Judge dismisses Airbnb lawsuit against New York City STR law
- Aug 22, 2023 | Jennifer Sokolowsky
A New York Supreme Court judge has dismissed a lawsuit filed by Airbnb and short-term rental (STR) hosts over New York City’s latest STR law. The ordinance is scheduled to go into effect September 5, 2023.
According to the New York State multiple dwelling law, short-term rentals are only allowed in most multifamily buildings if the permanent resident lives in the unit while guests are staying there, but it’s been difficult for the city to enforce that law. The new ordinance was passed in January 2022 to address illegal STRs and concerns about their effects on affordable housing.
The city law requires hosts to obtain a short-term rental registration number and include that number in any advertisements. The city will only issue registration numbers for hosts who permanently live in their short-term rental property and are renting out rooms, not the whole property. Operators must own the property, or, if they are tenants, prove they are allowed by the owners to rent the property for short terms. Hosts must also disclose who else lives in the property. Rent-controlled or city-subsidized buildings or public housing are not eligible for STR registration.
Airbnb claimed the measure amounts to a “de facto ban” on STRs and that the company would lose 95% of its $85 million revenue from New York City listings.
Supreme Court Judge Arlene P. Bluth said the city’s rules “make perfect sense” and the registration requirement is not an “overly onerous obligation” to hosts and STR marketplaces.
“To be sure, these rules will likely not be perfect,” Bluth explained. But the law addresses a problem identified by city officials — “the continued prevalence of illegal short-term rentals,” she said.
Out of the approximately 40,000 New York City STRs listed on Airbnb, about 25% are regularly booked. From 2017 to 2021, the city received almost 12,000 complaints and issued more than 15,600 violations related to illegal short-term rentals.
According to the ordinance, hosts must inform the city if their vacation rentals are listed with a short-term rental marketplace such as Airbnb or Vrbo. Marketplaces are also required to register with the city, include registration numbers in listings, and verify registration numbers prior to processing transactions.
“As the regulations relate to Airbnb, they give Airbnb a very simple way to make sure it is no longer facilitating — and making money from – unlawful activity,” Bluth said in her ruling. “All Airbnb has to do is properly verify potential listings.”
After the lawsuit was filed on June 1, 2023, New York City officials delayed enforcement of the new law until September 5. After that date, the city can begin issuing violations and imposing fines on hosts and marketplaces. Violations can result in fines of up to $5,000, or three times the revenue generated by the short-term rental, for each violation. Short-term rental marketplaces can face fines of $1,500 per violation for processing payments for unregistered hosts.
The ordinance also allows property owners to register with the city to block their properties from being permitted as STRs. So far, around 8,000 buildings have been added to the prohibited list.
Short-term rentals in New York City are subject to the city’s hotel room occupancy tax. Vacation rental operators must collect and pay this tax unless the host rents a whole home to guests not more than 14 days in a year or only once or twice in a year. Vacation rental hosts in New York City must also collect state-administered lodging taxes: state sales tax, New York City sales tax, and a hotel unit fee of $1.50 per day.
Some short-term rental marketplaces have agreements with individual counties in New York to collect lodging taxes for their hosts. However, neither Airbnb nor Vrbo currently collect taxes on behalf of their hosts in New York City. When hosts don’t have lodging taxes collected on their behalf, they’re responsible for registration, collection, and tax return filing with the city and state.
MyLodgeTax can help New York vacation rental hosts automate and simplify lodging tax compliance. For more on short-term rental taxes in New York, see our Vacation Rental Tax Guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.
