have also been problems with unscrupulous landlords ousting their tenants in order to convert to short-term rentals. Do the math: It averages about $100 to $150 a night ($100 or more cheaper than a standard hotel) to rent a studio apartment in Manhattan. If you're a landlord, you stand to make a lot more in a month ($3,000 to $4,500) than the $2,500 or so you'd get by renting to a permanent tenant with a lease.

In one apartment I used to live in, most of the long-termers were squeezed out, and now there's a stream of visitors from Northeast Asian countries who come a few days and leave. When it comes to a cramped city like New York, where affordable housing is already at a premium, seeing low-cost apartments removed from the inventory hurts the middle and working classes.

But many of the brokers in operation, aware of the controversies, and also that their reputations are their lifelines, already take steps to make sure their apartments are not de facto flophouses for tourists. Reps from NY Habitat, for example, say it only works with renters who are up-front with their landlords or co-op boards. No one gets hurt.

Which is only fair -- after all, owners of apartments pay taxes on them whether or not they're resting their heads in them at night. If this law goes into place, anyone who wants to have a paid guest in for a few days will have to lie to get it done. They will claim they're being visited by a friend, lie about the true length of their stay, or get paid purely under the table. Once you start fudging the paperwork, it leaves almost no safety net for the consumer.

On the surface, corruption is what lawmakers object to, but that's not what they have written the law (read it here) to prevent. It's a blanket ban, like shooting a cannon to kill a rat. If the politicians had more finesse, they would craft a law that protects the personal freedom to rent out your home for legitimate purposes while still banning landlords from turning their tenants out on the street for the more lucrative short-term market. An appropriate law would provide protections for a thriving cottage industry, not stamp it out entirely.

But even New York's official tourism bureau, NYC & Company, went on record with USA Today in 2008 with a slam of the entire flat rental business: "This isn't a business practice we support, and we strongly discourage people" from renting apartments, representative Chris Heywood told the paper. "It's a real case of 'buyer beware.'"

The board of NYC & Company, which issued that categorical condemnation, is packed with hotel execs who rightly have a vested interest in the tourism success of the city. Until 2008, Jonathan Tisch, the CEO of Loews Hotels, was its chairman, and today, the Executive Committee includes heads at Hilton, InterContinental and the Hotel Association of NYC, and the New York Hotel and Motel Trades Council.

Last year, the tax on proper hotel rooms rose from 5% to 5.875% -- a tax that renters of single rooms in private apartments do not have to pay.

And that's where the Budget Accommodation Cull of 2010 gets interesting. It's not just vacation rentals that are under attack. Other budget accommodations that up until 2010 were operating legally are now being declared illegal.

In the past few months, New York City's budget hotels and hostels have faced an onslaught of forced closures by city inspectors who have grown unusually zealous.

In a development little covered by the mainstream press, hostels with no previous violations -- basic, low-price places very popular with a steady stream of budget travelers -- were slapped with closure notices, stranding budget travelers. In short order, Zip112 was shuttered.

The Village Inn, in the East Village, was also closed down, slapped with a sudden citation over occupancy, and its Facebook page is now posted with quizzical messages from backpackers wondering what happened to their reservations. Many young foreigners arrived in New York, many on their first visits to the United States, only to find their planned shelter padlocked.

The Village Inn's operator, NYC Hostel Connection, posted this inflammatory accusation in the discussion section of his company's Facebook page:
When you're charging minimums like $300.00 per night and you start realizing your numbers are down because there are better options (i.e. Hostels) who do you complain to and/or attack. Answer: (Fill in this blank with your favorite Hostel). Despite the fact that this task force no longer reports to the Department of Buildings New York, they have taken to renegade tactics like unrelenting harassment in order to please their superiors (i.e. politicians, hotel union leaders – who, you got it, PAY THEM UNDER THE TABLE). Maybe this is hard to understand from an outside perspective, however, in the long history of New York this is politics as per usual.
Do you buy it? Is it sour grapes or does he know something we don't? I don't have the answer because I have seen failings on both sides of the issue, but I do know it merits closer attention from all of us.

Whether or not you buy it, there's something going in the Empire State's political scene, and at this rate, budget accommodation options are quickly dwindling. Which means you'll pay more to visit the Big Apple.

New York State residents are registering their opposition to the bill here.

Follow WalletPop's Jason Cochran on Facebook.

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