What Happened After Cities Cracked Down on Short-Term Rentals (And Why It Matters)
In the first post of this series, we looked at what the data actually shows about short-term rentals and housing affordability. The takeaway was straightforward: STRs are not a structural driver of housing costs at the city or regional level.
That naturally leads to the next question policymakers often ask:
If cities aggressively restrict short-term rentals, what actually happens next?
The answer matters, because over the last decade, several major cities have effectively run real-world experiments by dramatically reducing or nearly eliminating STR supply. These were not incremental policy changes. In many cases, 50–90% of legal STR listings disappeared in a short period of time.
If STRs were a primary cause of housing unaffordability, these crackdowns should have produced clear, visible relief.
They didn’t.
New York City: the largest natural experiment
New York City offers the most dramatic example. After the implementation of strict registration and enforcement rules, the number of legal short-term rentals fell by roughly 80–90%.
That is not a rounding error. It represents one of the largest single-market removals of STR inventory anywhere in the world.
If STRs were driving the city’s housing crisis, this should have been the moment when vacancy rates rose and rents softened.
Instead, the opposite occurred.
Vacancy rates remained extremely low, hovering near full occupancy. Rents continued to rise year over year, with Manhattan setting new records for average one- and two-bedroom rents. In other words, the city successfully eliminated STR supply — but the underlying affordability problem remained firmly in place.
The policy achieved exactly one thing: it removed STRs. It did not meaningfully increase housing availability or stabilize rents.
Los Angeles County: large reductions, small effects
Los Angeles County provides a different but equally instructive case.
When STR regulations rolled out across multiple municipalities, listings were reduced by roughly 50%. That is a substantial contraction, particularly in a region with intense housing pressure.
The measurable result was a modest decline in rents and home prices — on the order of about 2%.
That change is not nothing. But it is small relative to the scale of the restriction, and it pales in comparison to the price pressures created by zoning limits, permitting delays, and decades of underbuilding.
Cutting the STR market in half did not come close to solving affordability. It produced a marginal adjustment in a system dominated by much larger forces.
South Lake Tahoe: bans don’t create long-term rentals
Resort and tourist markets are often cited as places where STR restrictions should have the strongest effect. South Lake Tahoe tested that theory.
After a near-total STR ban went into effect in 2018, proponents expected a meaningful increase in long-term rental availability and price stability.
What followed instead was a sharp rise in housing prices over the next several years, combined with continued scarcity in the long-term rental market.
Former STR properties did not flood the rental pool. Many were sold, converted to second homes, or retained as occasional-use properties. The housing supply problem remained — and in some respects worsened.
This pattern highlights an important reality: banning STRs does not force properties to become long-term rentals. It simply removes one lawful use, leaving owners to choose among other options that may do nothing to help local workers or renters.
A consistent pattern across markets
While the details vary by location, the outcomes are remarkably consistent:
- Large reductions in STR supply
- Little or no improvement in vacancy rates
- Continued upward pressure on rents
- No meaningful expansion of housing supply
Where changes do occur, they tend to be localized and modest. The dramatic, system-wide relief often promised during policy debates simply does not materialize.
That consistency matters. These are not theoretical models. They are real-world outcomes observed after policies were fully implemented and enforced.
So what did change?
Although housing affordability showed little improvement, something else changed very quickly.
Hotels raised prices.
In markets where STR supply was sharply reduced, hotel rates increased as displaced demand flowed into a more concentrated lodging market. Travelers still came — they just paid more and had fewer choices.
This is not incidental. It reflects basic supply-and-demand dynamics and becomes important when evaluating who benefits economically from STR restrictions.
We’ll explore that question directly in the next post.
Why this matters for policy
The lesson from these cities is not that STRs have zero impact anywhere. It’s that they are not a lever capable of fixing a housing shortage driven by decades of constrained supply.
When policymakers treat STR restrictions as a substitute for housing reform, they risk spending political capital on measures that deliver limited results — while leaving the real drivers of affordability untouched.
Good policy should be judged by outcomes, not intentions. And the outcomes of aggressive STR crackdowns are now well documented.
What’s next
In the next post, we’ll follow the money and look at who actually benefits when STR supply is restricted — and why the answer is rarely renters.
Next up: Who Really Benefits From STR Restrictions? Follow the Money.