New York City has had to return a “vast majority” of applications from Airbnb Inc. and other short-term rental hosts seeking to register their listings because they were illegal, prompting many hosts to list their property for longer-term stays.
New laws went into effect last month requiring all hosts offering lodging for fewer than 30 days to apply for a license to operate in New York, to ensure they comply with the city’s strict housing rules.
The city has received 4,794 applications as of Oct. 9 and has reviewed 1,697 of them. Of those, 57 percent have been returned to hosts to provide additional information or to correct deficiencies, said Christian Klossner, executive director of New York’s Office of Special Enforcement, which regulates short-term rentals. The agency has granted licenses to only 481 applicants, or 28 percent, who meet the occupancy regulations and building codes that prohibit rentals in most apartments for fewer than 30 days without a tenant present.
“People are still sending us applications for an entire home with six people or illegal basement apartments, or listings that make clear that they’re not going to be there,” Klossner said in an interview. It “has taken a lot of one-on-one education” with hosts so they can come into compliance, he added.
The difficulty of the approval process reveals the impact of regulations in New York, which had once been one of Airbnb’s biggest domestic markets. As of late September, listings available for booking for fewer than 30 days fell 89 percent compared with early August, to 2,322, according to market analytics firm AirDNA.
Airbnb has fought with the city for years over regulations. Critics say the platform has led to higher rents and limited availability in a notoriously tight real estate market, while many hosts argue that they need the extra income to help pay mortgages. By the time the enforcement kicked in in September, the company said New York only accounted for about one percent of its annual revenue.
Many Airbnb hosts have switched from offering stays of a few days or weeks, to longer-term leases with a 30-day minimum, which excludes them from needing to apply for a license. Those rentals, which are largely unregulated, now account for 94 percent of all of Airbnb’s listings in New York, up from 54 percent in early August, according to AirDNA.
The city’s work with the rental platforms has resulted in “strong compliance, and a massive reduction in illegal short-term rental listings,” Klossner said. Airbnb said it has worked closely with OSE staff by connecting to their verification system, which flags unregistered listings and prevents listings that fail the city’s verification from hosting short-term stays.
The city has long argued that more than half of what Airbnb earned in New York was derived from illegal listings. The registration requirement aims to hold platforms like Airbnb, Expedia Group Inc.’s Vrbo and Booking Holdings Inc. accountable and prevents them from profiting from non-registered units by blocking financial transactions.
The pace of applications has slowed, Klossner said, but his office is still working through a glut of thousands of applications, as most were filed only after a judge dismissed Airbnb’s lawsuit challenging the rule in August.
The crackdown isn’t deterring all short-term rental hosts, though, resulting in a black market of sorts. Some former Airbnb hosts are now listing their homes on platforms including on Craigslist and Facebook Marketplace, which don’t collect money on the transactions and so can easily bypass the rules. Hosts are marketing their dwellings as “Airbnb alternatives” from veteran “superhosts” with 5-star reviews, a much sought-after status granted by Airbnb to top-rated and experienced hosts.
The proliferation of illicit listings is hard to track and will be difficult to completely stamp out. The OSE’s short-term rental enforcement is “entirely based on responding to 311 complaints,” Klossner said. The city’s housing inspectors don’t have access to the application process, he said, meaning they won’t be going after people based on denied or returned applications.
“OSE continues to monitor the short-term rental industry as a whole, and will take appropriate measures to address short-term rentals operating in violation of the law,” Klossner said.
