Future of Hotel Industry in New York [Airbnb Becoming a Game Changer]

Photo by Newsweek.

The New York Senate just passed a bill that would make it illegal to advertise short-term rentals, classified as stays less than 30 days, for entire homes on Airbnb. The bill, sponsored by New York State Senate Republican Andrew J Lanza, mainly applies to New York City, however it is applicable statewide for any city with over one million inhabitants. The next step is for Governor Andrew Cuomo to either sign or veto the proposed bill.

The bill reiterates that it is illegal to post short-term rentals on Airbnb that violate New York City’s multiple dwelling law, which went into effect in 2010 in an effort to crack down on landlords who withhold apartments from the market to operate illegal hotels.

The fines for the violations are high. Anyone who posts a listing for an entire home for less than 30 days could receive a $1000 dollar fine for the first offense and up to $7500 for the third offense.

Roughly 55 percent of Airbnb listing are for entire homes or apartments, many of which are probably illegal. With the exception of one or two-family homes, entire homes cannot be rented out in NYC for less than 30 days. The other 45 percent are for private or shared room rentals, which is allowed under the law. Most listings are almost entirely in Manhattan and Brooklyn. The top three neighborhoods for listings are Manhattan’s Lower East Side and East Village, and Brooklyn’s Williamsburg.

The bill has bipartisan support as well as support from hotel unions and major players in Manhattan real estate. Airbnb’s opponents range widely from hotel industries to neighbor tenants.The hospitality industry is upset that it is losing business to Airbnb hosts who do not pay hotel tax.

Landlords are worried they could be held liable if anything goes wrong when a tenant rents out their rooms. And affordable housing advocates are claiming that Airbnb allows hosts to hold an apartment hostage and rent it out to tourists, striking at the city’s already critical miniscule affordable housing supply.

Democrat Assemblywoman Linda Rosenthal said regarding the bill that “Airbnb has flouted the laws that protect affordable housing and tenants with impunity for years.

This bill, once it’s signed into law, will send a strong message that we prioritize hardworking New York families and affordable housing, and will give law enforcement the tools they need to crack down on illegal hotels that destabilize communities and deprive us of precious units of affordable housing. I commend my colleagues in both houses for voting against special interests and for hardworking New York families.”

“Affordable housing is at crisis levels in our city, with vacancy rates in the single digits,” said Letitia James at the hearing last year.

Vijay Dandapani, the chairman of the Hotel Association of New York City, told Gothamist that “Airbnb facilitates the creation of a black market for illegal and unsafe commercial rental properties that don’t follow any of the same regulations as legitimate hotels and negatively impact the residential real estate market by driving up rent and diminishing housing supply.This smart and innovative legislation will allow law enforcement agencies to better target, track, and penalize lawbreakers, while also protecting one of New York’s most vital economic contributors—the hotel and hospitality industry.”

Airbnb representatives argue that renters, mostly middle class, are using the service to supplement their incomes. The average unit was rented for 42 nights in a year and brought in $5110 per year on average, according to the company’s data.

Fewer than 1.4 percent of Airbnb hosts have listings for three or more apartments—a cause for suspicion for operating illegal hotels and the main case used by hotel unions. A report found that in 2013 nearly 2000 units were rented out for more than half a year. While 2000 is a miniscule number in comparison to New York’s 30,000 listings, it still accounts for 38 percent of Airbnb’s revenue.

“It’s disappointing—but not surprising—to see politicians in Albany cut a last-minute deal with the hotel industry that will put 30,000 New Yorkers at greater risk of bankruptcy, eviction, or forecluser,” Airbnb Head of New York Public Policy Josh Meltzer said in a statement.

“Let’s be clear: this is a bad proposal that will make it harder for thousands of New Yorkers to pay the bills. Dozens of governments around the world have demonstrated that there is a sensible way to regulate home sharing and we hope New York will follow their lead and protect the middle class.”

In light of the recent fire from politicians, Airbnb officials have argued that their service helps New Yorkers pay the bills and make ends meet. New York is Airbnb’s largest market but also their most controversial. Whereas the rental platform’s supporters say that it helps New Yorkers pay their ridiculously high rents, others say that the platform is taking away from affordable housing and risks illegal hotel operations.

This isn’t the first time Airbnb has clashed with politics in New York. In January of 2015, a hearing at the New York City Council stretched over eight hours and comments regarding the rental platform ranged from a marauding army to a miraculous lifeline.

Still, Airbnb is getting a whole lot of support after the announcement of the bill from Venture Capitalist Fred Wilson to actor Ashton Kutcher. Further, Quinnipiac poll found that 56 percent of New Yorkers would rent out their homes to strangers while on vacation. Airbnb said that if New York legalized short-term rentals, the city stands to gain $65 million in hotel and tourist taxes, according to an article in The Verge last year.

“I needed another income because my son was in school and another was in college,” Richelle Burnett, an Airbnb host in Bed-Stuy said. “Airbnb has helped us with tuition, home repair and other bills.”

While the neighborhood is indeed gentrifying and prices are going up, she told the New York Times that Airbnb has, on balance, been good for small-business owners and homeowners. “We send guests to businesses that wouldn’t normally get that traffic,” she said.

A sharing economy is a vision that Airbnb promotes. Many companies such as Uber also promose a similar model. With Airbnb attacked by officials, ride sharing services such as Uber and Lyft could find themselves next in the crossfire.

“The part that is most troubling is the message it sends: these types of companies aren’t welcome here,” said Julie Samuels, executive director of Tech:NYC, an advocacy group, in an interview with the New York Daily News. Uber operates in over 450 cities worldwide, including New York City. “These companies are not going anywhere. And for many people, they’re incredibly important sources of money.”

Baaria Chaudhary

Baaria is Staff Writer for Silicon NYC and brings her multicultural views and experience that spans the globe. She is here to guide readers as they discover and navigate complexity of ever changing NY tech scene.