NYC Tells Airbnb Hosts: Don’t Get Too Cozy

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The internet is causing big changes in New York’s hospitality business. Many visitors now spend the night in private homes, which they find through websites such as Airbnb. While these rentals tend to be cheaper, they are also very often illegal, and a growing number of hosts – people who rent out their homes or additional rooms – are being slapped with violations by city authorities. Now Airbnb says it is working to change local laws to make it easier to rent out an apartment.

$30,000 Fine For $300 Rental

The night before he was due in court last Thursday, Nigel Warren slept badly. He rose before daybreak, made himself coffee, and considered the cloud he’s been living under for the past five months.

Last September, Warren used Airbnb to rent his fifth floor East Village walkup to a visitor from Russia for three nights, making $300 while he was out of town for a few days.

He now faces fines as high as $30,000, for running what the city contends was an illegal hotel.

When The New York Times first reported Warren’s story in 2012, the violations had been dismissed on a technicality. Warren said a court officer assured him that was the end of the story.

But it wasn’t. The 30-year old web designer has since received five new violation notices based on the same September rental.

“The punishment doesn’t fit the crime,” Warren said, adding that he doesn’t believe his rental violated the law at all.

An Upstart Startup That’s Hard to Ignore

Until recently, it wasn’t very common for New Yorkers to rent out their homes on a short-term basis. But websites like VRBO, HomeAway, and Roomorama make person-to-person rentals easy. Airbnb said it helped 17,000 people find a place to stay in New York last New Year’s Eve.

The company also said it arranged temporary housing for more than 400 New Yorkers made homeless by Sandy.

“I think it’s another great example of the private sector using technology to help address this emergency,” said Mayor Bloomberg when he announced the program one week after the storm.

But Airbnb is also the latest example of how rapidly growing tech companies can run smack into government regulations. New York’s multiple dwelling law, which was tightened in 2011, makes most short-term rentals in larger buildings illegal.

Inspectors issued 1,897 related violations in 2011, the most recent year for which there are available records. The city continues to enforce the law vigorously.

John Feinblatt, chief policy advisor to Mayor Bloomberg, noted the city has different building codes for private homes and for hotels.

“Hotels have sprinkler systems, hotels have those instructions on the back of the door that tell you how to get out during an emergency,” Feinblatt said. “Hotels have to have two means of egress. Because we know that people who stay for a week or a day or three days need these extra supports in case of an emergency.”

Targeting Local Laws

For a long time, Airbnb brushed aside these kinds of concerns. The site said it was up to individual users to know what local laws apply and to follow them. The Airbnb Terms and Conditions page runs more than 12,000 words long.

Recently, however, the company has signaled a change in tone, positioning itself as an advocate for its hosts.

“What we’re really trying to do is look at the big markets where they have some laws, like in New York, that make it harder for hosts to host, and to change those laws,” said David Hantman, Airbnb’s head of global public policy, who was recently recruited from Yahoo!.

The company paid $30,000 to Bolton-St. Johns, an Albany lobbying firm, in the first six months of 2012, public records show. Hantman now travels regularly to New York City and Albany to speak with lawmakers, but to date, there is no legislation to amend the multiple dwelling law.

Hantman said the law needs to distinguish between people who occasionally rent out their own homes, and landlords who illegally run residential buildings as hotels.

Changing the law is also very much in Airbnb’s interest. A quick search of available rooms shows that many may not be legal under the multiple dwelling law. While the city has concentrated its enforcement efforts on individual hosts, the company could also find itself vulnerable.


A $30,000 Question

Nigel Warren arrived at the Environmental Control Board on John Street with a folder full of documents, ready to make his case, and expecting to make it by himself.

So he was surprised to find three people wanting to speak with him in the windowless waiting room: Airbnb’s David Hantman, an outside attorney hired by Airbnb, and Lindsay Garroway, a lawyer representing the management company responsible for Warren’s building, the A. Michael Tyler Realty Corp.

“There’s a whole party here,” Warren said. “I feel a little bit like I’m in over my head.”

Hantman explained he was there as an observer. Garroway said that the management company had an obligation to defend the landlord, who is named on the violation notices.

Inside the administrative law judge’s chamber, a lawyer for the New York City Department of Buildings requested more time to produce evidence, and the judge set a new hearing date for February 20th.

Afterwards, Warren noted that he could easily admit the violations, and pay a much smaller fine, about $6,000. Or he could just let the landlord deal with the violations, and face likely eviction.

Instead, he’ll go to court again to try to get the violations thrown out.

“Not that I need to justify my decision here – it's just that this is reminding me how insane this entire saga has been, given that the trigger was a several day rental that netted me a few hundred dollars,” Warren wrote, in an email.


Clarification:  New York City says it makes home inspections and issues violation notices based on complaints the city receives from neighbors about possible illegal occupancy of residences.  While Nigel Warren is contesting the violations issued as a result of his using Airbnb and says he will take responsibility for them, the violations were issued to his landlord.