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NYC Short-Term Rental Regulations Cause Problems for Airbnb, but May Benefit Renters

On October 21, 2016, New York governor Andrew Cuomo signed into law new restrictions on short-term apartment rentals. ((Katie Benner, Airbnb Sues Over New Law Regulating New York Rentals, N.Y. TIMES (Oct. 21, 2016), http://www.nytimes.com/2016/10/22/technology/new-york-passes-law-airbnb.html?_r=1.)) The restrictions have dire implications for companies like Airbnb and other home-sharing websites. It is now illegal in New York City to advertise your entire home or apartment on Airbnb for less than 30 days. ((Alison Griswold, New York Made It Illegal to Advertise Your Apartment on Airbnb for Less than 30 days, QUARTZ (Oct. 21, 2016), http://qz.com/816486/new-york-governor-andrew-cuomo-signed-a-law-making-it-illegal-to-advertise-your-apartment-on-airbnb-for-less-than-30-days/.)) The rule applies to buildings designed for three or more families. ((Id.)) Renting a shared or spare room in an owner occupied apartment is still perfectly fine. ((Id.)) Airbnb hosts also cannot post more than one listing concurrently on the site. ((Greg Bensinger, Airbnb Revises New York Rules Amid Possible Legislation, THE WALL ST. J. (Oct. 19, 2016), http://www.wsj.com/articles/airbnb-revises-new-york-rules-amid-possible-legislation-1476891334.)) “Violators will be fined $1,000 for the first offense, $5,000 for the second, and $7,500 for the third.” ((Griswold, supra note 2.))

In New York City, renting out an entire apartment for less than 30 days has been illegal since 2010. ((Id.)) Airbnb just decided to ignore the rules and now they face an issue with the new law and penalties.

In response to the new law, Airbnb filed a federal suit claiming that the new law would cause it “irreparable harm.” ((Benner, supra note 1.)) The New York suit follows two other law suits filed by Airbnb against San Francisco and Santa Monica, which both have fined the company for illegal listings. ((Id.)) Airbnb is also facing suits globally for illegal listings. Some cities, like Berlin, have banned most short-term rentals. ((Id.))

Airbnb has tripled in value, to over $30 billion, within the past two years, but the new restrictions will slow or even stop that growth if not as many apartments can be listed. ((Id.)) For the company to keep growing at a steady pace, it needs to keep increasing the number of hosts on the platform and that cannot happen under the new restrictions. Many cities all over the world have put or will put similar restrictions to the New York City ones in place. ((Id.))

While these Airbnb restrictions are a bad thing for the company, the restrictions will protect affordable housing from illegal short-term rentals. ((John Banks, New Airbnb rule doesn’t ban home-sharing, it targets scofflaws, REAL ESTATE WEEKLY (Nov. 2, 2016), http://rew-online.com/2016/11/02/new-airbnb-rule-doesnt-ban-home-sharing-it-targets-scofflaws/.)) The new restrictions were passed to stop the growing number of commercial operators who are using Airbnb and other home-sharing sites to run unregulated lodging businesses. ((Id.)) These operators are avoiding licenses, taxes, insurance, safety provisions, and other requirements. ((Id.)) Affordable units have fallen off the rental market and are listed on Airbnb. Not only will the new law protect the rental market but, it will also protect jobs in the hotel industry, increase safety, and improve the quality of life for residents. ((Id.)) People do not want their apartment buildings being turned into illegal hotels.

The new law will further enforce the laws that were put in place in 2010. The pending suit filed by Airbnb may delay the enforcement of some of these restrictions. As New York and other major Airbnb markets around the world continue to pass laws that limit short-term housing rentals and how they can be advertised, Airbnb will have to change the way it does business if it wants to remain competitive and continue to grow.