A two-story brick house in Flushing, New York, is a million-dollar home, but it may not be what you expect.
Just off Main Street in a residential neighborhood in Queens, not far from a car wash, a pharmacy and a T-Mobile store, the house has an old newspaper on the door that partially obscures a yellow notice from the New York Department of Buildings and a sign warning that security cameras are watching.
According to public records, the house had been used as an illegal Airbnb rental property and people had been living in the attic and basement. It has been on the city’s radar for years, racking up violations, complaints from neighbors and orders to vacate parts of illegally occupied homes, city filings show. In 2021 alone, homeowners were hit with $984,000 in unpaid fines, according to a Bloomberg calculation based on city records. The same filing shows that the accumulation of fines is more than any other illegal Airbnb property in 2021, the most recent year of data available, by a large margin, about 11% of all fines issued a year.
But far from alone. New York has more than 29,000 short-term rentals, and almost a third of them are registered as illegal, according to Mayor Eric Adams’ Office of Special Enforcement, which is tasked with regulating the short-term rental industry. With some of the strictest regulations in the country, New York actually prohibits most apartments from being rented for less than 30 days without a tenant.
The city has made several high-profile shakedowns of the illegal Airbnb empire and issued $8.9 million in fines in 2021. But records show that only a fraction of hosts are quick to pay. In fact, filings show many allow the penalties to pile up. One property near the Port Authority at Manhattan, owned by ORJ Properties, collects about $170,000 in 2021, according to a calculation of Bloomberg records. ORJ Properties, which has several judgments dismissed, did not respond to phone and email requests for comment. The man at the Flushing home turned away reporters who showed up at the door and declined to comment.
New York has been in talks with Airbnb Inc. for years over the proliferation of illegal listings and has spent significant resources chasing down violators. The new rules that went into effect in May are designed to prevent properties like the one in Queens from going on the market. Hosts who want to list on Airbnb or other platforms must register with the city and obtain an operating license. The company won’t be able to collect booking fees on unregistered properties, so it should help ease pressure on the city to track down illegal listings. Units with uncorrected fire code violations or vacating orders are not eligible for registration.
The new rules are the culmination of a year-long legal battle between Airbnb and New York, one of the company’s largest domestic markets. The city blames Airbnb for increasing the cost of living in some neighborhoods, listing unsafe accommodations and taking much-needed rental space off the market for local residents.
Measures to be introduced this spring will put more teeth into existing legislation and introduce new rules. Hosts will be required to show a diagram with all exit routes in the unit and present a registration certificate, send proof that the host is a permanent resident and a list of permanent resident numbers not related to the place. Hosts can face penalties of up to $5,000 for repeat violations.
The watered-down policy has sparked protests from hosts who worry about the significant loss of income if they are unable to rent out properties in one of the world’s most expensive real estate markets.
“Ordinary New Yorkers should be able to share their homes and not be targeted by the city when so many families are trying to avoid the rising cost of living,” said Nathan Rotman, Airbnb’s regional public policy lead. “The rules as they are currently written will prevent the majority of New Yorkers from listing homes, and we call on the administration to work with host communities to support a regulatory framework that helps Hosts be responsible and target illegal hotel operators.”
After several public hearings, the city made the rules more flexible by doubling the registration period to four years, expanding eligible identification documents and agreeing not to require the submission of a full lease during the application process, among other changes.
Until a lawsuit is settled in 2020 in which Airbnb agrees to turn over personal data on hosts, officials are often forced to weed out illegal listings through old-school sleuthing, like looking at photos online. And the fines and penalties seem to have had little effect on the few property owners who stubbornly flout the rules. Close to 75% of all violations issued by the Office of Special Enforcement in 2021 for failure to file documents with the city indicating previous violations, such as not having adequate fire safety, have been corrected.
Licensing short-term rentals “has been on the city’s radar for over 10 years,” said Kathleen McGee, a partner in the law firm Lowenstein Sandler and former director of the Office of Special Enforcement in the Bloomberg administration. “It’s an administrative burden on the city for entities that don’t pay those fines.”
In 2019, the Office of Special Enforcement collected 21% of all fines imposed, but it dropped in 2020 as the pandemic ravaged New York City. That year, officials imposed fines of $7.4 million, but paid back just over $400,000 in August 2021. The fines should be removed, leading officials to believe that they will eventually pay. The city sees the Queens home and ORJ Properties building as outliers.
After eight years, time is running out for the city to collect on the debt. But that doesn’t mean the offender is off the hook.
“If you’re going to be a legitimate business concern, you can’t do this,” says Chris Slowik, a real estate attorney and partner at Klein Slowik PLLC.
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