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The Airbnb Problem in Residential Housing

By Jeffrey Turkel
May 02, 2015

Pursuant to L. 2010 ch. 225 (“Chapter 225″), the New York State Legislature amended the Multiple Dwelling Law and various other statutes to crack down on landlords running so-called illegal hotels. The Legislature determined that certain landlords, rather than renting vacant apartments and rooms to tenants at regulated rents, recognized that it was more lucrative to use Airbnb and similar platforms to rent rooms on a nightly basis at market rates. As the Second Circuit observed in Dexter 345 Inc. v Cuomo, 663 F3d 59, 62 (2d Cir 2011):

The stated purposes of Chapter 225 were to (1) prevent building owners from circumventing the strict fire safety standards applicable to hotels; (2) prevent 'unfair competition to legitimate hotels that have made substantial investments to comply' with buildings codes; (3) protect the rights of permanent occupants who 'must endure the inconvenience of hotel occupancy in their buildings;' and (4) preserve the supply of affordable permanent housing.

Ironically, some rent-regulated tenants ' who are intended beneficiaries of Chapter 225 ' got into the Airbnb act as well. These tenants realized that there were substantial profits to be made by renting their apartments, or individual rooms within their apartments, to short-term transients at market rates, well above the regulated rents they were paying to their landlords. Although an individual tenant could not turn a building into an “illegal hotel,” the tenant could certainly turn a single apartment into a bed and breakfast.

This article details the City's efforts in one case to enjoin a business that facilitated the creation of illegal hotels, and a landlord's efforts in another case to eject a rent-controlled tenant who was using Airbnb to rent rooms within her four bedroom apartment overlooking Central Park.

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