This has been a rough week for Airbnb: New York Attorney General Eric Schneiderman issued a disparaging report of the company and New York City Mayor Bill de Blasio’s office filed a lawsuit against landlords operating illegal hotels through Airbnb.
Mr. Schneiderman’s report found that a whopping 72 percent of Airbnb’s rentals in New York were illegal, with about six percent of hosts operating 36 percent of units. The most profitable Airbnb host operated 272 units, which resulted in 3,000 reservations and $6.8 million in revenue. The top dozen commercial hosts on Airbnb brought in over $1 million a year each. The issue, determined the Attorney General’s office, is also neighborhood specific: 40 percent of host revenue was earned in the Lower East Side, Chinatown, Greenwich Village, Soho, Chelsea, and Hell’s Kitchen. By comparison, every rental in Queens, Staten Island and the Bronx brought in only three percent of the host revenue.
Airbnb spoke out against the report, telling Betabeat, “The report’s conclusions rely on incomplete and outdated information. For example, the findings do not account for the more than 2,000 listings we have already removed from our community in New York. Additionally, every single home, apartment, co-op and living space in New York is subject to a myriad of rules, so it’s impossible to make this kind of blanket statement. That kind of uncertainty and lack of clarity is exactly why we’re advocating for clear, fair rules for home sharing.” Several Airbnb hosts told us that while the report was slightly concerning, they would keep renting out their apartment as they saw fit.
As for the lawsuit, Mayor de Blasio’s office is focusing on one particular note in Mr. Schneiderman’s report, that on illegal hotels. The report found a dozen properties that rented sixty percent of their units for terms shorter than six months, which indicates that they were operating as an illegal hotel (it is illegal to rent out an apartment for less than 30 consecutive days.)
Two such properties, 59 Fifth Avenue and 5 West 31st Street, are owned by brothers Hamid and Abdolmajid Kermanshah, and the city has officially granted a preliminary injunction against the pair. In addition to violating the 30 day regulation, the brothers have allegedly violated fire codes as well as building codes. These code regulations are a constant consideration of city landlords, and carry loftly consequences.
The mayor’s office offered a brief comment on the matter, “In this case, we have two buildings operating as illegal hotels, operating dozens of apartments as illegal hotels, with serious health and safety problems, like lacking sprinklers or appropriate fire exits. When we have bad actors engaged in that level of dangerous practice, we’re going to go after them.” The term “bad actors” has been thrown around since the battle between the rental site and the city began.
Airbnb spokesperson Nick Papas told Betabeat, “We do not support converting buildings into Illegal hotels and the individuals named in this complaint were removed from our site earlier this year.”
The case comes as pressure mounts from hotel associations and city officials, both of which have spoken out against Airbnb’s practices. The lawsuit “links the illegal rentals to the housing crunch,” however, Airbnb has long defended that their rentals do not impact city-wide housing issues.
Earlier this year, Airbnb commissioned a study by UC Berkeley professor Ken Rosen, who determined Airbnb did not impact New York’s housing crisis, however, not all were convinced. City Council member Ben Kallos addressed the issue with Betabeat this summer, “When we are talking about thousands of units on Airbnb, where the average is this $7000 number, it indicates the people sleeping in the units are not New Yorkers. The argument works against them. To have Airbnb tell me that renting thousands of units above market rate does not affect the market flies in the fact of jurisprudence, the law and common sense.”
The brothers have not returned request for comment.