On October 21, 2016, New York Governor Andrew Cuomo signed into law a bill that imposes significant fines against hosts of certain short term rentals (N.Y. Mult. Dwell. Law § 121). Airbnb responded by immediately filing a lawsuit to prevent the enforcement of the new law. The parties to the suit are now in negotiations to settle the suit.

New York is Airbnb's largest market with about $1 billion in transactions each year and over 40,000 active listings. In 2010, New York passed a law that made it illegal for a host to rent out an entire unit for less than 30 days if the host was not present. The 2010 law permits rentals of less than 30 days for a portion of a unit if the host is present.

The 2010 law was rarely enforced and often ignored by short term rental hosts. As short term rentals gained in popularity, complaints emerged about:

The new law prohibits the advertisement of short term rentals for less than 30 days for entire units if the host is absent and includes fines of up to $7,500 against those hosts. The new law applies to any offered unit in a permanent residence with three or more units. It does not apply to one or two family homes or temporary residences like hostels and dormitories. It also does not apply when the host is present for the duration of the rental.

The 2016 law provides for the following penalties against hosts:

Advocates of the new law argue that it will increase the number of affordable housing units on the market and reduce rents. They also argue that the law will protect guests from illegal hotels with unsafe conditions.

Opponents of the law claim that the new law was created to protect the New York City hotel and hospitality industry.

Almost immediately after the new law was enacted, Airbnb filed suit against New York City Mayor Bill DeBlasio, New York Attorney General Eric Schneiderman, and New York City.

Airbnb argued that the statute is ambiguously worded in a way that could potentially expose Airbnb to liability because of the actions of hosts. Airbnb claims the law may violate the Communications Decency Act of 1996, which protects internet publishers from content posted on their websites by third parties (47 U.S.C.A. § 230). Airbnb also claims that the law violates its First Amendment free speech protections.

Both parties are currently in settlement negotiations to resolve the law suit, but it is likely that any settlement would protect Airbnb from fines while continuing to hold hosts liable for illegal listings.

Airbnb is also currently litigating a law in San Francisco, California that requires it to reject booking fees from hosts that have not registered with the city.

The popularity of short term rental platforms like Airbnb, VRBO, and HomeAway is sure to generate increased regulatory actions by states and cities. Many large metropolitan areas already have some form of legislation regulating or prohibiting short term rentals.

Real estate counsel, property owners, hosts, and guests in New York should continue to monitor this case and familiarize themselves with the applicable short term rental laws.

For more information on short term rental legislation, see: