Airbnb Tries to Clear Away Political and Legal Challenges in New York and San Francisco

In two of Airbnb’s biggest markets in the United States — San Francisco and New York City — the short-term rental giant is progressing with its efforts to address the issue of regulations, especially as the company, currently valued at $31 billion, continues on its path towards an initial public offering.

In its hometown of San Francisco, Airbnb and its fellow home-sharing platform HomeAway, today announced they have settled their suit with the city, agreeing to automatically register all local hosts in the city in compliance with short-term rental laws that went into effect in 2014.

And in New York City, Airbnb’s largest market in the U.S., New York State assembly member Joseph R. Lentol (D-North Brooklyn) sponsored legislation over the weekend that would fundamentally change the city’s current Multiple Dwelling Law regarding short-term rentals.

Speaking about Airbnb’s settlement with the city of San Francisco, Airbnb Head of Public Policy Chris Lehane said, during a press conference call, “For us it’s really, really important that we continue to put these kinds of partnerships in place. We fundamentally do believe that platforms need to take responsibility.”

San Francisco Lawsuit Settled, But Still Needs Approval

In San Francisco, Airbnb and HomeAway’s federal lawsuit against the city’s short-term rental regulation laws has been settled, according to City Attorney Dennis Herrera.

The agreement stipulates that Airbnb and HomeAway will work with the city to automatically register all hosts who use their platforms to rent out their homes, in accordance with short-term rental laws that originally went into effect in February 2015.

A major part of that law stipulated that all vacation rental hosts in the city must register with the city’s Office of Short-Term Rentals and obtain a business license to do so. However, since the law went into effect, only 26 percent of all hosts (2,100 out of an estimated 8,000) have actually gone through the proper government channels to get registered and to obtain a business license.

Airbnb said the automatic host registration will work via a “pass-through registration” system similar to the ones the company has already developed to register hosts in cities that include New Orleans and Chicago. Information passed along to the city’s Office of Short-Term Rentals will include only the hosts’ names, addresses, and zip codes, and will only be submitted with the consent of the hosts to avoid any conflicts regarding host privacy. Airbnb and HomeAway also agreed to cancel future stays and deactivate listings if notified by the city about an invalid registration or listing.

Under the agreement, Airbnb and HomeAway will not be responsible in any way for enforcing the current short-term rental laws; they are simply agreeing to help streamline the mandatory registration mandated by the city. However, the platforms must also regularly provide the city with specific data about San Francisco listings that will enable the city to enforce the current laws.

Today’s agreement mirrors a proposal outlined by Lehane in a San Francisco Chronicle opinion piece published in November. In it, he asked the city to work with Airbnb to “create a modern, simplified registration system” and said Airbnb would be “willing to share data, given appropriate safeguards for the privacy and safety of our hosts and guests, with the city.”

Last June, both Airbnb and HomeAway sued the city, arguing that new legislation that would hold the companies liable for steep fines and criminal penalties generated from short-term rental stays that were not in compliance with the city’s current laws was a violation of their rights.

The two companies said that the board of supervisors’ legislation violated the federal Communications Decency Act, which essentially says that websites, in most cases, are not responsible for the activity, legal or illegal, that their users engage in. U.S. District Court Judge James Donato, on Nov. 8, 2016 had previously rejected the main arguments that Airbnb and HomeAway had made in court.

In a press statement, San Francisco City Attorney Herrera said, “We have successfully defended San Francisco’s common-sense regulations on short-term rentals. This agreement helps protect the city’s precious housing supply by obligating these companies to ensure that all their listings are legal and properly registered. This is a game changer. The settlement will also make it easier for residents who follow the rules to supplement their income by renting out a spare room or their home while on vacation.”

The agreement would go into effect within 120 days following approval from the San Francisco Board of Supervisors and the Mayor.

At that time, Airbnb and HomeAway will then require all of their new hosts to be registered with the city before posting rentals on their sites.

The city attorney’s office said existing hosts will be “phased in over several months to ensure a smooth transition for both hosts and city enforcement staff” and “listings linked to suspected bad actors will be among the first ones required to come into compliance.” All hosts on both platforms will have to be registered by the end of 240 days.

“This is a turning point when it comes to enforcement,” Herrera said. “This settlement ensures that the two largest rental platforms in San Francisco will only include legal listings. It also guarantees that enforcement with real teeth begins in short order. This will help prevent our precious housing stock from being illegally turned into de facto hotels as we work hard to turn the tide on San Francisco’s housing crisis. At the same time, we’ve crafted this agreement to give people enough time to comply with the rules and to make it easier for them to follow the law.”

“HomeAway is pleased to have reached an agreement with the city to create a more convenient means for owners to comply with local rules,” said Philip Minardi, director of policy communications for HomeAway. “We look forward to continue working with the city on reasonable regulations for vacation rentals that balance the needs of communities with our owners’ rights to rent their properties — and take into account the benefits that traditional vacation rentals have brought to the San Francisco area for decades.”

In New York, Airbnb’s Fight Continues

Airbnb and New York City don’t exactly have a love affair with one another, but that won’t prevent Airbnb from attempting to woo city and state legislators in its efforts to change the current laws regarding short-term rental laws.

The company’s most recent attempt to fundamentally change the current short-term rental laws arrived over the weekend in the form of a bill, A7250, sponsored by Assemblyman Joseph R. Lentol.

New York’s current Multiple Dwelling Law, which was last revised in 2010 and which has been flouted by Airbnb, HomeAway, and their peers, 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 actually present during the guest’s stay, and is renting out a spare room, for example, that is considered legal. One- and two-family homes are also exempt.

Lentol’s bill would do away with that restriction against home-sharing of entire apartments where a host is not physically present, as well as implement a mandatory, automatic registration system for hosts as Airbnb is already doing in New Orleans and Chicago.

According to data provided by Airbnb, approximately 51 percent of its listings in New York City could potentially be considered illegal under the current Multiple Dwelling Law if they comprise entire home listings in multiple dwelling units (buildings with three or more units). A 2014 investigation conducted by New York Attorney General Eric Schneidermann, and based on Skift-commissioned research, noted at least 72 percent of Airbnb rentals in New York City were in violation of state law.

The bill would also limit short-term rental hosts to listing just one entire space listing on any home-sharing platform within New York City, upholding an initiative, “One Host, One Home,” that Airbnb says it has already implemented in New York City and San Francisco. Airbnb claims that in New York it has removed more than 4,200 listings that violated this provision since November 2015 and that 96 percent of its New York City hosts who rent an entire space have only one listing.

Addressing the concerns of neighbors is another item that Lentol’s bill attempts to address with mandatory requirements for insurance, the implementation of a 24/7 hotline for neighbors to complain or express their concerns, and a “three strikes” policy for hosts who regularly violate city and/or state regulations.

The bill would also enable Airbnb to collect and remit applicable local and state taxes to the city and state, similar to its tax agreements with cities that include New Orleans, San Francisco, Chicago, and Portland.

“I am very excited to introduce legislation on short-term rentals. The intent is to update and strengthen New York law, something we do in every other area of law whether it be criminal justice law or environmental law or consumer protection laws. Laws evolve and short-term rental regulation should evolve to meet today’s needs as well,” said Assemblyman Lentol in a press statement. “Homesharing is here to stay. We need to provide strong laws so that it can be done in a safe and responsible way. Most people participate in this program because they need help to pay bills–to help them maintain their residence in expensive NYC. The interesting aspect about home sharing is that it also offers a way to get tourists spending their money in areas outside Midtown Manhattan. Local neighborhoods net the benefits when hosts bring people in to enjoy New York’s local fare.”

Josh Meltzer, Airbnb’s Head of New York Public Policy, said in the same release, “Assemblyman Lentol is showing true leadership by paving the way for a modern regulatory framework that allows everyday New Yorkers the chance to earn extra income by sharing their homes. While New York has tried to position itself as a leader in the Internet economy, outdated regulations enacted to help entrenched special interests are standing in the way. We are grateful for Assemblyman Lentol’s leadership and look forward to continuing conversations with the rest of the Legislature so that they also recognize home sharing as a tremendous economic driver across the state.”

A recent report from UBS suggested that recent short-term rental regulations in New York City have had a negative impact on Airbnb’s business. The newest law went into effect this January, heavily fining Airbnb hosts who advertise any listings that violate New York’s Multiple Dwelling Law. Airbnb had previously sued New York City over the fines, but dropped its suit when the city confirmed that fees would only be directed to hosts, and not to the home-sharing platforms themselves.

With this new piece of legislation being presented, it appears Airbnb is much more willing to share information with the New York City, albeit on the company’s terms by allowing entire apartments to be rented out for a period of less than 30 days.

New York State Senator Liz Krueger (D-New York), who spearheaded 2010 amendments to the Multiple Dwelling Law, said she’s doubtful Lentol’s bill will gain enough legislative support in the State Assembly or Senate to be passed.

“Each year we seem to play whack-a-mole with variations of different bills that Airbnb is trying to move in both houses,” she said. “I’m fairly optimistic that this year we can convince enough legislators in both houses that this would be damaging to tenants and affordable housing in the City of New York. This is one of those rare situations where we find ourselves, tenants, activists, housing experts and the real estate industry itself being on the same side, seeing these various proposals and seeing this serious damage being done to the stability of residential housing in New York City.”

Does Such a Thing as Common-Sense Short-Term Rental Regulation Exist?

That’s the big question that both Airbnb and local jurisdictions are trying to answer. Both of Airbnb’s efforts in San Francisco and New York City demonstrate a willingness on the part of Airbnb to at least attempt to do so.

“We needed to take responsibility to engage those cities and work to develop solutions and tools,” Airbnb’s Lehane noted during his press conference.

However, in both cases, Airbnb has stopped short of actually being responsible for enforcement of existing short-term rental laws.

And in New York City, for example, taxpayers are helping fund an additional $2.9 million over the next two years to crack down on illegal short-term rentals via the Mayor’s Office of Special Enforcement.

When it comes to regulatory battles regarding short-term rentals, it’s hard to know who really wins and loses, whether it’s the local communities who may be impacted by worsening housing shortages or hosts trying to make ends meet by renting out their homes on occasion. But what’s clear is that for any solutions and tools to work, both cities and the platforms need to be willing to work together. And San Francisco could, potentially, be a start.