Airbnb listings in New York are mostly illegal, AG says

Nearly three-quarters of the New York City listings offered by the short-term rental service Airbnb violate city or state laws, New York state's attorney general charged Thursday.

A report released Thursday by Attorney General Eric Schneiderman also charged that many of the listings are placed by commercial operators running illegal hotels, not by New Yorkers renting out a spare room.

In one instance, Schneiderman said, a single commercial user made $6.8 million.

“This report raises serious concerns about the proliferation of illegal hotels and the impact of Airbnb and sites like it on the City of New York,” Schneiderman said in a press release. “We must ensure that, as online marketplaces revolutionize the way we live, laws designed to promote safety and quality-of-life are not forsaken under the pretext of innovation. The joint city and state enforcement initiative is aimed at aggressively tackling this growing problem, protecting the safety of tourists and safeguarding the quality-of-life of neighborhood residents.” 

The report is based on data obtained by Schneiderman's office as a result of a May 2014 subpoena. It examined New York City Airbnb bookings between Jan. 1, 2010, and June 2, 2014.

During that time, the report said, 25,532 of 35,354 private short-term listings – 72 percent – violated state or city laws.

It is generally legal to rent out a room while the homeowner or tenant is present, but many listings violated city zoning laws because the legal resident of the unit was away when the Airbnb client stayed there, a spokesman for Schneiderman said.

Additionally, he said, some listings violated state tax laws.

The report charged that large operators controlled a disproportionate number of listings.

According to the report, just 6 percent of hosts ran large-scale operations, but that group generated 36 percent of all rental transactions and collected 37 percent of total revenue, or $168 million.

Schneiderman announced the formation of a joint city-state enforcement unit that will investigate illegal hotels.

"We must ensure that, as online marketplaces revolutionize the way we live, laws designed to promote safety and quality-of-life are not forsaken under the pretext of innovation," he said.

Airbnb said in a statement that it has helped "countless" families pay their bills and stay in their homes.

"We need to work together on some sensible rules that stop bad actors and protect regular people who simply want to share the home in which they live," the company said. "We look forward to working with everyone in New York in the weeks ahead."

Some of the report's highlights are as follows:

• Up to 72% of Airbnb listings are illegal: Of the 35,354 private, short-term listings, data suggest that 25,532 of them violated either New York State’s Multiple Dwelling Law and/or New York City’s Administrative Code (zoning laws). Hosts generated approximately $304 million in revenue from these listings alone, and Airbnb itself earned almost $40 million from these transactions.
• Commercial users run multimillion-dollar businesses: Over 100 users controlled more than 10 different apartments that were rented out regularly through Airbnb. Together, these hosts booked 47,103 reservations and earned $59.4 million in revenue. The most prolific user administered 272 unique listings, booked 3,024 reservations and made $6.8 million in revenue. Additionally, while only 6% of hosts ran large-scale operations on Airbnb, that same group dominated the platform, generating 36% of all rental transactions and collecting 37% of total revenue – or $168 million. 
• Numerous units appear to serve as illegal hostels: New York law prohibits commercial enterprises from operating hostels. In 2013, approximately 200 units were booked through Airbnb for more than 365 nights during the year, indicating that multiple, unrelated guests shared the same unit on the same night, as they would in a hostel. The 10 most-rented units were booked for an average of 1,900 nights in 2013, with one top listing average 13 reservations per unit per night.
• Gentrified neighborhoods account for vast majority of Airbnb revenue: Bookings in just three Manhattan neighborhoods – Greenwich Village/SoHo, Chelsea/Hell’s Kitchen, and Lower East Side/Chinatown – accounted for more than 40% of hosts’ revenue, or about $187 million. By contrast, all reservations in Queens, the Bronx, and Staten Island combined brought in $12 million, less than 3% of the New York City total.
• Short-term rentals are displacing long-term housing options: In 2013, more than 4,600 units were booked for at least three months of the year. Of these, nearly 2,000 were booked for a cumulative total of six months or more, rendering them largely unavailable for use by long-term residents. Notably, the share of host revenue from units booked as short-term rentals for more than half the year increased steadily, accounting for 38% of the site’s revenue by 2013.

Airbnb said it has already removed more than 2,000 of the New York listings that violated state or city laws.