Airbnb Sues New York City Over Limits on Short-Term Rentals

Why It Matters: The lawsuit pits tourism against the housing crisis.

New York City remains one of Airbnb’s most important markets. The platform said in the lawsuit that its net revenue in 2022 from short-term rentals in the city was $85 million; and as of Jan. 1, there were at least 38,500 active listings.

The platform asserts it is important to the city’s tourism industry and helps residents earn supplemental income.

But with the city facing a dire housing shortage, short-term rentals have become a frequent target for local activists and politicians, who say many of the listings amount to “illegal hotels” that take affordable homes off the market. Influential groups associated with the hotel industry have also fought Airbnb and similar platforms.

The lawsuit may also be another flashpoint in the debate around a federal law, Section 230 of the Communications Decency Act, which has come under fire by some lawmakers who say it is too broad in the protections it provides technology companies. Airbnb said in the lawsuit that the city’s rules improperly “seek to hold Airbnb liable in its role as a ‘publisher’ of posts by third parties” in violation of the law.

Online platforms like Airbnb must verify that a listing was properly registered with the city before collecting fees. Hosts could face penalties of up to $5,000 for violating the rules and Airbnb could face penalties of up to $1,500 for transactions involving rentals that were not properly verified.

Background: New York City and Airbnb are familiar opponents.

Existing rules on when hosts can offer short-term rentals are regularly flouted, which has prompted complaints from city officials, housing advocates and the hotel industry, who say Airbnb has not done enough to clamp down on illicit rentals.

In 2018, Airbnb sued after New York City tried to force it and other platforms to share more data about hosts, resulting in a settlement in June 2020.

The conflict is emblematic of how many cities across the nation have sought to regulate similar online platforms. Many have turned to registration schemes similar to the one in New York City with apparent success: Data shows a modest to significant decrease in the number of listings after such a scheme went into effect in Santa Monica, Boston and San Francisco.

What’s next: The city may fight back, or not.

Litigation in other places may foreshadow what happens in New York.

A legal challenge brought by Airbnb against Santa Monica over its registration scheme resulted in a settlement with the city in 2019. And this year, officials in Santa Monica have begun looking at expanding the ability of hosts to list rentals on the platform.