Airbnb in big problems in Big Apple

Airbnb in big problems in Big Apple

Airbnb Inc. said it faces “staggering penalties“ after New York City indicated over the weekend that it would begin enforcing the state’s new anti-sublet listing law, according to Bloomberg.

On Friday, just hours after the law was signed by New York Governor Andrew Cuomo, Airbnb asked a judge to temporarily block the measure. U.S. District Judge John Koeltl refused.

Airbnb said in an Oct. 22 letter to the judge that it now fears the city may begin immediate enforcement, and it renewed its request for a restraining order. The San Francisco-based company, which has a $30 billion valuation and investors including Sequoia Capital Operations LLC and Kleiner Perkins Caufield & Byers LLC, said it faces the choice of fines or immediate removal from its site tens of thousands of listings, including “entirely lawful“ ones.

“Airbnb now faces the immediate, and very real risk of irreparable harm,“ the closely held company said.

Melissa Grace, a spokeswoman for New York Mayor Bill de Blasio, said in the statement that the city is “taking the steps necessary to enforce the law." She refused to specify what measures the city would put in place.

Separately, New York state said in a filing Monday afternoon that it had agreed not to enforce the law against Airbnb until the lawsuit is resolved.

New York, which represents the company’s single-largest market in the U.S., is the latest city seeking to block Airbnb from helping apartment residents sublet their units. The laws have been pushed by the hotel industry, which has faced sharp revenue declines as a result of the upstart. They are also strongly backed by cities, which in many cases rely on hotel occupancy as a source of tax revenue.

New York City, with more than 100,000 hotel rooms, received $560 million in revenue from so-called bed taxes in 2015, according to a report by the state comptroller’s office. But revenue has begun to edge lower, with officials citing the effect of companies like Airbnb.

New York state’s law prohibits apartment tenants from advertising their units for a short-term rental while they are away. People are allowed to rent a room as long as the tenant is staying there too. San Francisco and Santa Monica, California, have passed similar laws.

Airbnb has said the law violates the company’s First Amendment right to advertise its business and conflicts with U.S. laws intended to promote the growth of Internet-based companies. Airbnb raised a similar defense in a lawsuit over San Francisco’s law, eliciting a skeptical response from a judge at an Oct. 6 hearing.

A key issue in the New York case is how soon the city will begin "retroactive" enforcement of the law, imposing penalties of as much as $7,500 per listing on either sublessor or the company.