New York City Cracks Down on Illegal Short-Term Rentals

New York City is implementing long-awaited rules to crack down on illegal short-term rentals, but the registration process is overwhelmed. The city's Office of Special Enforcement has approved only 257 short-term rental registrations out of 3,250 applications as of late August, just over a week ahead of a September 5 enforcement deadline.

With over 10,000 Airbnb listings active in New York City, according to Inside Airbnb data from January 2022, it's clear that many hosts will be operating illegally if they still need to register with the city. Unregistered hosts face fines up to $5,000 or three times the revenue for a third violation, starting September 5th. Their registrations may also be revoked if they manage to obtain one.

Rush of Applications Overwhelms City

According to the Office of Special Enforcement, they have only reviewed around 25% (808 applications) of the total submissions to date. Over half of the applications came in after August 8th, when a judge dismissed an Airbnb lawsuit challenging New York City's registration rules. Airbnb has called the rules a "de facto ban" on short-term rentals.

With less than a week left before enforcement begins, it seems unlikely the city will be able to review the remaining 75% of applications in time. They have already denied 72 applications and returned 479 more requesting additional information.

Rules Require Registration and Host Presence

The registration rules, known as Local Law 18 or the Short-Term Rental Registration Law, were adopted by New York City on January 9, 2022. The law requires anyone renting out their space for less than 30 consecutive days to register with the city and pay a $145 nonrefundable application fee.

Additionally, hosts must be present during any stay under 30 days. This aims to cut down on landlords illegally operating full-time Airbnbs. The city also bans locks on bedrooms rented to guests in shared spaces. Rentals of 30+ days are exempt from the registration requirement.

Enforcement Focuses on Booking Platform Compliance

According to Christian Klossner, Executive Director of the Office of Special Enforcement, initial enforcement starting September 5 will focus on getting booking platforms like Airbnb to comply. The platforms must use the city's verification system to check registrations, stop processing unverified transactions, and file monthly reports.

Airbnb, Vrbo, Booking.com, and others face fines of $1,500 per illegal booking if they fail to enforce the law. Airbnb has stated that New York City accounted for around $85 million of its annual revenue - a significant loss if they are barred from operating there. Klossner estimates that 55% of Airbnb's NYC revenue came from illegal listings.

With less than a week until enforcement begins, short-term rental hosts in New York City are facing major fines if they have not registered properly with the city. For many, it appears to be too little too late as the city works through a massive application backlog. Airbnb and others also face major losses if they continue processing bookings for unregistered hosts. We will soon see if these strict new measures reduce illegal short-term rental activity in New York City.