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STATE OF NEW YORK PASSES LEGISLATION IMPOSING FINES FOR THE ADVERTISEMENT OF ILLEGAL APARTMENT RENTALS

Erin Lloyd - Friday, December 16, 2016

Recently, the New York state legislature passed a law that imposes significant fines on those who advertise the renting of apartments in ways that violate certain New York City and state laws. Specifically, any print, television, radio, mail, text, or online advertisement, such as one through Airbnb, which solicits an illegal rental of an entire residential apartment, is punishable by up to $1,000 for a first offence, as much as $5,000 for a second offense, and $7,500 for a third and subsequent violations.

Almost immediately, and as previously promised, Airbnb filed a lawsuit to contest the law, which included asking the Southern District of New York to grant a temporary injunction blocking the enforcement of the new law. Both state Attorney General Eric Schneiderman and attorneys for the city agreed not to enforce the law until the request for a preliminary injunction was resolved, but as of the end of November, Airbnb agreed to withdraw its lawsuit against New York State entirely. The company appears poised to continue its battle with New York City, challenging its legal jurisdiction to impose the fines. This battle is sure to come with many more twists and turns in the coming months and we will surely revisit it.

For years now lawmakers and proponents of home sharing, like Airbnb, have been at odds over the legality and regulation of short-term rentals. The combination of rising rents and costs of living, along with the increased convenience of home sharing online through Airbnb has led to a spike in short-term rentals statewide as a means of generating much-needed supplemental income. As the number of short-term rentals has grown exponentially, lawmakers and officials have been scrambling to figure out how to best address the home sharing economy.

On the one hand, many residents feel that they should be allowed to generate extra income through home sharing. Often, monies paid by transient guests is absolutely necessary for tenants to pay their monthly rents. By participating in the home sharing economy, people are able to stay in their homes and make ends meet. Home sharing proponents say that their actions are beneficial overall and claim that the real motivation behind “anti-Airbnb” legislation is to protect the hotel industry, which has been declining with the rise of the share economy.

On the other hand, the government does have an interest in insuring that rentals are safe and properly equipped to handle numerous transient guests. A rotating set of strangers in a residential building can cause a plethora of safety issues and skirts the various tax and other requirements imposed on commercial spaces, such as hotels. When individuals or landlords rent out apartments on a short-term basis with such a frequency that they are essentially operating illegal hotels, this becomes contrary to the residential purpose of the buildings and is more akin to a commercial operation.

Also at issue is the effect that Airbnb and other short-term rental platforms are having on affordable housing as a whole. A 2014 report by the Attorney General’s office revealed that almost three-fourths of local Airbnb advertisements between 2010 and 2014 were illegal hotels that violated state and city laws. What’s more concerning is that even though a small percentage of Airbnb hosts have multiple listings, these hosts account for more than one-third of Airbnb’s business in New York. In effect, this means that at least one-third of all New York listings on Airbnb are being managed not by people renting out part or all of their own homes, but by those who are acting as de facto illegal hotel operators.

Politicians and some tenants’ rights groups argue that this study supports their claims that Airbnb is worsening New York City’s housing crisis by making affordable housing unavailable to its residents. Their argument is that apartments that are occupied entirely or mostly by transient guests by definition reduce the number of apartments available for full-time residents. A reduced housing stock skews the level of demand, which is already out of control, which in turn causes rents to go up. Also, because the amounts transient guests pay per week or per day add up to significantly more than what monthly tenants typically pay, there is a disincentive to lease apartments to permanent residents. The overall effect is skyrocketing rents and fewer affordable apartments for rent for residents.

What makes the most current legislation different is that for the first time, lawmakers are going after the advertisement of an illegal rental as a stand-alone offence – whether or not the apartment is ultimately rented in a manner that violates the law.

We will be following any developments in this case carefully, so check back for updates. Our office can help individuals navigate the laws and regulations specific to your situation. For questions about Airbnb, contact Kyle Carraro (kc@lloydpatel.com) or Erin Lloyd (el@lloydpatel.com).

 

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