Foregoing the Cleaver for the Scalpel: How New York Can Add Some Nuance to Its Short-Term Rental Laws

• Author: J.T. Minor
• Position: J.D. Candidate, The University of Iowa College of Law, 2018; B.A., Belmont University, 2013
• Pages: 817-839

817

Foregoing the Cleaver for the Scalpel:

How New York Can Add Some Nuance to

Its Short-Term Rental Laws

J.T. Minor*

ABSTRACT: In 2010, New York passed a law that made it illegal for

residents living in areas zoned as class A multiple dwelling to rent their homes

on a short-term basis using services like Airbnb. Just six years later, New York

went even further and prohibited the advertisement of these short-term rentals.

This Note will argue that New York’s short-term rental laws go too far in

banning short-term rentals outright. In addition, this Note will discuss

solutions for how New York can provide greater nuance to these laws by

simultaneously addressing the legislature’s primary concerns with short-term

rentals and allowing New York to reap the tax and tourism benefits that these

rentals provide. These solutions include (1) imposing at least the standard

hotel tax on short-term renters and allowing services like Airbnb to facilitate

the collection of that tax; (2) distinguishing between commercial and non-

commercial short-term renters (allowing the latter and outlawing the former);

and (3) enabling individual neighborhoods to opt out of allowing non-

commercial short-term rentals via a petition and subsequent hearing.

I.INTRODUCTION ............................................................................. 818

II.BACKGROUND ............................................................................... 820

A.THE LOOPHOLE THAT LED TO LAW ......................................... 821

B.NEW YORK CITY’S APPROACH COMPARED TO SAN

FRANCISCO AND CHICAGO ........................................................ 824

III. WHY NEW YORK’S SHORT-TERM RENTAL LAWS ARE

PROBLEMATIC ............................................................................... 826

A.LOSS OF TAX REVENUE ............................................................ 827

*

J.D. Candidate, The University of Iowa College of Law, 2018; B.A., Belmont University,

2013. I would like to thank my wife Meredith for all of her love and support while writing this

Note and throughout law school. I would also like to thank my parents for a lifetime’s worth of

love and encouragement.

818 IOWA LAW REVIEW [Vol. 103:817

B.LOSS OF INCOME STREAM FOR RENTERS .................................... 828

C.LOSS OF REVENUE FROM TOURISM ............................................ 830

IV. THE SOLUTION: REVENUE, NUANCE, AND OPT-OUTS .................. 832

A.CHARGE SHORT-TERM RENTERS (AT LEAST) THE HOTEL

TAX RATE ............................................................................... 833

B.REGISTRATION AND THE ACQUISITION OF A SHORT-TERM

RENTAL LICENSE AS A MEANS OF DISTINGUISHING

BETWEEN COMMERCIAL AND NON-COMMERCIAL

SHORT-TERM RENTERS ............................................................ 835

C.HEARINGS AND PETITIONS FOR INDIVIDUAL

NEIGHBORHOODS: THE CHANCE TO OPT OUT OF

SHORT-TERM RENTALS ........................................................... 836

V.CONCLUSION ................................................................................ 838

I. INTRODUCTION

In 2010 and 2016, the New York State Legislature passed two short-term

rental laws that make it illegal for New York residents living in areas zoned as

class A multiple dwelling to rent out their homes using services like Airbnb.1

These short-term rental laws are problematic in a number of ways. First, these

laws prevent New York from reaping the benefits of a significant amount of

tax revenue that could go not only to ensuring the proper use of short-term

rentals but also to other important social programs like homeless services and

low-income housing.2 Second, these laws take away an income stream upon

1. S.B. 6873, 2009 Leg., 234th Sess. (N.Y. 2010) (deleting “as a rule” from New York State

Multiple Dwelling Law § 4); Assemb. B. 8704, 2015 Leg., 238th Sess. (N.Y. 2016) (amending New York

State Multiple Dwelling Law § 4 to make advertisement of short-term rentals illegal). New York

Governor Andrew Cuomo signed the latter bill into law only very recently, and Airbnb has now filed a

suit against the state of New York. Katie Benner, Airbnb Sues over New Law Regulating New York Rentals,

N.Y. TIMES (Oct. 21, 2016), http://www.nytimes.com/2016/10/22/technology/new-york-passes-law-

airbnb.html. There is evidence that New York has recognized a distinction between commercial and

non-commercial hosts since at least 2014, but the legislature did not attempt to use any such distinction

in the bill enacted in 2016. See Henry Grabar, Everyone Is Wrong in the Battle Between New York City and

Airbnb, SLATE: MONEYBOX (Oct. 24, 2016, 6:31 PM), http://www.slate.com/blogs/moneybox/2016/

10/24/some_new_york_airbnb_hosts_may_be_fined_under_a_new_law.html. This bill has further

incited protests by many Airbnb hosts. Anisa Purbasari, Airbnb Hosts Protest New Rental Law Outside New

York Governor’s Office, VERGE (Oct. 26, 2016, 4:32 PM), http://www.theverge.com/2016/10/26/

13421874/airbnb-rally-law-home-sharing-new-york-governor-cuomo.

2. The estimation for this lost revenue ranges from $20 to $60 million. Compare Airbnb to Start

Charging Hotel Taxes in a Handful of Cities, IOWA PUB. RADIO (Apr. 18, 2014, 6:13 PM) [hereinafter Airbnb

Charging Taxes], http://iowapublicradio.org/post/airbnb-start-charging-hotel-taxes-handful-cities#

stream/0 (estimating a loss of $20 million), with Reuters, New York Bill Would Ban Airbnb Listings for Some

Short-Term Rentals, NBC NEWS (June 21, 2016, 7:00 AM), http://www.nbcnews.com/t ech/tech-

news/new-york-bill-would-ban-airbnb-listings-some-short-term-n596111 (estimating that the company

paid $60 million in taxes before the short-term rental laws were passed). As this Note will address, these