As any visitor to New York City discovers, the Big Apple isn’t the best place to get a hotel room. Rates top $300 per night, the highest in the country, and supply is quite limited.
At year-end in 2013, New York, with a population 8.3 million had fewer hotel rooms than either Chicago, with a population of just 2.7 million, or than much smaller tourist hot-spots like Las Vegas, Orlando, and Washington. Booming and gentrifying Brooklyn, with roughly the same population as Chicago, has a grand total of two full-service, major-brand hotels.
The limited supply and high demand benefits incumbent hotel owners, who get to enjoy high prices. But the room shortage clearly harms the local economy as a whole, by limiting the number of tourists and business travelers who can visit. To their credit, city officials recently eased hotel permitting processes and more than 12,000 new rooms are now under constructions. But unsurprisingly, the city also has seen a boom in Internet-based room-sharing services.
Bureaucrats at the state level aren't crazy about the idea of new consumer choice. Dusting off old laws intended to deal with brothels and slumlords, busybody state Attorney General Eric Schneiderman is now wielding them against individuals who rent rooms out through websites like Airbnb and Roomarama. His office recently issued a report that estimates more than two-thirds of Airbnb accommodations are illegal. Even if there are antiquated laws that technically prohibit these types of rentals, many of them are simply nonsensical. For example, one state law targeted toward slumlords could be interpreted to ban nearly all bed and breakfast accommodations.
Indeed, by-the-night room rentals seem like one of the last areas where the government has much business interfering with people’s housing choices. Unlike home purchases or even apartment rentals, by-the-night accommodations are temporary: if any harm is done, it is easy to evict the malefactors. So long as there’s no obvious danger (say, cramming 20 people into a one-bedroom apartment) it’s better and easier to remedy any problems after the fact. Even when they have laws similar to those in New York—and such laws are legion—officials in other state governments have mostly left well enough alone, letting the room-sharing market develop on its own.
Schneiderman appears to have other ideas, vowing a continued crackdown. It's probably worth noting that, as the Ralph Nader-founded New York Public Interest Research Group points out, Schneiderman's contributions from the hotel industry have soared recently. More than a third of the contributions he's ever received from hospitality businesses have come in the just last two months. Coincidence?
Eli Lehrer is president of the R Street Institute.