Start spreading the news: it looks like Airbnb (ABNB) -) is leaving NYC.
Yes, even though Frank Sinatra said that if you could make it here, you could make it anywhere, Airbnb may not be waking up in the city that never sleeps much longer.
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A new ordinance, Local Law 18, which goes into effect Sept. 5, requires that all short-term rental hosts in the Big Apple must register with the city, live in the place they’re renting, be present when someone is staying, and can only have two guests.
This could mean that Airbnb's vagabond shoes may have to stray somewhere else and the news comes as the San Francisco-based company is set to join the S&P 500 on Sept. 18.
The rules “are a blow to its tourism economy and the thousands of New Yorkers and small businesses in the outer boroughs who rely on home sharing and tourism dollars to help make ends meet,” Theo Yedinsky, global policy director for Airbnb, told Wired.
Judge says law 'entirely rational'
“The city is sending a clear message to millions of potential visitors who will now have fewer accommodation options when they visit New York City: You are not welcome.” Yedinsky says Airbnb has a goal of working with the city on “sensible” home-sharing rules, but he did not elaborate on the company’s next steps.
There are currently nearly 45,000 Airbnbs in New York, according to Inside Airbnb, which tracks listings on the platform.
Last month, New York Supreme Court Judge Arlene P. Bluth dismissed lawsuits brought by Airbnb and three hosts over the city’s rules for short-term rentals, saying the restrictions are “entirely rational,” AP reported.
Bluth said a 14-page ruling that having to comply with a registration system does not present an “overly onerous obligation” to the company and hosts. Such a system, she said, will help identify many illegal short-term rentals before they’re listed on the Airbnb platform.
“To be sure, these rules will likely not be perfect,” she added. “But it addresses a problem raised by OSE (New York City Mayor’s Office of Special Enforcement) and avoids a key obstacle — enforcing the ban on illegal short-term rentals.”
A city official cited thousands of illegal short-term rentals when defending the new rules in court, noting 43,000 on just Airbnb in 2018. The city received nearly 12,000 complaints regarding illegal short-term rentals from 2017 to 2021.
Some small-time hosts feel the law unfairly loops them in with professional landlords, and Restore Homeowner Autonomy and Rights, a group of homeowners in New York.
The group is advocating for amendments to the regulations that would allow owner-occupied one- and two-family homes to register their units with the city and do away with capacity limits.
Rules 'hard to enforce'
"Eliminating the option of short-term rentals, will threaten owners’ ability to cover their mortgages, possibly creating an additional housing crisis," the group said on its website. "The law and implementation of Local Law 18 takes away our autonomy over our homes and puts us at acute financial and personal risk."
Airbnb said it is canceling and refunding reservations in unregistered accommodations from Dec. 2 onwards, but those up until Dec. 1 can remain in effect to lessen the impact on hosts and guests.
Guests won’t be penalized if they book and stay in an unregistered rental, but hosts and the platforms they advertise on could be as of September 5.
Robert Frank, CNBC’s wealth editor, said on Squawk Box that city councils in Dallas Philadelphia New Orleans have passed similar rules, but "so far they haven't had much effect because they're so hard to enforce. This will be the test for New York starting today."
"Airbnb's revenues from Manhattan last year were about $85 million," he said. "That's just a share of the total revenue that people are making, but there were people not just buying apartments and renting, but also renting them, especially during the pandemic, at an effectively higher rate."
Meanwhile, Brian Chesky, the company's co-founder and CEO, told analysts during an Aug. 3 earnings call that "Q2 was another strong quarter for Airbnb.
"We had over 115 million nights and experiences booked," he said, according to a transcript of the call. "Revenue of $2.5 billion grew 18% year over year."
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