On December 2, 2016, Airbnb entered into a tentative settlement agreement with New York City in its legal challenge to the City’s short-term rental law.  The law at issue, signed into law by Governor Cuomo in October 2016, imposes fines as high as $7,500 for illegally listing a short-term (less than 30 day) home rental in a multi-family building unless the host is present.  The law’s intended targets were individuals who rent multiple apartments in the City, only to turn around and repeatedly rent them out through Airbnb.  Critics allege that this practice, which is technically operation of an illegal hotel, has reduced the availability of affordable housing in the City.  Airbnb brought an action challenging the law shortly after passage, arguing it was vague with respect to whether the host or Airbnb would be subject to the fine.

Under the terms of the agreement, which became official on December 5, 2016, Airbnb agreed to drop its lawsuit in exchange for an agreement that the City would limit the imposition of fines to hosts, and not Airbnb itself.  In addition, the New York State Attorney General agreed that enforcement of the law would be left to New York City.  For its part, Airbnb further vowed stricter enforcement of its newly announced “One Host, One Home” policy, which prohibits users from listing more than one property on the site.  

Though some have framed this agreement as a capitulation by Airbnb, the agreement is in many ways a win-win scenario for both parties.  Airbnb users in New York City generated nearly $1 billion worth of bookings last year, of which Airbnb takes between 6% and 12% in fees (depending on the price of the booking). By making this agreement, Airbnb protects that important revenue stream, while ensuring it will not be subject to heavy fines under the new law for illegal conduct by its users.  At the same time, the government gets to notch a victory and end a practice that has caused outrage among tenants rights groups.