A recent NYT article discusses the plight of users of an online crowd-sourced room rental service called Airbnb, which allows users to offer their rooms for rent for travelers looking to avoid paying exorbitant hotel fees. The problem? In many cities, such as New York City, people offering their rooms for rent to travelers are breaking local laws:
Back in September, Nigel Warren rented out his bedroom in the apartment where he lives for $100 a night on Airbnb, the fast-growing Web site for short-term home and apartment stays. His roommate was cool with it, and his guests behaved themselves during their stay in the East Village building where he is a renter.
But 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.
New York City ordinances outlaw this sort of “crowd-sourced” approach to offering lodging for travelers:
local laws may prohibit most or all short-term rentals under many circumstances, though enforcement can be sporadic and you have no way of knowing how tough your local authorities will be. Your landlord may not allow such rentals in your lease or your condominium board may not look kindly on it … [NYC law] says you cannot rent out single-family homes or apartments, or rooms in them, for less than 30 days unless you are living in the home at the same time.
The NYCRR is a labrynthine mess that even lawyers have trouble navigating. Needless to say, though I’ve worked with the NYC regs before, I was unaware of this particular restriction.
What struck me about these ordinances, however, is that it appears to be a textbook definition of rent-seeking by hotel concerns when I read it. Indeed, after reading further, the justification for these laws seem flimsy at best:
New York City officials don’t come looking for you unless your neighbor, doorman or janitor has complained to the authorities about the strangers traipsing around.
“It’s not the bargain that somebody who bought or rented an apartment struck, that their neighbors could change by the day,” said John Feinblatt, the chief adviser to Mayor Michael R. Bloomberg for policy and strategic planning and the criminal justice coordinator. The city is also concerned with fire safety and maintaining at least some availability of rental inventory for people who live there.
These justifications don’t hold up upon interrogation. The “bargain” in question is one governed by the terms of the lease, and landlords are generally free to dictate the terms of that lease as they please. Landlords could, for example, place a restriction on this sort of short-term room rental if they wanted to. The fact that the landlord at issue in this case did not only proves further that this isn’t really a concern that comes up that often. If it was, you can bet the landlord would have a section in their lease devoted to banning this practice, so as to ensure they don’t get held liable for their tenants’ violation of the ordinance in question.
Second, the fire safety concern is related to the number of people in the building at any given time. That would be controlled by placing restrictions on maximum occupancy, which already exist. Notably, the fire hazard concern would also be implicated where people simply allowed friends to sleep over in their apartments, which a ban on individual room rentals would not prevent.
Third, the idea of “maintaining at least some available rental inventory for the people who live there” doesn’t even make sense. The only way these rooms get rented out is by someone who already occupies them. There’s no way that crowding out of rental space could occur here. The room is already “unavailable” to the other residents of the city because somebody already lives there.
So all we are really left with in this case is a law that represents rent-seeking by hotel businesses in New York City. There doesn’t seem to be a good reason to place a per se restriction on this sort of transaction where other laws already account for the justifications given. Which makes this whole thing a shame, because people clearly benefit from having this option available to them. Particularly in New York City, where reasonably safe and clean hotel rooms are notoriously expensive.
This is a good example of an instance where we really should just let the market (and the wonders of the internet) do its thing. For the reasons cited above, I can see no legitimate reason for this type of ordinance other than fattening the pockets of both hotel concerns and city governments, who get to impose fines every time a violation occurs. Regulations that attempt to solve legitimate problems with land use in a heavily populated suburban area are one thing. Regulations that serve merely as revenue-raising and rent-seeking provisions for the city—and its attendant private beneficiaries—are another thing entirely.
h/t Matt Yglesias
As someone who used Airbnb for housing in Indianapolis, during the MBA job fair, I have to say it is a wonderful service. In fact, I intend to use it from now on. This situation, explained above, is reminscent of the food truck battle occuring in NYC, D.C., Chicago and L.A. Incumbents, aka the hotels, are trying to find ways to curb the competition from people who offer far better service at a cheaper price. The same can be said of brick-and-mortar restaurants( and food carts) who pushed for parking regulations against food trucks. The market has decided it wanted an alternative to traditional housing and like all other industries, where incumbents are fighting competition, they will use government to force consumers to choose them.