Will Airbnb Regulations Cause a Housing Bust?

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As most of my long time listeners know, I’m a live in let live type of a guy. I’ve got my libertarian principles to me. I’m not big with rules and regulations. However, however, when it comes to housing, when it comes to the neighborhood that you live in, I don’t mind rules. I don’t mind zoning restrictions, as long as again, you know them going in. Again, when you have certain issues pop up around the country,

where so-and-so is upset because so-and-so is not abiding by the regulations. Again, I can understand how it can be a pain in the neck dealing with busy bodies, but you did agree to certain rules. Anyway, what am I talking about right now? We’re gonna talk about the Airbnb regulations that are coming down the pike. And there’s been some pushback. And listen,

One being, having lived in New York City and living in apartment buildings and high rises, I know that I wouldn’t want my neighbors on my floor to be renting out their place to short-term renters, Airbnb-ers, people that might be throwing crazy parties in there on a regular basis. I don’t wanna live like that. Imagine having a family and kids and…

not knowing who’s buying into some short term rental buy you. So I get the regulations. And now they’re starting to come down the pike and will it be and will it cause a housing bust? So you got regulations now in New York City. And again, it’s gonna make it much, much tougher for people to rent out their property via Airbnb. Some of the new regulations limit on guests.

Short-term rentals can accommodate no more than two paying guests at a time, regardless of the property size or number of bedrooms. Hosts are required to be physically present while their properties are being rented. Hosts and visitors must leave the interior doors within the rental unlocked, allowing occupants access to the entire unit. They’re trying to cut down on short-term rentals, and obviously Airbnb doesn’t want to get sued or in trouble.

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So, you know, you’ve got to apply for a permit to do this. And then you’ve got to show that now to Airbnb. I think all these regulations come into place in December. What does this mean? And could this cause a bit of a housing bust for many investors? Damn straight. We’ve been talking about this for some time here. You got a lot of people that much like we saw back in 2006, 2007, 2008, buying up.

properties highly leveraged using debt. You know, the old pre-construction condos getting as many as they possibly could. And I watched that happen down in the state of Florida and I watched it blow up for a lot of people. I mean, I wasn’t even familiar with the concept of short sales until 2008 when all of a sudden they had all these houses hitting the market, you know, via short sales because people couldn’t pay their bills.

Well, many people, again, thought that they were gonna be real smart and say, you know what? I want to be, I want to own my own hotel business, but I don’t want to own a hotel. I know what I’ll do. I’ll go out and I’ll lever myself up and buy up apartments, houses here, there, and everywhere. And I’ll rent them out on Airbnb. And that’s what people did. But guess what? Kids, when you lever up,

and you’re taking these loans at short-term rates and now all of a sudden these rates are much higher, the numbers don’t work anymore. They don’t for many of these investors. And now guess what? We’re gonna start going through the process again and it’s gonna happen. It’s gonna happen. You’re gonna start seeing the short sales on many of these properties.

Then you’re gonna see the whole deed in lieu thing where they’re gonna have try to hand in the keys and here a little bit of a warning, people out there that did this and you turn in the keys and guess what? They sell off the property and part of your loan is forgiven. It’s not really forgiven when it comes to the tax man. You still have to pay that, that loan that was forgiven. You have to pay that in your taxes. That’s a part of it as well. Yeah, what’s the…

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Again, we live in a country where you can go out and you can take risks and these banks take risks as well. But again, this could be highly damaging to many people’s credit for a while. It’s going to take about seven years to get out from underneath this. But this is going to be a continued trend. More and more places around the country, around the world for that matter, are pushing back on this.

And this is actually gonna affect some of the big companies that decided to get into this. And they’re not gonna be dealing with the situation in regards to the leverage because they had the capital, but these regulations are gonna make it much more difficult for investors out there to buy up so many of these properties. Again, it’s gonna also offer up an opportunity for people to step in and get a piece of property on sale.

As the world turns, as the market turns, as people do dumb things with their money, we’re here. Watchdog on wallstreet.com.