Airbnb filed a federal lawsuit on Friday, October 21, 2016 after New York Governor Andrew Cuomo signed a bill that would fine Airbnb hosts up to $7,500 for posting illegal short-term rentals on the popular website.
Airbnb contends the law violates free speech and due process, and additionally violates their rights under the Communications Decency Act,
“a federal law that says websites cannot be held accountable for content published by their users.”
Proponents of the bill, which legislators approved 110-24 in June 2016, say the fines are an effort to keep housing affordable. Considering New York City is already one of the most expensive places on the planet to rent an apartment the size of a closet, surely Airbnb and Airbnb’ers alike can sympathize. Moreover, the bill doesn’t change what is and isn’t legal regarding rentals, so this isn’t technically imposing anything new on Airbnb, which has been criticized for considering itself above the law. Advocates of the bill hope the new fines will give teeth to existing law since many, if not most, Airbnb hosts in New York have been violating the law with impunity for a while now. The first violation will cost a host $1,000, the second violation will cost $5,000, and the third violation will cost $7,500. What is new is that the law makes it illegal to advertise an illegal rental. This last part is what Airbnb believes violates due process and their rights under the Communications Decency Act.
The current New York housing law has existed since 2011 and prohibits renting permanent multiple dwelling apartments for periods shorter than 30 days, unless the owner who is renting out the apartment is also occupying the apartment at the same time.
A report by the New York Attorney General found that between 2010 and 2014, 72% of short-term Airbnb rental units in New York violated housing law.
Critics of Airbnb like the current housing law because it makes it illegal to basically turn apartments into hotels, which drives up the cost of housing. For example, a report by the Housing Conservation Coordinators and MFY Legal Services found that the average price of rentals in the top 20 Airbnb neighborhoods rose by 10%, suggesting a direct correlation between the availability of Airbnb rentals and increasing rental costs. Cost is not the only factor—permanent stable housing is also incredibly scarce in the city. According to the report, 8,000 housing units were lost to Airbnb, which reduced the availability of affordable housing by 10%. Advocates also claim the bill protects residents from noisy and obnoxious Airbnb’ers in these black market “de-facto hotels.”
New York is Airbnb’s largest market, so the company’s revenue could take a serious hit if they’re unable to overturn the law. In its complaint, Airbnb stated that in order to comply with this new law, “Airbnb would be required to screen and review every listing a host seeks to publish.” The company also stated the law “creates the incorrect perception that Airbnb’s own activities are unlawful” and “will lead to the sort of reputational injury and loss of goodwill that irreparably harms a business.”
Airbnb’s central argument, that it will be illegally penalized for content posted by users, is essentially the same argument they’re using to fight similar legislation in San Francisco, which happens to be the company’s home. Sites like eBay and Amazon have cited the same law to protect themselves against liability from illegal transactions between users, but the argument might not be a winner for Airbnb this time. The U.S. District judge presiding over the San Francisco case said earlier this month that he “wasn’t ‘seeing the link’ between free speech protections and San Francisco’s short-term rental regulations.”
Prior to Cuomo’s signing, Airbnb doled out a list of alternative measures (like preventing hosts in New York from listing more than one apartment), which many viewed as an eleventh-hour-hail-mary pass that was too little, and too late.