By: Bryan Hudson
On September 5th, 2023, New York City (NYC) began enforcing its short-term rental ban, known as Local Law 18.[1] NYC initially adopted Local Law 18 on January 9th, 2022, in an effort to address the city’s growing housing crisis. The law mandates short-term rental hosts to register with the Mayor’s Office of Special Enforcement (OCE), and prohibits booking service platforms, such as Airbnb and VRBO, from facilitating transactions for unregistered short-term rentals. The new law also imposes significant fines for those who violate it, with hosts facing penalties of up to $5,000 if they fail to register with the OSE, and booking platforms potentially incurring penalties of up to $1,500 for processing unverified transactions.[2]
In response to Local Law 18, Airbnb filed suit against the OCE, seeking injunctive relief to halt its enforcement.[3] In its petition Airbnb argued that the rules the OCE promulgated were arbitrary and capricious, as they were burdensome, ineffective, costly, and failed to account for reasonable alternatives. However, Justice Bluth, writing for The New York State Supreme Court disagreed. In her opinion she wrote that it is not the task of this courts to assess whether a problem is addressed in the most effective way, rather it is to assess whether the rules have a rational basis and these rules, although not perfect, are sufficiently rational and logical responses to address the prevalence of illegal short-term rental.
Since the States Supreme Court’s ruling, reports have indicated that the number of short-term Airbnb’s available in NYC has dropped to about 30 percent of what it once was.[4] Despite this dramatic drop in listing as of September 8, 2023, NYC still had more than 39,000 listings, making it the city with second-most Airbnb’s in the United States. As for Airbnb’s share price, it appears to not have been impacted by the ban, holding at a share price of 142.75 as of September 15, 2023. One reason for why this might be the case, is because although NYC drove over $85 million in annual net revenue for Airbnb in 2022, it only constituted a little more than 1% of the company’s 8.4 billion in annual revenue.[5] However, despite these seemingly optimistic reports it’s important to keep in mind that only time will show the true impact this law will have on companies like Airbnb and whether other jurisdictions will follow in the footsteps of NYC.
Citations:
- Short-Term Rental Registration and Verification by Booking Services, NYC OFFICE OF SPECIAL ENFORCEMENT (last visited, Sep. 15, 2023), https://www.nyc.gov/site/specialenforcement/registration-law/registration.page
- Stacey Leasca, New Restrictions Are Coming for NYC Airbnbs This Fall – What to Know, TRAVEL AND LEISURE (Sep. 7, 2023), https://www.travelandleisure.com/nyc-vacaton-rental-law-airbnb-vrbo-7966085#:~:text=The%20new%20rules%20require%20hosts,to%20%241%2C5000%20per%20transaction.
- Airbnb, Inc. v. N.Y.C. Mayor’s Office of Special Enf’t, 2023 N.Y. Slip Op. 32740 (N.Y. Sup. Ct. 2023)
- Naomi Buchanan, Early Impacts of New York City’s ‘De Facto Ban’ on Airbnbs, INVESTOPEDIA (Sep. 10, 2023), https://www.investopedia.com/new-york-city-enforces-de-facto-ban-of-airbnbs-7967344#:~:text=New%20York%20City%20adopted%20the,of%20Special%20Enforcement%20(OSE).
- Suzanne Rowan Kelleher, Why Airbnb Can Survive a ‘De Facto Ban’ In New York City, FORBES (Jun. 7, 2023), https://www.forbes.com/sites/suzannerowankelleher/2023/06/07/why-airbnb-can-survive-a-de-facto-ban-in-new-york-city/?sh=6c1877037570