New York vs AirBnB: Can the company survive restrictions from cities?

New York Gov. Andrew Cuomo signed into law a restrictive measure targeting Airbnb rentals in one of its most popular markets on Friday.

Shannon Stapleton/Reuters
Supporters of Airbnb stand during a rally before a hearing called "Short Term Rentals: Stimulating the Economy or Destabilizing Neighborhoods?" at City Hall in New York, U.S. on January 20, 2015.

New York Gov. Andrew Cuomo signed into law on Friday restrictive measures that limit Airbnb's activities in one of its most popular markets, marking the company's latest battle with cities worldwide.

The law, intending to prevent Airbnb rentals from decreasing affordable housing options, will only allow rentals of rooms where the host is also living there, and imposes fines up to $7,500 on those who advertise rentals fewer than 30 days in multiunit buildings without the permanent resident’s presence, which is already illegal under the state’s laws.

It's a tussle between city officials, affordable housing advocates, tenants, landlords and neighborhood associations which may all have different views about the matter. Balancing each party’s concern can be a tough job for regulators. Drawn-out battles have followed some of the decisions, as seen in places from Berlin and Paris to Seattle and Chicago. San Francisco, also considering a limit to short-term rentals, is an upcoming case.

With Airbnb rentals, "you know right away the assessment value of those properties is going to go up, for low-and-moderate income families, it's going to be out of their reach" Frank Shafroth, director of Center for State and Local Government Leadership at George Mason University tells The Christian Science Monitor in a phone interview. But renting out empty rooms will also help others, he says, "it's clearly godsent to some middle-and-lower income people."

Airbnb has responded to Mr. Cuomo's law by filing a lawsuit, arguing that it is not responsible for what the hosts post on the website.

“We will continue to fight for a smart policy solution that works for the people, not the powerful,” Josh Meltzer, head of New York public policy for Airbnb, said in a statement, as reported by The Wall Street Journal.

When Airbnb burst onto the scene in 2010, it was celebrated as a way for homeowners to earn a side income and meet new people, while allowing travelers to benefit from affordable lodging. However, hosts have been blamed for preferring to offer such short-term rentals over long-term rentals, thus limiting the housing stock and raising rental prices. A study by housing advocates and supportive lawmakers claim that rents have nearly doubled in areas with the most Airbnb rentals. The transient neighbors, some complain, also hurt the neighborhood’s well being.

“Will non-occupied Airbnb owners vote to support local school levies?” Denise Derr, a resident of Seattle said in a council meeting when the state was considering limitations to Airbnb rentals in June, as reported by The Seattle Times. “Will their guests participate in neighborhood-watch programs? Are we innovating or disrupting the social fabric?”

But on the other hand are some hosts who use the extra income to pay for bills, especially in big cities where cost of living can be prohibitive.

“I am not OK with what he [Cuomo]  is doing,” Eddie Anderson, an Airbnb host in New York told The Wall Street Journal. “It is going to affect a lot of New Yorkers, and we use this to pay our bills. I use it to pay my rent every month.”

A study published in June by researchers from Boston University also found that while Airbnb has impacted the bottom line of lower-priced hotels and non-business-traveler hotels, it has helped in reducing aggressive hotel room pricing that typically occurs around period of peak demand.

While renting out your couch for a traveler may not have much impact on housing availability, many cities are more worried about “commercial listings” – homeowners or investors who rent out rooms, apartments and houses frequently over a long time period. They argue that these spaces could have accommodated a long-term resident instead. To curb the trend, Los Angeles is planning to allow residents to offer short-term rentals a maximum of 120 days per year, while San Francisco is considering a 60-day limit. Chicago limits the number of listings allowed per building and imposes taxes to raise revenue for homeless funds.

Airbnb has tried to address cities’ and critics’ concerns. Earlier this month, it announced its plans to crack down on individuals who rent out multiple homes and it has taken 3,000 commercial operators off its website, according to The New York Times. It has also installed the same tools to detect such hosts in San Francisco. Another solution proposed was to collect tax payments from hosts, which the city can then include in its affordable housing fund.

“[To Airbnb] if you truly want to pretend you’re a sharing company, then you’re going to share a percentage of your profits that will be dedicated to affordable housing,” Mr. Shafroth says. 

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