Not much can slow down Airbnb (ABNB 0.68%) these days, it seems. Months of rumors of an "Airbnbust" failed to sap the vacation giant's growth, nor have sustained weakness in consumer spending, concerns about inflation, or the possibility of a recession. Now, New York City is taking a swing at the travel disruptor.

The biggest city in the U.S. and one of Airbnb's top markets just put into effect new restrictions that make it much more difficult to list New York City properties on Airbnb or other vacation rental platforms like Expedia's VRBO.

A new law requires hosts to obtain a license from the city showing that they are complying with the relevant occupancy regulations and building codes. Not only did 7,500 units fail to meet the requirements to get a license, according to a report from industry research firm AirDNA, but other hosts have complained of a backlog in the application process, likely impacting those listings as well. 

Those 7,500 units represent about 40% of the company's revenue from New York City.

The restrictions are the result of a yearslong battle with the platform as critics have charged that short-term rentals take needed housing away from long-term renters, create bad neighbors, and take jobs away from the hotel industry.

While you might expect the tussle to weigh on the travel stock, the opposite has been true. Airbnb stock actually finished the week higher, jumping early in the week on news that it would be included in the S&P 500 and several index funds would have to start purchasing the stock.

Two people look out of a big window at a wooded area.

Image source: Airbnb.

Does the ban matter?

Airbnb is no stranger to controversy. The company is a lightning rod for battles over rental regulations in cities and towns around the world for a wide range of reasons. Vacation rental is a difficult industry to regulate, and anybody with a place to share can use it to make money, which has helped drive the company's dramatic growth.

Regulations and resistance have frequently been thorns in the company's side, and it's fought the New York City rules and others in court, achieving a temporary delay in the New York restrictions. However, Airbnb has continued to grow even as regulations and restrictions on short-term rentals proliferated. 

The crackdown might seem significant, but on a large scale, it amounts to little more than a drop in the bucket as a percentage of the company's listings, which now top 7 million around the world. In other words, the 7,500 removed listings cited by AirDNA constitute a little more than 0.1% of Airbnb's total listings.

Airbnb's geographic diversification is also a source of strength in its fight against regulation as the company has listings in almost every country and in a wide range of locales, including urban, suburban, and rural areas, as well as upscale listings and others at bargain prices.

Revenue rose 18% year over year in its second quarter to $2.5 billion and gross booking value, or total spending on its platform, increased 13% year over year to $19.1 billion, a clear sign that it continues to deliver steady growth, despite new regulations and rumors that it's oversaturated.

Why investors should pay attention to the NYC ban

While the removal of 7,500 listings or even double that isn't going to have a material impact on Airbnb's business, the move is one of the biggest efforts yet to crack down on the travel platform. It also comes as complaints against Airbnb's chore lists and cleaning fees have become commonplace on the internet.

The proliferation of Airbnb's listings gives it some defense against regulation, but regulation still seems to be the biggest threat facing the company. After all, it dominates the industry with an estimated 74% market share according to M Science, and at this point, its value proposition is significantly differentiated from hotels.

The ban could be a testing ground for other restrictions on the platform, and how it plays out remains to be seen as Airbnb has plenty of supporters in New York City and elsewhere. Whether the city can adequately implement the restrictions is also an open question.

The looming restrictions against the company seem to make up part of the bear case of the stock, but Airbnb stock looks well priced considering its growth potential. If it can keep future regulations at bay and continue to grow, the stock should continue to be a winner.