San Francisco Online Rental Company Airbnb Suffers New York Setback

Save Article

Failed to save article

Please try again

Short-term rentals just got harder.  A New York judge has ruled against Airbnb, an online service that connects people with space to travelers who need lodging.

Although the ruling in New York doesn't immediately affect other cities where Airbnb operates, it's a setback for the San Francisco-based company that hoped to make New York a test case.

(Justin Sullivan/Getty Images)

From CNET:

As Airbnb continues to shake things up for the hotel industry, it's increasingly running into issues with the law, particularly in areas where the law is not clear cut. It's not just in New York—officials in the company's hometown of San Francisco are concerned about property owners potentially using its service to get around local tenant protections and land use codes.

The New York case of Nigel Warren shows how easily an Airbnb user could fall foul of the law, the New York Times reports.

... when he returned from a three-night trip to Colorado, he heard from his landlord. Special enforcement officers from the city showed up while he was gone, and the landlord received five violations for running afoul of rules related to illegal transient hotels. Added together, the potential fines looked as if they could reach over $40,000.

The Business Insider provided this statement from Airbnb:

"This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed and we are considering all appeal options as we move forward. Put simply, this decision is wrong on the law, and bad for New York. The laws in New York and around the world are confusing and often contradictory, but we intervened in this case because this was the one area of the law that seemed most clear. This decision demonstrates how difficult is for hosts and even companies like ours to adequately understand laws that were not meant to apply to regular people hosting to make ends meet.

"And more importantly, this decision makes it even more critical that New York law be clarified to make sure regular New Yorkers can occasionally rent out their own homes. There is universal agreement that occasional hosts like Nigel Warren were not the target of the 2010 law, but that agreement provides little comfort to the handful of people, like Nigel, who find themselves targeted by overzealous enforcement officials. It is time to fix this law and protect hosts who occasionally rent out their own homes. 87 percent of Airbnb hosts in New York list just a home they live in—they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law."

The issue is simmering in San Francisco, reports the San Francisco Bay Guardian:

As Airbnb continues to avoid making any public comment on the $1.8 million annual Transient Occupancy Tax obligation to the city that it appears to be dodging, with the complicity of the Mayor's Office, Board of Supervisors President David Chiu is getting closer to introducing legislation to regulate so-called “shared housing” and holding public hearings on the issues it raises.

In addition to the tax issue, there are concerns that Airbnb,, and other Internet-based sites that facilitate short-term rentals of San Francisco apartments are increasingly being used to circumvent local tenant protections, often after evicting tenants from the apartments using the Ellis Act. That state law allows owners to leave the rental business and convert to other uses, and landlords can argue that Airbnb is a commercial use and not a residential use.