Rooms for Regulation: Lawmakers target Airbnb in fight against illegal hotels

As Airbnb’s business has grown, so to have its problems in New York. In 2010 the state Legislature passed a law aiming to bar landlords and tenants from converting apartments into illegal hotels, a practice long decried by lawmakers and housing advocates as a safety hazard, a nuisance for neighbors and a practice that siphons affordable housing off the market at a time when vacancy rates in the city are low enough as to constitute a crisis. Airbnb’s website, which some operators of illegal hotels use to book guests, has been accused of making little effort to stop them. But the company’s proponents say the law is overly broad in that it also condemns regular New Yorkers who just want to occasionally rent out their living space while they are away.

A 2012 update to New York City law also made it unquestionably illegal “to use, occupy, convert, or offer or permit the use of a permanent residential apartment space for other than permanent residence purposes.” But use of Airbnb has continued to skyrocket—there are currently over 27,000 listings in the city, up from roughly 3,000 in 2010. An October report from the state Attorney General’s office estimated that 72 percent of these listings are for entire apartments for a span of fewer than 30 days while the host is away, making them illegal.

While most of the thousands of Airbnb hosts in New York City have avoided legal problems over the years, others have not. Even some who have simply rented out their place while out of town for a week have been snagged in the city’s enforcement net: In 2012, The New York Times reported on a man whose landlord potentially faced $40,000 in fines after the tenant rented out his East Village apartment during a three-night trip to Colorado. The violations were eventually dismissed, but only after the city failed to file the proper paper work.

One of the reasons most hosts have steered clear of trouble is that the city agency charged with enforcing the law is a complaint-driven office. The Mayor’s Office of Special Enforcement (OSE) does not proactively ferret out illegal hotels, but rather responds to complaints from neighbors, which are usually called in via 311. With a staff of 12 from various city agencies, the office received 1,150 complaints in 2014 reporting a suspected illegal hotel operation. It conducted 883 inspections and issued 495 environmental control violations and 391 Department of Buildings violation notices, according to testimony given at a recent City Council hearing. Violations are handed down to property owners, and since the fines can range into the five figures, landlords have in turn started to seek ways to crack down on their tenants. The OSE reported a 62 percent increase in complaints about transient lodgers from 2013 to 2014.

But some lawmakers say the OSE’s activities are too limited, given the number of illegal listings are in the thousands and not the hundreds. And in recent months there have been early signs of a more concerted crackdown.

In February, a Manhattan Housing Court judge ruled that tenants living in rent-stabilized apartments are not allowed to profit by charging tourists more to stay in their homes. The case involved a tenant who was evicted after regularly renting out his Hell’s Kitchen apartment while he actually lived in Queens, according to neighbors. The judge, who ruled that his actions undermined “the purpose of the Rent Stabilization Code,” is reportedly the first in the city to evict someone outright without giving them a second chance—and the ruling may set an example for other landlords to follow.

This decision supports the contention of some city lawmakers that many hosts are behaving unscrupulously—even ones who aren’t necessarily running illegal hotel operations with dozens or even hundreds of listings. By occupying a house in Queens while simultaneously making money on his rent regulated apartment, the former tenant was effectively removing a unit from the residential market.

Lawmakers also point to research posted online by Murray Cox, a self-described community activist who claims no affiliation to the government or the traditional hotel industry. Cox mapped Airbnb’s listings in the city using data gleaned from Airbnb’s website, and found that 58.3 percent of listings are for entire homes or apartments. While it may be legal for one- or two-family homeowners to do this, it is illegal for tenants.

Cox’s website also found that 86.3 percent of all listings in the city are available, on average, for more than 60 days out of the year, further bolstering the claim that many if not most are being run more like a real business than a source of supplemental income. Additionally, around 29 percent of New York City’s Airbnb hosts have multiple listings—stronger evidence of an illegal operation, since no host could feasibly live in multiple units at once.

Airbnb counters that Cox is working from incomplete records.

“We do not comment on public scrapes of our information, because, like here, these scrapes use inaccurate information to make misleading assumptions about our community. Thousands of regular New Yorkers are using Airbnb everyday to help make ends meet. That’s why it is so important that we fix local laws to allow people to share the home in which they live,” the company said in a statement.

Airbnb has already gone through a protracted legal fight with state Attorney General Eric Schneiderman, resulting in the company’s release of anonymized data to Schneiderman’s office late last year. While the Attorney General will not comment on ongoing investigations, it has been reported elsewhere that the office has sought further details from Airbnb in some 120 instances, based on findings in the data.

According to Schneiderman’s October report, just 6 percent of the hosts analyzed accounted for a whopping 36 percent of private short-term bookings, and $168 million—37 percent—of all host revenue. Some of these hosts were responsible for hundreds of units. (The other 94 percent were responsible for no more than two units apiece during the period under review.) It isn’t hard to imagine that the Attorney General’s office is targeting this tiny slice of questionable hosts.

Numbers aside, Airbnb officials say their interests are actually in line with New York City’s and that they want to work together going forward.

“We as a company also don’t like big, illegal hotels,” said David Hantman, head of global public policy at Airbnb. “We’ve taken many of them off our site for quality reasons and will continue to do that. And we’re not advocating for a law that allows them. We are just focused on trying to get a law passed to exempt people who are doing this in their primary homes.”

But New York City Councilman Jumaane Williams, who chairs the Council Committee on Housing and Buildings, isn’t buying this line. Quality and legality are not one in the same, he points out, and he has challenged Airbnb to do more to ban lawbreakers, considering the reams of internal use data they have access too.

After the OSE’s testimony at a January City Council hearing, the proceedings devolved into an interrogation of Hantman and Airbnb about the company’s purported lack of cooperation.

“You’ve explained a lot of things, and it just seems strange that one of those things, and research that you would try to do, is not to make sure that the business model that you’ve presented is actually a legal business model,” Williams told Hantman.

“What was most distressing to me was that they did not seem to care about the laws that govern the business that they’re in in this city,” Williams later told City & State.

Hantman argues that with listings in 34,000 cities worldwide, it would be impossible for Airbnb to sort through all the statutes. And in New York City at least, Airbnb does provide a disclaimer to all prospective hosts outlining city laws that could impact the transaction, along with a warning that the tenant or homeowner could be in violation of their lease or condo bylaws should they choose to rent out their home. However, the company is independently taking it upon itself to research tax codes in many major cities in order to make it easier for their users to pay hotel taxes to local governments.

While Airbnb has pitched New York City on charging renters a hotel tax, as numerous other cities have already done both in the U.S. and globally, state Sen. Liz Krueger says she wants none of it. As the sponsor of the 2010 state law barring landlords from turning vacant apartments into illegal hotels, she argues that collecting the tax would tacitly demonstrate the city’s approval of an activity that can get tenants evicted.

“If you look at the leases for apartments in New York City, or co-op/condo bylaws, it will explicitly say ‘These units are for residential purposes, not business purposes,’ ” Krueger said in an interview with City & State. “The act of paying a business tax would provide evidence in a court of law that you have violated your lease or condo bylaw. Why would I want to put people in harm’s way?”

Hantman scoffs at this attitude. “It gives people so little credit,” he said.

Airbnb has already started collecting and remitting hotel taxes and transient occupancy taxes in U.S. cities like San Francisco and Portland, Ore. Both cities have also legalized the activity of short-term rental websites, and now require that hosts obtain a permit to continue to rent out their homes.

In Portland, that permit costs $178 and includes a safety inspection. City officials acknowledge that some residents’ leases may prohibit short-term rentals, but claim this is not the city’s responsibility.

“It is not an issue that the city is going to take on,” said Mike Liefeld, enforcement program manager for the Bureau of Development Services in Portland, which carries out the permitting process. “It is not unlike any other type of development process. When folks come in and they try to apply for permits, we do not review, or have any authority or jurisdiction to review any sort of civil contract.”

Portland has been touted as a prime example of a place where city officials are more optimistic about the benefits of the sharing economy than they are skeptical of its pitfalls.

“[City lawmakers] looked at all the issues and had lots of public involvement about the pros and the cons and ultimately found that they believed the right policy direction was to create the right standards and directions for allowing short-term rentals in our city,” Liefeld said.

But that doesn’t mean Portland and Airbnb are tension-free. As of Feb. 20, short-term rental companies in the city are also subject to a $500 fine for each unpermitted host listing on their websites. Currently only around 10 percent of the city’s estimated 1,600 hosts have applied for permits. It remains to be seen if the city will follow through with penalizing the companies, but it wouldn’t be the first time. Last year, Barcelona fined Airbnb 30,000 euros, or roughly $34,000, for breaching local law.

In New York City, where the Attorney General has estimated that Airbnb made over $282 million in 2014, local law would need to be changed in order for hotel taxes to be levied on users. For Hantman, this constitutes the second part of his wish list for the city.

“We need the tax law changed to allow us to pay taxes, and we need the short-term rental law changed to allow regular people to rent out their own home,” Hantman said. "New York should be going after bad actors and changing the law to ensure it protects regular New Yorkers who are just trying to make ends meet. There's nothing stopping New York's leaders from doing both of those things right now."

But lawmakers do not currently seem interested in allowing such rentals while residents are not there. They are instead preoccupied with ramping up efforts to go after the multitude of hosts who appear to be breaking the law as it currently stands. City Council members, including Helen Rosenthal, Jumaane Williams and Liz Crowley, want to increase funding for the Office of Special Enforcement in order to enable the agency to take a more proactive approach in identifying illegal rentals.

However, at the recent City Council hearing, Thomas Jensen, the FDNY’s fire prevention chief, testified that funding for more bodies at the OSE (which already includes one inspector from the fire department) would not necessarily allow the agency to fundamentally change its approach.

“You have to realize that enforcement in this area is quite difficult,” Jensen testified. “My inspectors enforce the fire code … this goes beyond the fire code at this time.

Jensen added, “We need the tools, the specific laws to do that. And enforcement, and that has to be a cooperative effort between our legal, City Hall, buildings department, HPD, to all get together to do this.”

In the meantime, the recent swirl of activity and publicity around the issue has more and more landlords paying attention. If enough of them take matters into their own hands, more hosts may decide the risks simply aren’t worth it.

As was reported in the Post, the Manhattan attorney who recently won the groundbreaking case against the Hell’s Kitchen host accused of living in Queens while profiting from his rent stabilized apartment said that he received over two dozen emails and calls from landlords in the hours after the decision. If they weren’t sure about their chances of winning such cases before, landlords are now a lot more confident that the government is in their camp in these situations.

“I do think at the same time there is a growth in the activity itself, there is also a growth in the understanding of what’s going on,” Krueger said of short-term rentals in the city. “And therefore more action is being taken by the real estate community to stop this from happening. The more advertising Airbnb does, the more landlords go, ‘Hey, I can look on their website and see if they’re doing this in my buildings and go after the folks.’ ”