Mr. Chesky Goes To Albany: Why Airbnb Is Putting Pressure On Gov. Cuomo

Last week, Gov. Andrew Cuomo received a letter from a number of famous tech names—including PayPal co-founder Peter Thiel, Facebook co-founder Chris Hughes, and actor and venture capitalist Ashton Kutcher—urging him to veto legislation that would penalize Airbnb hosts who advertise rentals fewer than 30 days in permanent Class-A units up to $7,500. 

These rentals have been illegal since 2010, but the law hasn’t been rigorously enforced. When it has, the building’s owner or landlord received the fine, not the tenant who put the space on Airbnb CEO Brian Chesky's (pictured) $25B home-sharing behemoth or its competitors.

Anti-regulation advocates believe the regulation will poison the well for the Big Apple, making it less appealing to tech companies that can't compete with the established businesses that have their hands in the pockets of the government.

But the issue isn’t quite so simple. Belkin Burden Wenig & Goldman partner Sherwin Belkin is adamant this new legislation does absolutely nothing new, but fine-tunes the existing law, preventing landlords and property owners—who may have not known of the tenant’s listing or even reported it to the authorities—from being fined for something out of their control.

“It has nothing to do with technology, ” he says. “It's trying to make sure the wrongdoer is punished, something that the real estate community has been clamoring for for a very long time, but only recently got attention because Airbnb’s business—and thus the fines—have gone up exponentially in the last year.”

Sherwin points out that these short-term leases are outlawed by several laws and statutes, such as the Multiple Dwelling Law, Real Property Law 226-b (which governs sublets), Real Property Law 235-f (which governs roommates) and the Rent Stabilization Law and Code (which, when applicable, limits rents).

Sherwin was also quick to reference Attorney General Eric Schneiderman’s 2014 investigation, which found the vast majority of rentals were illegal for a host of reasons, both safety and quality of life. He tells Bisnow there’s a clear distinction in the security and safety precautions between Class-A permanent dwellings, and a hotel or transient residence.

Pro-regulation voices—which include the Real Estate Board of New York and affordable-housing advocates—say Airbnb has exacerbated the city's affordable housing issues, believing many units are being rented out by building owners to create illegal hotels. They say these units would be otherwise be available to low-income tenants. 

It’s important to note this regulation's supporters include a number of hotel unions, a connection Airbnb has jumped on, insisting the bill is another effort by the hotel industry to stifle competition and deny middle-class New Yorkers the chance to earn extra income.

A source at Airbnb says this lack of distinction between the middle-class user and an actual illegal hotel was the problem with the law in the first place, and this new bill would only make it harder to enforce the law.

“The authorities will have to sort through all these Airbnb listings and they won’t be able to find an actual instance of the problem they’re looking for,” the source tells Bisnow.

The home-sharing giant has been fighting the original legislation since it was enacted, using public ad campaigns and demonstrations, but to no avail.

If critics actually want to support affordable housing, Airbnb says, why not bring back the 421-a tax abatement? Why not introduce reasonable legislation that allows Airbnb to operate and even give taxes to the city for each listing?

“It’s because the hotel industry doesn’t even want to have that conversation,” the source said. “We’ve always been very willing to collect taxes on behalf of our hosts and have even done so in other states like Connecticut.”

Sherwin says the original law has “hotel benefits,” but insists helping hotels was never the law's intent. NYC, he says, is an apartment-centric market, and anything that disrupts the quality of life of the market's majority needs to be addressed.

Cuomo has until January to make his decision on the bill, and Sherwin’s uncertain of how he will decide.

“My legislative and gubernatorial crystal ball is cracked,” he says. “But unless Airbnb’s able to convince him and the state legislature that it’s such an undeniable public service that proper enforcement of the laws on the books shouldn't occur, the governor should sign.”