Updated June 14, 2023 with information about the Airbnb lawsuit and the new enforcement date.
At the end of 2021, the New York City Council passed Local Law 18, also known as the Short-Term Rental Registration Law. When it comes into full effect later this year, it will be illegal to lease short-term rentals that have not yet been registered with the city. More importantly, booking platforms like Airbnb, VRBO, and Booking.com will no longer be able to process payments for unregistered units and will be subject to fines if they do.
The impact on New York City’s short-term and long-term rental markets promises to be significant. Still, only time will tell if the aggressive new initiative can help the city reclaim the thousands of apartments that have been converted from long-term to short-term rentals over the past decade.
At the end of 2021, the New York City Council passed Local Law 18, also known as the Short-Term Rental Registration Law. When it comes into full effect later this year, it will be illegal to lease short-term rentals that have not yet been registered with the city. More importantly, booking platforms like Airbnb, VRBO, and Booking.com will no longer be able to process payments for unregistered units and will be subject to fines if they do.
The impact on New York City’s short-term and long-term rental markets promises to be significant. Still, only time will tell if the aggressive new initiative can help the city reclaim the thousands of apartments that have been converted from long-term to short-term rentals over the past decade.
New York City’s history of regulating short-term rentals
Since 2010, Airbnb and other short-term rental platforms have had a profound and mostly unintended impact on housing markets around the world. In summary, as landlords and investors realized the potential financial benefits of renting out units by the night rather than month or year, short-term rentals surged while long-term rentals declined. From Barcelona to New York City, this has resulted in housing shortages and driven up the cost of rental housing. By May 2022, when local rental values reached an all-time high in New York City, one investigation found that there were more Airbnb listings available in the city than long-term rentals.In an effort to fight back, over the past decade, New York City officials have engaged in several initiatives to limit and even ban short-term rentals. In fact, since the introduction of the New York State Multiple Dwelling Law (MDL) in 2016, most short-term rentals have been illegal. Still, non-compliance persists, which is why city officials are now taking a more aggressive approach to regulating short-term rentals.
Before accepting the keys to your short-term rental, make sure it's in compliance with the new law. (Pexels - Alena Darmel)
Compliance with the Short-Term Rental Registration Law
The Short-Term Rental Registration Law creates new compliance rules for building owners and managers of short-term rentals and the digital platforms currently being used to process payments on short-term rentals. Among the specific passages targeting owners and managers of short-term rentals is the following, which clearly states:"It shall be unlawful for a person who owns, manages, occupies, or otherwise controls a dwelling unit to offer, manage or administer the short-term rental of such dwelling unit unless such dwelling unit is registered in accordance with this chapter, such dwelling unit has been issued a unique short-term rental registration number, and such registration is currently valid. It shall be unlawful for a person who owns, manages, occupies or otherwise controls a dwelling unit to falsely represent or falsely advertise a dwelling unit as registered for short-term rental pursuant to this chapter when such dwelling unit is not so registered."
However, the Short-Term Rental Registration Law doesn’t just make it illegal for owners and managers to rent out unregistered units. It also clearly states that the digital platforms used to facilitate payment for short-term rentals will also be breaking the law if they continue to accept payment for unregistered apartments. As stated, “It shall be unlawful for a booking service to charge, collect or receive a fee from a person in connection with a short-term rental of a dwelling unit or housing accommodation” unless the digital platform has verified that the unit has been properly registered or is excluded from the list (e.g., it is already classified as a hotel).
Fines for non-compliance
Fines for non-compliance will also be steep. Owners and managers who violate the new law will be liable for a civil penalty of not more than the lesser of $5,000 or three times the revenue generated by the short-term rental for each such violation. And for each transaction in which a booking service charges, collects or receives a fee related to a short-term rental that is in violation of the new law, the booking service will be liable for a civil penalty of not more than $1,500.Controversies surrounding Local Law 18
Enforcement of Local Law 18 was originally set to begin in May 2023, but was delayed to July owing to a staff shortage at the mayor’s Office of Special Enforcement, the newly created agency charged with registering hosts and enforcing the law. Later, at the beginning of June 2023, Airbnb sued the city over the new restrictions, calling them “extreme and oppressive” and declaring it a “de facto ban” on short-term rentals. The city is reviewing the lawsuit, but has postponed enforcement to September 5, 2023, giving local hosts more time to register and prepare – see below for guidance.How to prepare for Local Law 18
If you're currently renting out a room or apartment on a short-term basis, now is the time to register your unit or units on the Short-Term Rental Registration Portal. The city strongly encourages owners and managers to act well before the law comes into full effect, and the extended date of September 2023 gives them more time to do so. However, bear in mind that as per the New York State Multiple Dwelling Law, the vast majority of units, including all rent-controlled and rent-stabilized apartments, are not eligible for registration.If you are an owner, or a coop or condo board interested in cracking down on illegal short-term rentals in your building, it is also time to take action. The new law also requires the Mayor’s Office of Special Enforcement (OSE) to maintain a Prohibited Buildings list. The list will include all buildings where short-term rentals are prohibited by the law (e.g., NYCHA buildings) or due to other lease and occupancy agreements (e.g., a coop board agreement or lease with a private landlord that prohibits unauthorized sublets). Use this application to have your building placed on the Prohibited Building list.
Good news has also finally arrived for anyone with a neighbor who has been illegally renting out their apartment. If you suspect your landlord or another tenant in your building is operating an illegal short-term rental and you're tired of the endless stream of strangers and noise, you can report the activity to 311 (see details here). While the option to launch a 311 complaint about an illegal rental isn't new, with the launch of the Prohibited Buildings list, it will now be much easier to quickly determine whether or not the short-term rental in your building is authorized.
The potential impact of Local Law 18
If Local Law 18 and the establishment of the Short-Term Rental Registration Portal and Prohibited Buildings list are effective, there are two potentially positive outcomes for New York City. First, local hotels will see increased traffic as the option to rent illegal short-term rentals declines. Given the taxes collected by local hotels, this would benefit the hotel industry and the city itself. Second, and most importantly, there is hope that the aggressive new law will finally help return tens of thousands of apartments to the long-term rental market. Considering the city is currently struggling to meet the demand for rental apartments and, by one estimate, will need to add more than 500,000 units by 2030 to meet local demand, the timing of Local Law 18 wouldn’t be better.
Contributing Writer
Cait Etherington
Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.
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