Monday, September 25, 2017

Most Airbnb rentals are illegal in New York City and have been made so by legislation supported by the combined efforts of the hotel industry and affordable housing advocates. In addition, residents of co-ops, condos and rental buildings oppose the presence on their premises of short-term (less than 30 days) renters who have not been vetted and allowed occupancy by the landlord or by the co-op and condo boards. Because New York City comprises the largest short-term rental market in the United States, Airbnb vehemently opposes any laws that curtail its activities in New York City.

It is obvious why the hotel industry opposes Airbnb’s activities. Hotel rooms here are expensive and Airbnb’s prices tend to be lower, helped by the failure of Airbnb’s hosts to add to their rental fees the sales and occupancy taxes that must be added to hotel bills and submitted to the local taxing authorities. Therefore, in an effort to outlaw its Airbnb competition, the hotel industry runs anti-Airbnb advertising—for example, by raising security issues, even linking Airbnb renters to terrorist bombings in one ad! (Airbnb responded, noting that terrorists have stayed in hotels.) In an ad paid for by the Hotel Association of New York City and by a hotel workers’ union, the question is asked, “So who’s in your building? Airbnb won’t say.” Also provided is a phone number for complaints against Airbnb, so that callers can “stand up for New York’s safety and security.” Airbnb’s response, on its website, is that it runs background checks on all U.S. hosts and guests—but only if there is enough information to identify the U.S. guest! In response, the hotel industry supports legislation that requires home-sharing sites to include specific locations (address, apartment number, borough, town, county) of advertised premises so that law enforcement can ensure that Airbnb or similar organizations comply with laws protecting affordable housing and the safety of residents and guests.

In addition to the hotel industry, Airbnb is opposed by Share Better, a coalition of politicians, unions and housing and tenants groups who charge that Airbnb has had a negative effect on housing because it hastens gentrification in the outer boroughs where affordable housing is sorely needed. Share Better has created a hotline for tenants to report illegal short-term rentals in order to provide New York City with help in anti-Airbnb enforcement. The phone number is 646-979-4117.

Indeed, New York City has been struggling to provide affordable housing. Affordable housing advocates oppose Airbnb, saying that Airbnb makes it easier to illegally rent out apartments for the short term, thereby removing these apartments from the market for full-time tenants, which in turn drives housing costs higher and allows these units to be used as unregulated hotels (a serious violation, see below).

Tenants and owners who offer their residences for short-term Airbnb rentals respond defensively, maintaining that the income from the rentals enables them to better afford to live in New York City, which is undoubtedly an expensive city. Yet, while these tenants and owners benefit, an analysis published in The Real Deal (Oct. 14, 2015) states that Airbnb’s presence increased rents by as much as $69 per month in Williamsburg and Greenpoint and between $39 and $67 per month in other neighborhoods. How does this happen? Is there a link between Airbnb and the decline of affordable housing? Does the data support the contentions of the affordable housing advocates?

Some of the Airbnb “hosts”—a “sizable minority,” according to The Real Deal—are operating de facto hotels and earning substantial income. The Real Deal determined this by analyzing data from Airbnb’s own website and concluded that these hosts are thereby worsening New York’s “already acute rental housing shortage, taking hundreds of rental units off the market in some of the city’s hottest neighborhoods and putting upward pressure on rents.”

 According to legislation passed in 2016, most Airbnb rentals violate the 2010 law banning short-term sublets (but there are exceptions—see below).

The Real Deal’s article reports that New York’s Attorney General has designated Airbnb’s listings as “commercial” if they are rented through Airbnb for at least 182 days per year; the Real Deal estimated that 2400-4600 units, or eight percent to 17 percent of units at that time, met this criterion. The Real Deal opined that the impact has been “significant” on neighborhood rents and that, even if these rentals were legal, the impact on rents would remain.

Airbnb rentals are either hosted or un-hosted. If un-hosted, the renter occupies the entire dwelling unit. The NYS Multiple Dwelling Law prohibits (in buildings of three or more dwelling units) un-hosted rentals in Class A buildings for less than 30 days. Such buildings may only be used for “permanent residence purposes”; i.e., each unit must be occupied by the same person or family for at least 30 consecutive days. Therefore, dwelling units in Class A buildings cannot be rented for less than 30 days unless a “permanent resident” is present during the time of rental. Moreover, this person must be a “natural person”—not a corporation.

In New York City, the Multiple Dwelling Law is enforced by the Mayor’s Office of Special Enforcement, yet reports indicate that enforcement efforts may not be as vigorous as opponents of Airbnb would like. If a complaint is made, the city may then obtain a court order stopping building owners from making prohibited short-term rentals; fines of up to $2500 per day may be imposed.

Airbnb was further challenged by the 2016 law signed by Gov. Cuomo and supported by the Real Estate Board of New York, the hotel workers’ union, and affordable housing advocates. This law makes it illegal to advertise any short-term rental that is in violation of the Multiple Dwelling Law. Thus, these rentals may not be listed on Airbnb and similar sites. Violators may be fined $1000 for the first violation, $5,000 for the second, and $7,500 for three or more violations. These fines can be imposed on hosts, on Airbnb and on similar operations. Airbnb filed suit against this law, claiming that it would cause Airbnb “irreparable harm,” that it violates the First Amendment’s free speech guarantee and due process. Airbnb contends that the law also violates the federal Communications Decency Act that states that websites cannot be held accountable for content published by their users. Airbnb complained that, under the New York law, Airbnb would be required to screen and review every listing that a host wants to publish; New York officials responded that the law holds hosts responsible for advertising illegal listings and does not impose any fines on Airbnb. New York has decided not to enforce this law until the case is decided.

There is a slight glimmer of hope for Airbnb because the Multiple Dwelling Law does not prohibit rentals for less than 30 days if a guest has access to all parts of the unit and if the human host is present; if the short-term rental, hosted or un-hosted, is in a one- or two-family private home; or if the rental is for more than 30 days. But hosts who legally do short-term rentals in NYC may have to obtain a special license or permit to operate a business. If so, the lessor may be subject to various state and local taxes such as the hotel room occupancy tax and New York State and New York City sales taxes. Airbnb does not collect these, so the lessor must collect and remit these taxes. This would add to the cost of the rental, making it less competitive with a hotel rental, and it would also mean more paperwork for the lessor.

But that is not the only roadblock for the prospective lessor, for even if these conditions are met, the rentals could violate other laws or rulings. First, the rental may be prohibited by the bylaws of a co-op corporation or condo; if so, boards will likely establish penalties (fines, etc.) for cooperators or condo owners who are in violation. Second, zoning laws may prohibit transient rental buildings in certain areas; violators risk heavy fines. Third, short-term rentals may be in violation of the building’s certificate of occupancy—that is, a building certified for long-term residential use cannot be used for transient occupancy without amending the certificate of occupancy. This entails certification by the city that the building meets applicable fire and building codes that are more stringent than for long-term rental dwellings. Fourth, tenants in rent-controlled and rent-stabilized housing may or may not be permitted to engage in short-term renting of their premises. Fifth, any residential lease may contain prohibitions against sub-leasing without the consent of the landlord.

In addition to violations of New York laws, there have been the publicized horror stories of premises trashed by guests, of wild partying, of excessive noise, of theft of hosts’ property, etc. Guests have been subjected to refusal of occupancy on the basis of discrimination (race, gender, age etc.), and have discovered premises that are not as advertised, or are unsafe, unsanitary and not in the safest of neighborhoods.

Caveat emptor, everyone!

By Vivian J. Oleen, Associate Broker, Sopher Realty

Vivian J. Oleen is an associate broker at Sopher Realty

 

 

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