Airbnb, Rising Rent, and the Housing Crisis in Los Angeles

As part of my final project while working at Hadsell Stormer and Renick LLP, I was told to research the impact of Short-term rental companies like Airbnb and their effects on the housing economy specifically in New York. Before starting the project, I was ambivalent to the company which seemed to serve its customers fairly and consistently. All my friends and family who have used the service were satisfied from beginning to end, so I was curious as to why my boss wished for me to research its negative effects on local businesses and property. Since the project however, I have developed a very significant stance against short-term rentals like Airbnb as they phase out affordable housing, raise rents for tenants, and destroy communities.

Since the introduction of Airbnb in New York in 2009, rents have been rising and housing has been taken off the rental market for long-term renters. Airbnb has invested a substantial amount of money towards gaining the favor of members in the Senate who elicit Pro-Airbnb legislation: laws that allow illegal home-sharing and pose a threat for cities suffering from Airbnb operation. Airbnb is also catalyzing gentrification while ignoring discrimination against guests, tenants, and communities of color. In response to the backlash Airbnb received after its tremendous revenue in NYC, Airbnb was able to spend over $1 million in July 2016 alone on all media sources to block the existing legislation and negative coverage against short-term rentals.

A Short-term rental (STR’s), as defined by the American Legal Publishing Corporation (ALPC), is the home dwelling of a non-natural individual for less than 30 days and are considered illegal in residential buildings when the owner is not present. This measure is designed to help the city recognize the hosts who might be “warehousing residences,” and dominating the housing industry in a manner that is unfair and negligent towards low-income renters. With this existing law, the New York City Council (NYCC) can specifically target illegal short-term rentals while simultaneously reducing the power of Airbnb and protecting the rights of the tenant and the landlord. As of July 2018, the NYCC voted unanimously to require Airbnb and other hosting platforms (“platforms”) to disclose the names and addresses of their hosts to a city-mandated enforcement agency in the hopes to diminish the illegal short-term rentals in the city. This effort to outlaw STR’s has not only helped Shared-Home Renters (SHR’s) to regain their influence on the housing economy but has also preserved the jobs of hundreds in the city of New York. Currently, 12 percent of Airbnb hosts in New York City, or 6,200 of the city’s 50,500 total hosts, are commercial operators, meaning they own multiple properties around New York and contribute to 28% of the Airbnb revenue in New York alone. Thus, to remove their influence, the city’s administrative code on multiple-dwellings regulates:

NYCAC § 27.2.08 (b). Class A multiple dwelling. [The] incidental and occasional occupancy of such dwelling unit for fewer than thirty consecutive days by other natural persons when the permanent occupants are temporarily absent for personal reasons such as vacations or medical treatment, provided that there is no monetary compensation paid to the permanent occupants for such occupancy.

The host may rent out a portion of their dwelling unit, but they must be present if the rental is for less than thirty days. Thus, the host is still able to participate in Airbnb, but they must reside in the property throughout the rental.  

While it is already illegal to occupy a Class A multiple dwelling for less than 30 days, the new law also prohibits advertising of STR’s. Despite the new law, STR platforms still contain advertisements for use of units, prolonging their old business model to gain as much profit before the city takes measures to enforce the law.

Currently, the efforts to enforce the law are at best rudimentary. The Department of Housing Preservation and Development (HPD) is responsible for establishing the minimum standards of housing as well as dispatching housing inspectors.  However, the HPD is only authorized “to issue violations, employ contractors, and bring Housing Court actions” if a problem about housing conditions is reported through the City’s 311 customer service center. Thus, the enforcement of the law relies on the reports of the owner and tenants, which in this case, are ambivalent to illegal home-sharing. Those engaging in the illegal practice have no incentive to report the crime and thus, propagate the problem.

Aside from issues of enforcement, Airbnb has a tremendous campaign fund heading into the city elections of 2017 and state elections of 2018. Airbnb has become a large political force in New York and is willing to spend profusely to maintain its influence in city/state elections. However, many companies are rising against Airbnb and using undercover tactics to expose Airbnb for its crimes. If these companies are successful in stripping the platformer companies of their social, political, and economic power, markets can begin to equilibrate, tenants can be sure of their property value, and guests will be free of any illegal business transactions.