New York Law Banning Airbnb Challenged in Federal Court

Published November 16, 2016

New York Gov. Andrew Cuomo (D) signed a law criminalizing the advertisement of short-term housing rentals in apartments, prohibiting the use of peer-to-peer economy companies such as Airbnb to connect individuals seeking short-term housing with hosts providing places to stay on their property.

Cuomo signed Assembly Bill 8704, sponsored by Assemblywoman Linda Rosenthal (D-Manhattan), into law on October 21. The new law, which took effect immediately, prohibits individuals from advertising the availability of unused housing space in their apartments.

On the day of the bill’s signing, lawyers representing Airbnb filed a lawsuit against the state in the U.S. District Court for the Southern District of New York. The plaintiffs claim the law violates federal statutes restricting website owners’ liability for speech in which users engage.

The judge, Katherine Forrest, has not set a court date to hear arguments.

Fuzzy Housing Math
Jared Meyer of the Manhattan Institute says incumbent businesses, such as hotel companies, are misleading consumers about Airbnb’s economic effects.

“The main argument for the law in New York is that it’s a way to promote affordable rents, which is an argument that the hotel industry has been pushing,” Meyer said. “They’ve never cared about affordable rents before the last few months, because hotels take up space that could theoretically go to affordable housing.”

Meyer says Airbnb is not the reason renting an apartment is so expensive in New York.

“If you’re looking at New York City, there are three million residential housing units, and at about the highest, there are 40,000 Airbnb listings each night, and 90 percent of those are for people’s primary residence,” Meyer said. “So, doing the math, that’s 0.1 percent of total housing units that you could theoretically argue are being taken off the market. There’s no way that could make a substantial difference in rents. It’s completely disingenuous.”

Complementing, Not Competing

Peter Klein, an economics professor at Baylor University, says the rise of the peer-to-peer economy does not mean the decline of traditional businesses.

“People who have an apartment or a spare bedroom that they currently use for themselves, decide to make it available on Airbnb,” Klein said. “That’s not taking away an apartment that otherwise would have been available to local renters. It was never on the market to begin with until Airbnb entered the scene.”

“It’s expanding the pie of lodging options,” Meyer said.