NYC Has Issued $16.3M In Fines As It Cracks Down On Short-Term Rentals
Between 2019 and 2022, real estate firm Mega Home and broker Katherine Cartagena allegedly raked in $2M converting Manhattan apartments to illegal short-term rentals.
During that time, the group managed 550 short-term rental stays, hosting more than 2,000 guests at four units in the buildings at 311 E. 51st St. and 207 W. 75th St.
Then, New York City’s Local Law 18 went into effect, with enforcement beginning Sept. 5. What became known as the “Airbnb ban” restricts short-term rentals, including Airbnbs and Vrbos, by forcing hosts to register their units with the city and enforcing other guest and host mandates. It also granted stronger enforcement power to city and state regulators.
In March, the state shut down Mega Home and Cartagena's operations, and they agreed to pay an $845K fine to settle the charges, according to a statement from the Department of State.
That fine is just one of dozens handed out less than a year into the new regime, which has led to a boom in local hotels' business and a wave of city-led prosecution.
As of the end of March, the city has filed a total of 25 lawsuits that has netted $16.3M in settlements and counting, a spokesperson for the mayor’s office told Bisnow. Some of the cases are ongoing, meaning the settlement amounts could change.
Also in March, LuxUrban Hotels was hit with a $1.2M fine for operating illegal short-term rentals in 67 units across 29 buildings in Manhattan and Brooklyn. The 4,300 stays in those units generated $3.9M in payouts for the company, according to OSE.
The company, which operated the units under its former CorpHousing Group branding, has since pivoted from operating short-term units to master leasing hotels, although it has struggled to find its footing two years after the transition.
“Illegal short-term rental operators hurt our hospitality industry and make it harder for New Yorkers to find affordable housing, and we must ensure we are holding them accountable,” New York City Mayor Eric Adams said in a statement at the time.
In the Mega Home settlement, all of the company’s illegal listings were removed and Cartagena agreed that if she advertised illegal rentals again, her real estate license would be revoked. Cartagena and Mega Home couldn't be reached for comment.
After the Sept. 5 enforcement date, short-term listings in the city dropped by more than 80%, according to an AirDNA report. New York went from more than 22,000 short-term rentals in August to just over 3,000 by Oct. 1, with only 417 units undergoing registration at that time.
By the end of 2023, a total of 1,337 applications for short-term rentals were submitted to the Office of Special Enforcement. Of those, 179 had to be returned to applicants for correction and 24 were denied for being in a rent-regulated or otherwise prohibited building, according to an annual report by the office.
As of May 6, the Office of Special Enforcement has received 6,140 registration applications and has approved or denied 6,122, or 99.8%, of those, a spokesperson said.
The crackdown comes as the city attempts to solve its housing crisis. A 2018 report by then-Comptroller Scott Stringer found that for each 1% of residential units in a neighborhood listed on Airbnb, rental rates in that neighborhood went up by nearly 1.6%. The report also showed that short-term rental listings take stock from areas with low quantities of affordable housing.
The restrictions have been a godsend for hoteliers who experienced a shock during the pandemic. The lack of rental competition, along with high building costs, more red tape for permits and rooms being used to house migrants, has sent existing hotel revenue soaring.
Last year, the city’s average revenue per available room hit a new all-time high, up 18% from 2022 and 15% from 2019. The hotel occupancy rate hit 82%, above the national average of 63%, according to a JLL report.
UPDATE, MAY 14, 9:15 A.M. ET: This story has been updated with more current numbers from the Office of Special Enforcement.
