Airbnb Loses New York Battle as Governor Signs New Law Aimed at Hosts

Just days after receiving the bill on his desk, New York Governor Andrew Cuomo has signed a piece of legislation directly designed to crackdown on illegal short-term rentals and the growth of illegal hotels in the city and the state.

The bill, A08074/S6340, which went into effect immediately, heavily fines hosts on Airbnb and other short-term rental sites like HomeAway, FlipKey, and VRBO, who post listings that violate the state’s laws on short-term rentals. The law has a penalty of up to $1,000 for the first violation, $5,000 for the second violation, and $7,500 for the third and subsequent violations.

Josh Meltzer, head of New York Public Policy for Airbnb said, “In typical fashion, Albany back-room dealing rewarded a special interest — the price-gouging hotel industry — and ignored the voices of tens of thousands of New Yorkers. A majority of New Yorkers have embraced home sharing, and we will continue to fight for a smart policy solution that works for the the people, not the powerful. We are filing a lawsuit in New York this afternoon.”

Proponents of the bill, including New York State Senator Liz Krueger, were pleased with Cuomo’s decision to approve the bill.

“Today is a great day for tenants, seniors, and anyone who values the safe and quiet enjoyment of their homes and neighborhoods. It is also a huge victory for regular New Yorkers over the interests of a $30-billion dollar corporation. For too long companies like Airbnb have encouraged illegal activity that takes housing off the market and makes our affordability crisis worse. They have sat idly by while unwitting ‘hosts’ are evicted for breaking their leases, unscrupulous landlords drive out tenants to profit off the short-term market, and tourists are put in danger by staying in unregulated, unaccountable, and often dangerous illegal hotels.”

The new law doesn’t change New York’s current Multiple Dwelling Law, which was last revised in 2010 and largely ignored by Airbnb, HomeAway, and their peers. This law prohibits most apartments (buildings with three or more units) in New York City from being rented out for less than 30 days. This means that the majority of entire home/apartment listings that you find on Airbnb and other sites for New York City would be considered illegal, especially if you can book them for a period of fewer than 30 days. However, if the host is present and is renting out a spare room, for example, that is considered legal. One- and two-family homes are also exempt.

According to data provided by Airbnb, approximately 54 percent of its listings in New York City would possibly be considered illegal under the current law because they comprise entire home listings. A 2014 investigation conducted by New York Attorney General Eric Schneidermann noted at least 72 percent of Airbnb rentals in New York City are in violation of state law.

On Wednesday, Airbnb made a last-ditch effort to persuade the governor not to sign the bill, saying it had redesigned its platform to prevent New York City-based hosts from having more than one home listing on its site, addressing lawmakers’ and housing advocates’ concerns that the site was abetting the growth of illegal hotels.

Given the new law, will Airbnb go so far as to engineer its platform to prevent the advertising of illegal listings on its site? In a press statement, the company said, “We have always asked everyone in our community to follow all their local laws before they list their space and we will continue to do so, but the way the current law is, is confusing to most New Yorkers and there is no way it can be reflected on the platform. Many entire home listings in New York City are legal, and private room and shared space rentals are permissible as well.”

Will This Law Hold Up?

As noted above, Airbnb said it will make good on its intent to file suit in New York immediately. In September, the company sent a letter to Cuomo saying it believes this law is a direct violation of the Federal Communications Decency Act (CDA) and the First and Fourteenth Amendments of the Constitution.

Currently, Airbnb is engaged in a lawsuit with the city of San Francisco and it threatened to file a lawsuit against the city of Anaheim, Calif., using the same argument. The lawsuit in San Francisco is ongoing, and Anaheim revised its proposed regulations on short-term rentals to avoid a lawsuit.

However, as Skift has noted before, the New York law, while somewhat similar to the legislative regulations proposed in Anaheim and San Francisco, does not appear to fine Airbnb or the platforms for any violations of local short-term rental laws. The fines are limited only to the people who use Airbnb and other sites to advertise short-term rentals that are in direct violation of the current state law. The bill also does not require Airbnb or its peers to divulge information about its users as legislation in San Francisco and Anaheim proposed.

Eric Goldman, a professor at Santa Clara University School of Law and an expert on legal issues relating to websites, spoke with Skift earlier about the proposed bill in New York. He said that as long as the law makes a clear distinction between the advertisers (hosts) and the publishers (Airbnb, HomeAway, and their peers) it would likely be enforceable. However, he said, “If the law is interpreted to apply to publishers, in addition to the advertiser, it runs into several legal doctrines which limit is scope.”

Whether the law does distinguish between the advertiser or the publisher will be the crux of the lawsuit, as well as whether New York can institute a bill regarding advertising that could impact interstate commerce, as well.

Goldman also noted, “The First Amendment protections for advertising are a little reduced, and ads for illegal offerings may not get a lot of First Amendment protection. However, Section 230 protects intermediaries from liability for even ‘illegal’ ads.”

New York State Assembly Member Linda Rosenthal (D-Manhattan) who sponsored the bill, told Skift she and the bill’s authors were careful not to include any language that places liability on Airbnb or other home-sharing platforms.

“That’s why we were careful to not levy the fines on Airbnb. They are protected by the Communications Decency Act, which is why we did not make them the recipient of the fines. I don’t know what their possible claims could be. Their M.O. is to throw millions and millions of dollars at the problem, as they tried with this bill. A lawsuit would be equally doomed to failure.”

Rosenthal is referring to the $10-million super PAC that the company, valued at $30 billion, recently created in time for the state elections.

On a press call this Wednesday, Meltzer said the super PAC was created “to give our tens of thousands of hosts across the state a voice in the electoral process. I think they feel that they were largely ignored in the legislative session.”

How Will This Law Be Enforced?

Under this law, the New York Mayor’s Office of Special Enforcement will be tasked with collecting fines in New York City. The New York Mayor’s Office of Special Enforcement received an additional $10 million in funding in November 2015, to be spread out through 2017, to crack down on illegal hotels. Cities in New York with less than 1 million residents will receive assistance from the state to enforce the law.

Rosenthal said that the Mayor’s Office of Special Enforcement will continue to carry out their investigations of illegal short-term rentals as they already have been, with the “ultimate goal to cut down, dramatically, on the number of illegal units being offered to visitors of New York City.”

She added, “The have been doing this, they have their methods of enforcement, and now they have a sharper tool to enforce it.”

No additional budget has yet been allocated for enforcement of the fines, Rosenthal said, but the new law has gone into effect immediately, as will continued enforcement of the existing Multiple Dwelling Law.