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Airbnb and Rent Stabilized Apartments; the Two Don’t Mix
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By Karen Morris

5/31/2018

 

    

 

Violation of rules has consequences. This lesson was learned the hard way by New York City artist, Eileen Hickey, age 72, whose artwork appeared in the popular movie Eat Pray Love. The film was adapted from the best selling book by the same name. Hickey is also a former curator at the venerable Guggenheim Museum in NYC.

Hickey lived in a rent-stabilized loft in that city.  This means the rent is regulated by a government agency. In New York City that agency is the Division of Housing and Community Renewal (NYCDHCR), Rent stabilization applies to buildings with six or more units that were built before 1974. Some newer buildings are also rent-stabilized in exchange for tax abatements given to developers. To qualify for a NYC rent stabilized apartment, the renter’s household annual income must be less than $200,000. The NYCDHCR convenes every June to vote on how much stabilized rents can be increased, or if they should be frozen. Landlords cannot raise the rent beyond the amount specified by the NYCDHCR.

 

Numerous other cities have similar rent stabilization laws.

 

Hickey paid $1,500 per month for an apartment with a fair rental value of at least three times that amount. In violation of the NY Rent Stabilization Code, she rented out the apartment through Airbnb, earning up to $4,500 per month.

 

Rent stabilization laws bar tenants from making a profit on their rent-stabilized units. Additionally, NY’s Multiple Dwelling Law bars tenants from renting out their apartments for less than 30 consecutive days.

 

Hickey’s landlord brought an eviction action against her for violating the law. The tenant claimed she used Airbnb only briefly to assist in paying her former husband’s medical bills, a brief family emergency, and not to earn a living. She asserted she earned only a total of $14,000 from using the online site. The court ordered her to produce bank and credit-card statements.   She repeatedly failed to provide those documents. The court granted the eviction and authorized a city sheriff to “take all necessary steps . . . to effect the removal and ejection of Eileen Hickey . . from 460 Greenwich Street.” In addition, she was ordered to pay a fine of $185,000 for illegally renting out the rent stabilized apartment.

 

Hickey owns a condominium also in Manhattan. The landlord argued this fact proves she is not living in the rent-stabilized apartment. Hickey however claimed she uses the condo as an office. Apparently the judge found Hickey’s claim to be not credible.

 

The NYC Comptroller has reported, “Our city is facing an affordability crisis with rents constantly on the rise. A new study by my office shows one of the reasons why New Yorkers paid an additional $616 million in rent is because residential apartments are being used as tourist rentals b Airbnb.” Think supply and demand.

 

In an effort to combat the limited number of available rental units, NYC has recently heightened its enforcement of the Multiple Dwelling Law prohibition against rentals of apartments for less than 30 days. One goal of fines as punishment for violation of laws is to deter both the defendant and others from engaging in the illegal activity. Hickey’s $185,000 fine will no doubt catch the attention of many who currently use Airbnb illegally, and others who may have been considering such endeavor.

 

DISCUSSION STARTER:

 

1) Recognizing that rent stabilized apartments result in significantly reduced income to landlords, what government policies prompted the development of rent stabilized apartments?

 

2) Are those policies still relevant today?