Challenges to New York City’s Short-Term Rental Regulations
Posted on Nov 16, 2023Kristine Morr
On September 5, 2023, New York City began enforcement of the Short-Term Rental Registration Law, a regulation requiring short-term rental hosts to register with the city.[1] This new regulation, coupled with already-existing restrictions on rentals for fewer than 30 days during which the host is not present,[2] has created what Airbnb calls “a de facto ban on short-term rentals” in New York City.[3] The regulation also prohibits platforms that facilitate rentals, like Airbnb and VRBO, from facilitating transactions for unregistered hosts.[4] New York City can fine hosts who violate the regulation up to $5,000 and violating platforms up to $1,500.[5]
The new regulation’s imposition of penalties on platforms places the responsibility of implementation on the platforms, rather than solely on hosts. However, Airbnb contests this responsibility. In its Terms of Service, Airbnb states that it “do[es] not and cannot control the conduct of Guests and Hosts. [Users] acknowledge that Airbnb has the right, but does not have any obligation, to monitor the use of the Airbnb Platform and verify information provided by our Members.”[6] The Terms of Service also specifically include an assumption of risk clause, stating that hosts “assume the entire risk arising out of [their] access to and use of the Airbnb Platform [and] offering Host Services…[.] [Hosts] agree that [they] have had the opportunity to investigate the Airbnb Platform and any laws, rules, regulations, or obligations that may be applicable…[.]”[7] These terms directly contradict New York’s Short-Term Rental Registration Law.
Two months after the implementation of the regulation, it has become apparent that although many illicit listings were removed from platforms,[8] there are still some unregistered short-term hosts operating in the city.[9] Thus, it is necessary to understand whether the platforms have any legal arguments that support their denial of responsibility of ensuring host compliance. New York City is not the first city to place enforcement responsibility on platforms themselves.[10] San Francisco, Santa Monica, and Boston have each created regulations imposing liability on short-term rental platforms for the noncompliance of their listings, which the platforms challenged unsuccessfully.[11] Airbnb’s first challenge to New York City’s new regulation was dismissed, but cases from California and Massachusetts may shed light on potential arguments that could be effective in future litigation in New York.[12]
Previously, short-term rental platforms have challenged regulations in San Francisco, Santa Monica, and Boston using the Communications Decency Act of 1996, 47 U.S.C. § 230, (CDA).[13] In each case, the platforms claimed that the Act protects internet companies from liability for third-party content on their platforms.[14] They argued that they could not be held liable for hosts who were listing unregistered stays on the platform, as that would be treating them as a publisher, which the CDA does not allow.[15] The key factor in the decisions of the Ninth Circuit, Massachusetts District, and Northern District of California Courts in upholding the regulations was that the penalty provisions of each held the platforms liable for their own conduct, facilitating the transactions for the unregistered listings, rather than the conduct of the hosts.[16] However, the Massachusetts District Court did leave open the possibility that some CDA claims could be successful. Specifically, it decided that the platforms could succeed on the merits of the claim that Boston’s enforcement provision was preempted by § 230 of the CDA.[17] That enforcement provision required that the platforms remove ineligible listings and listings without valid registration numbers, and if the platforms did not comply, they would not be allowed to operate in Boston.[18] The court found the platforms successfully argued that this regulation would impose liability as a publisher of the listings, which the CDA preempts.[19] This result differs from the ruling about the penalty provisions as the enforcement provision did not solely target the platforms’ behavior.
If the platforms were to challenge the NYC regulation again, they should adopt an argument similar to that used against the Boston enforcement provision. They should challenge New York’s verification provision, which requires the platforms to use an electronic verification system to confirm the listing is properly registered before collecting any fees and to reconfirm that listing “any time it knows or should have known that any data it used to complete the verification in this section has changed[.]”[20] Though the provision does not require that Airbnb remove the listings that fail a verification as the Boston provision required, it does enforce a kind of duty expected of publishers by requiring that platforms monitor listings in case data related to a listing may have changed. By imposing liability for what platforms “should have known,”[21] the provision requires a heightened level of surveillance that would not typically be expected of an online platform under the CDA. This requirement is more extreme than the requirements of the penalty provisions of San Francisco, Santa Monica, or Boston. In its first complaint in New York, Airbnb did argue that the regulation was preempted by the CDA, but as the complaint was dismissed for lack of standing, this argument was not fully evaluated.[22]
The dismissed complaint was brought in state court, leaving available the federal courts for further challenges. For the platforms to succeed in any subsequent legal challenges using the CDA argument, they will have to adequately differentiate the New York City regulation from Santa Monica, San Francisco, and Boston. The regulations of the other cities do not mention a verification system; rather they only require that listings be registered with the respective city.[23] The platforms will need to prove that the electronic verification system requirement forces the platforms to act as publishers. The current biggest challenge for Airbnb and other short-term rental platforms is successfully bringing suit in New York. The dismissal of Airbnb’s complaint demonstrated that judges in New York may not be amenable to hearing arguments in favor of these platforms. As Judge Bluth admitted, “To be sure, these rules will likely not be perfect,”[24] but she prioritized the intended outcome of the regulation over the potential harm caused to the platforms. As more municipalities trend towards limiting short-term rentals and as courts become less willing to hear challenges to these regulations, the platforms will need to develop more nuanced arguments and use increased creativity to even get in front of a judge.
--------------------------------------------------------
[1] Mihir Zaveri, New York City’s Crackdown on Airbnb Is Starting. Here’s What to Expect., N.Y. Times (Sept. 5, 2023), https://www.nytimes.com/2023/09/05/nyregion/airbnb-regulations-nyc-housing.html.
[2] Id.
[3] Rules – Host: New York, NY, Airbnb (last accessed Nov. 6, 2023), https://www.airbnb.com/help/article/868.
[4] Registration for Hosts, N.Y.C. Office of Special Enf’t (last accessed Nov. 6, 2023), https://www.nyc.gov/site/specialenforcement/registration-law/registration-for-hosts.page.
[5] Zaveri, supra note 1.
[6] 16. Airbnb’s Role, Legal Terms – Terms of Service, Airbnb (last accessed Nov. 6, 2023), https://www.airbnb.com/help/article/2908#16.
[7] Managing Your Listing: 6.6 Your Assumption of Risk, Legal Terms – Terms of Service, Airbnb (last accessed Nov. 6, 2023), https://www.airbnb.com/help/article/2908#6 (emphasis not included; Airbnb bolds the entire text of this clause).
[8] Heather Tal Murphy, Just How Over Is NYC Airbnb? These Maps Offer a Hint., Slate (Sept. 13, 2013, 10:06 AM), https://slate.com/business/2023/09/new-york-city-airbnb-new-rules.html (stating that “[o]ne month ago, there were around 22,000 short-term listings on Airbnb in New York City. As of [September 13], there are fewer than 7,000, according to Inside Airbnb, a data-focused housing advocacy organization.”).
[9] Jill Terreri Ramos, If Short-Term Rentals Are Illegal, How Does My Neighbor Get Away With It?, N.Y. Times (Oct. 30, 2023), https://www.nytimes.com/2023/10/28/realestate/airbnb-short-term-rental-illegal.html.
[10] HomeAway.com, Inc. v. City of Santa Monica, 918 F.3d 676 (9th Cir. 2019); Airbnb, Inc. v. City and County of San Francisco, 217 F. Supp. 3d 1066 (N.D. Cal. 2016); Airbnb, Inc. v. City of Boston, 386 F. Supp. 3d 113 (D. Mass. 2019).
[11] City of Santa Monica, 918 F.3d; City and County of San Francisco, 217 F. Supp. 3d; City of Boston, 386 F. Supp. 3d.
[12] Doyinsola Oladipo, Airbnb lawsuit to block NYC law on short-term rentals is dismissed, Reuters (Aug. 8, 2023, 4:37 PM), https://www.reuters.com/legal/airbnb-lawsuit-block-nyc-law-short-term-rentals-is-dismissed-2023-08-08/.
[13] City of Santa Monica, 918 F.3d at 680; City of Boston, 386 F. Supp. 3d at 118; City and County of San Francisco, 217 F. Supp. 3d at 1071.
[14] Id.
[15] Id.
[16] City of Boston, 386 F. Supp. 3d at 120.
[17] Id. at 124.
[18] Id. at 117.
[19] Id. at 123-24.
[20] Admin. Code of N.Y.C. § 26-3202(a) (2023).
[21] Id.
[22] Verified Article 78 Petition, Complaint & Motion for Preliminary Injunction, Airbnb, Inc. v. N.Y.C. Mayor’s Off. of Special Enf’t, No. 154865/2023 (N.Y. Sup. Ct., June 1, 2023).
[23] City of Santa Monica, 918 F.3d at 680; City of Boston, 386 F. Supp. 3d at 118; City and County of San Francisco, 217 F. Supp. 3d at 1071.
[24] Lawsuits filed by Airbnb and 3 hosts over NYC’s short-term rental rules dismissed by judge, AP (Aug. 8, 2023, 8:36 PM) https://apnews.com/article/new-york-city-airbnb-lawsuit-dismissed-bbfc4f3ae2b226e496432eae8f444c09.