New York dealt a setback to Airbnb on October 21, when Gov. Andrew Cuomo signed a bill into law that prohibits users of the popular online hospitality marketplace and other home-sharing sites from advertising their units for short-term rentals, The Real Deal reported. Those who place such advertising could face fines up to $7,500 under the new law.

“This is an issue that was given careful, deliberate consideration,” said Richard Azzopardi, a spokesman for Cuomo, as reported by the New York Daily News.

Attorney and partner Adam Leitman Bailey of the New York City-based firm Adam Leitman Bailey, P.C. tells The Cooperator of the new law's ramifications: 

“Now they have put more teeth into the law by fining those people soliciting customers,” he says. “They’re not going after the customers--they’re going after the actual people renting their units out and fining them heavily. It may make it cost prohibitive to continue this business.”

The New York State Senate had earlier passed the legislation on June 17. New York already bans rentals of units for less than 30 days when the tenants renting out their places aren't present.

Airbnb Responds

Following the bill's signage, Airbnb filed a federal lawsuit in the Federal District Court in the Southern District of New York, according to The New York Times, claiming the new law would cause it “irreparable harm.” According to the suit, Airbnb argued that the law violates its rights to free speech and due process.

“In typical fashion, Albany backroom dealing rewarded a special interest — the price-gouging hotel industry — and ignored the voices of tens of thousands of New Yorkers,” Josh Meltzer, Airbnb's head of public policy in New York, said in a statement as reported by The Times Friday:

Reasons for for the Law

Proponents of this new bill, such as regulators and the hotel industry, argued that these accommodations under Airbnb are essentially serving as illegal hotels. One of those backers, Vijay Dandapani, chairman of the Hotel Association of New York City, told The Cooperator last June that the units that are put on Airbnb's platform pay fewer taxes, and described these accommodations as de facto hotels and fly-by-night operations masquerading as lodging.

“Without question it's hurting the industry, it's hurting our communities, it's hurting the fabric of society,” Dandapani said at the time . “And the safety issue is also a big factor. Taxes are not being had, the hotel rates are negatively affected, new construction won't happen... there's a range of issues that they're getting a free ride on. And Airbnb is not a technology company, they're using a technology platform just like Backpage.”

In response, Airbnb had earlier said the legislation would impact Airbnb hosts on paying the new fines and put them at possible risk of eviction, foreclosure or bankruptcy. The company also claimed the money earned by the hosts enables them to stay in their homes, and added that the fines would worsen New York City's affordable housing crisis.

New York State Senator Liz Krueger (D-28) voiced her support for the law on her website after Cuomo signed the bill, calling it “a great day for tenants, seniors, and anyone who values the safe and quiet enjoyment of their homes and neighborhoods...For too long companies like Airbnb have encouraged illegal activity that takes housing off the market and makes our affordability crisis worse.  They have sat idly by while unwitting "hosts" are evicted for breaking their leases, unscrupulous landlords drive out tenants to profit off the short-term market, and tourists are put in danger by staying in unregulated, unaccountable, and often dangerous illegal hotels.”

John Zurz is a staff writer for The Cooperator. Additional reporting provided by associate editor David Chiu.