By Tuesday, thousands of Airbnb Inc. rentals in New York City may suddenly be taken off the market.
(Bloomberg) — By Tuesday, thousands of Airbnb Inc. rentals in New York City may suddenly be taken off the market.
New rules set to take effect that day require hosts to obtain a license from the city verifying they are in compliance with strict occupancy regulations and building codes. But according to some property owners across the city, the Office of Special Enforcement is struggling to keep up with a backlog of license applications ahead of the Sept. 5 start date.
“The biggest frustration is just how hard it is to reach any humans at the office there,” said Ilan Rabinovitch, an Airbnb host of two years who has applied to register two rooms in his Upper West Side brownstone. He said he’s contacted the OSE at least four times inquiring about updates regarding his registration, asking for average turnaround times or staffing levels, but he’s either gotten no response or a vague reply from OSE Deputy Executive Director Francine Vlantes O’Keeffe.
At stake is potentially millions of dollars in lost revenue for Airbnb in one of its biggest markets. Some 7,500 units don’t meet the requirements to apply for a license, according to market analytics firm AirDNA, and so will likely eventually disappear from the platform. More than half of those listings are frequently rented and account for about 40% of Airbnb’s income in New York City, according to AirDNA. In a lawsuit against the city over the rules, Airbnb said it earned $85 million in net revenue in 2022 in the Big Apple, which is about 1% of its total.
New York has been sparring with Airbnb for years over rules that prohibit rentals in most apartments for fewer than 30 days without a tenant present. AirDNA estimates that only 9,500 of Airbnb’s 23,000 listings are legal.
The city has argued the registration law is necessary to crack down on unlawful rental operations by bad actors that subject guests to hazardous living conditions, force up rents and destroy the fabric of neighborhoods. But many hosts have sided with Airbnb in opposing the new rules, saying they rely on the extra income to be able to cover housing costs in one of the country’s most expensive real estate markets.
While the city works through its backlog of applications, some NYC hosts have been waiting for weeks, if not months, to hear about their status. Failure to register will lead to fines and the listing will be blocked on platforms like Airbnb and Expedia Group Inc.’s Vrbo.
The city has so far approved only 257 short-term rental host registrations out of 3,250 applications, New York’s Office of Special Enforcement told travel publication Skift on Aug. 28. It denied 72 applications and returned 479 to request additional information, according to Skift. Thousands more hosts have yet to apply.
The late-summer deluge of applications — more than half were filed only earlier this month after a judge dismissed the lawsuit — is weighing on the OSE, which was operating with 28 people, or less than half of its budgeted positions as of mid-May, Gothamist reported.
The OSE and its overseeing body, the Mayor’s Office of Criminal Justice, didn’t respond to emailed questions from Bloomberg News about enforcement capacity and the progress of application reviews. In her emailed response to Rabinovitch, which was seen by Bloomberg News, O’Keeffe said the office “reviews applications in order of submissions, and review times vary.”
Those operating short-term rentals illegally face fines of as much as $5,000, or three times the revenue generated by the unit. Airbnb and other rental platforms also face penalties if listings slip through. As a result, Airbnb is blocking the listing calendars of hosts who don’t provide a registration number by the deadline and haven’t updated their minimum night stay to 30 nights or more. A spokeswoman for Expedia declined to comment on the regulation. The company doesn’t break out metrics on its Vrbo unit, but AirDNA said Vrbo hosts 10% of short-term listings in New York or around 2,680, and doesn’t allow shared rooms on its site.
When asked for comment, Airbnb reiterated an argument it made in its lawsuit that the regulations will deprive the city of significant tourist dollars as they will take away a critical supply of alternative lodging that helps meet demand that hotels can’t during seasonal events like the NYC marathon and major holidays. While no city made up more than 1.3% of the company’s 2022 revenue, New York is among the top five Airbnb markets with the most active listings behind Orlando, Los Angeles and Phoenix.
“The city is sending a clear message to millions of potential visitors who will now have fewer accommodation options when they visit New York City: you are not welcome,” said Theo Yedinsky, Airbnb’s global policy director.
New York is far from alone in battling with Airbnb over listings and plenty of other cities have long tried to impose stricter regulations, with varying results. Meanwhile, San Francisco-based Airbnb recently reported reported total active listings jumped 19% in the second quarter from a year earlier to more than 7 million, adding more net active listings than in any quarter in its history. Its shares are up more than 50% this year.
Read More: Why Cities Can’t Crack Down on Airbnbs
But even if short-term stays still make up the bulk of listings on Airbnb, the company is seeing an increase in longer-term stays as some hosts are giving up fighting against restrictions like those in New York. Bookings for 28 days or more accounted for about 18% of total gross bookings in the second quarter. More hosts, concerned about the risk of penalties or legal costs, are focusing on month-to-month rentals, which can be less profitable but aren’t as widely regulated.
Rabinovitch said he’s conflicted about the information he has gotten from authorities about whether to keep his listing up if he doesn’t receive approval by Tuesday. He has also sought information from his city council member, whose office said they didn’t know the answer to his questions, and Manhattan Borough President Mark Levine, whose office told him to stop renting until he gets approval, Rabinovitch said. The office of the city’s public advocate told him it won’t be proactively issuing fines unless there is an egregious violation. In an email to Rabinovitch, the office said that while there are a large number of applications pending, “people have been making significant efforts to register may be given leniency.”
“We urge the Office of Special Enforcement to focus on large-scale bad actors depleting our city’s housing stock, rather than New Yorkers operating in good faith to try and make ends meet amid the ongoing affordability crisis,” a spokesman for the public advocate told Bloomberg News.
Rabinovitch said he’s confident he’ll ultimately receive approval from the city. He doesn’t want to risk fines but also needs the income to pay off expensive property taxes, he said.
“I have guests booked through the rest of the year,” he said. “They’re reaching out to me and asked me what to do. I’m like, I don’t know, I’ll let you know if I ever get approved.”
(Updates to add Airbnb shares.)
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