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EP139 Airbnb Regulations in New York Explained

New York is known as the city that never sleeps. But if you are an Airbnb host there, you may be losing sleep over the state’s anti-Airbnb crusade and complicated short-term rental regulations.

Today Jasper is on the line with Brendan MacKenzie, the founder of MetroButler, a short-term management company in New York. His background in law and familiarity with the Airbnb ecosystem make him the perfect candidate to explain what you need to know about the Multiple Dwelling Law and how it affects hosts in the Big Apple.

Beyond clarifying the laws around short-term rentals, Brendan breaks down the pros and cons of the city’s hardline approach as well as the opportunities NYC is missing out on by discounting Airbnb’s benefits. Listen in to understand New York’s housing crisis and how the city might compromise with Airbnb to help – rather than hinder – the housing market!

Topics Covered

New York’s Multiple Dwelling Law

  • Applies to Class A buildings
  • Restricts from renting for fewer than 30 days if host isn’t present
  • Designed to discourage commercial operators
  • Amended in recent months to prohibit advertising (w/ fines of up to $7500 per infraction)

Negative aspects of the Multiple Dwelling Law

  • Though the intention is to go after bad actors, it applies to a large number of hosts who are not commercial operators
  • Without an education campaign, many are unfamiliar with the Class A distinction
  • Might end up driving people out of their homes without Airbnb to help make ends meet

Why New York is taking such a hardline approach

  • Commercial operators take properties off the market
  • Pressure from the hotel lobby

Common sense compromises that would benefit the city

  • Applying a nominal tax would generate revenue to build affordable housing
  • Working with Airbnb to enforce the One Host, One Home policy

The benefits of embracing Airbnb in New York City

  • Brings travelers who would not be able to afford a hotel
  • Allows for a more efficient use of resources
  • Provides a source of additional income for struggling artists, freelancers, etc.
  • Creates jobs in the Airbnb ecosystem (cleaning services, contractors, etc.)

The MetroButler service

  • Serves the New York metro area
  • Provides “boots on the ground” for hosts while they travel
  • Full Service option for a 25% commission
  • Lite Service a-la-carte offerings (key exchanges, sheet rentals, etc.)

Connect with Brendan

MetroButler Website

Connect with Jasper

Email: jasper@getpaidforyourpad.com

Twitter: @GetPaidForUrPad

Instagram: @GetPaidForYourPad 

Facebook: www.facebook.com/getpaidforyourpad

This episode is sponsored by Hostfully.com where you can create a custom digital guidebook for your guests!

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Complete Transcript for Get Paid for Your Pad Episode 139

Welcome to Get Paid For Your Pad, the definitive show on Airbnb hosting, featuring the best advice on how to maximize profits from your Airbnb listing, as well as real-life experiences from Airbnb hosts all over the world. Welcome.

Jasper: This episode is brought to you by Hostfully, a company that helps you make beautiful guidebooks for your listing. Make your own at hostfully.com/pad, and a special for Get Paid For Your Pad listeners, you’ll get a free guidebook consultation after you make your guidebook.

Welcome, everybody, another episode of Get Paid For Your Pad, and today I’m joined by Brandon McKenzie, who is the founder of MetroButler, which is a short-term management company in the city of New York. So, Brandon, welcome to the show.

Brandon: Good morning. Thank you for having me.

Jasper: Yeah, it’s my pleasure. We wanted to talk all about the regulations in New York. It’s a bit complicated, I feel like, in New York. There’s always news about it, and new regulations and stuff going on, so I really wanted to ask Brandon to explain to us, what’s the situation, what’s going on, what can you do and what can’t you do as an Airbnb host. So, Brandon, what’s the word?

Brandon: So, wow, that is quite a question.

So, New York, since about 2010, has had a law in the books, known as the Multiple Dwelling Law, that says that if you’re in a certain type of building, you are not supposed to rent out your home for fewer than 30 days if you are not present. This hasn’t deterred most hosts on Airbnb. There are over 40,000 listings and there have been a handful of citations.

Now, what’s changed in recent months is, the city has amended the law to say that not only are you not supposed to actually rent out your home if you’re in one of these buildings, but you’re not supposed to advertise it, and the city can now levy fines up to $7,500 per infraction, simply for advertising. Now, ostensibly, the purpose of this is to discourage commercial operators, you know, people who have, say, an entire building on Airbnb, say, 30 units. If you’re getting hit with a $7,500 fine per unit that’s advertised, you’re looking $225,000 worth of fines.

Now, that seems to be a pretty strong disincentive, whereas before, the process was largely complaint driven for, say, much smaller fines, say, $500. And it was complaint driven, so if my neighbor were to call the city and say, “Look, my neighbor’s Airbnb-ing, I don’t like it,” the city would have to launch an investigation, I’d be entitled to a hearing, and it’s a pretty drawn-out process. Also, the city might capture and might not capture $500, while the fees for sort of carrying out that process might exceed that $500, so it wasn’t really justifiable.

Now, what’s happened is, the city is now saying, “Look, this is giving us a tool to effectively go after bad actors.” Unfortunately, the way the law’s been drafted, it doesn’t really discriminate. The city, should they elect to do so, could go after, basically, any Airbnb host in New York in one of these buildings.

Jasper: And is there a distinction between renting out your entire place and renting out a private room?

Brandon: Yes, there is. So, the Multiple Dwelling Law does have a carve-out. People generally refer to it as the ‘roommate exception’. As long as you’re present there, if you rent out an individual room, you are entirely within the bounds of the law.

Jasper: Okay, so there’s no limitations on renting out a spare room. Let’s say you have a two-bedroom apartment and you live in the apartment, you sleep in one of the bedrooms, and then, the other one, you rent out, there’s no limitations on that.

Brandon: That’s correct.

Jasper: And you’re talking about specific buildings, so this law only applies when you’re in a condominium building?

Brandon: It’s a class A multiple dwelling, which is generally, you know, it’s listed on the building certificate of occupancy, and I think that’s where some of the confusion arises. A lot of hosts don’t really understand the distinction between a class A, a class B. We’ve heard people say, “Well, I own my condo,” or, “I live in a co-op, so surely, it must be okay.” And I think one of the things that the city could do a better job of is launching sort of an education campaign if they want to get the word out.

Now, there’s an interesting wrinkle here in that they’ve spent so much time stating their purpose as, (this is the city and, actually, lawmakers in Albany), saying, “We only want to go after bad actors.” Now, you have to remember, like I said, there are over 40,000 listings on Airbnb. Of those, these “bad actors” make up such a tiny, tiny, tiny percentage, that the city, I feel, has kind of put themselves into a bit of a bind. You know, they have sort of two options here. They can generally apply the law, and they could go after anyone they choose and sort of discourage Airbnb, or they can only go after bad actors.

Now, you know, at MetroButler, we’re okay with them going after bad actors. I think there are certain moral implications. It’s a very polarizing issue. But, if you are just actively taking housing stock off the market… You know, New York is basically perpetually in a housing crisis. Rents are very high; vacancy rates are very low. That’s fine, if they want to go after those people, and so far, that seems to be the way they’ve enforced it.

Where I get concerned is if they do actually go after people who are just doing this to make ends meet, to get by, artists, freelancers, people who might otherwise face eviction, because if the city’s saying, “Look, you’re hurting affordable housing, you’re going to be driving people out of their homes by increasing rents,” well, you also will be driving people out of their homes if you don’t give them the opportunity to Airbnb to pay those rents. So, I feel like if they do start enforcing it that way, over 40,000 listings in Airbnb is a quick way to get yourself voted out of office. It seems fairly politically unpopular, if you ask me.

Jasper: Right. It’s kind of like trying to kill a mouse with a giant ax, and you kind of kill everyone in the process.

Brandon: Yeah.

Jasper: So, if you’re not in one of those class A buildings, then you’re actually free to rent out as much as you want?

Brandon: Yes and no. So, largely, yes. You know, the city has gotten creative and found some loopholes. I had heard a story about a woman with a townhouse in Brooklyn that was not class A, and the city decided to go after her because she didn’t have the appropriate business licence, or something about her home wasn’t up to code, I don’t recall exactly what that was, and they looked for another way to sort of get at her. And that sort of behavior, frankly, grinds my gears a little bit.

So, one of the things I do… You know, I’m giving you full disclosure here. So, I volunteer as an attorney at New York City Housing Corp. from time to time, and just to give you some perspective, right now, the state of New York is sort of launching this anti-Airbnb crusade, if you will. Now, I’ve had people walk into my office in New York City Housing Corp. and, believe it or not, these are two statutes that are actually on the books in New York.

Number one, if a landlord deprives a tenant of adequate heat… So, yesterday, we had a blizzard here in New York. It was quite cold outside. If your home were not up to legal levels, that landlord could be fined $500, right. Now, this is not a joke. There’s actually a statute on the books that says, if the landlord installs a device on the building’s boiler to deliberately keep the heat below legal levels, that landlord would be subject to a $1,000 fine.

So, putting aside the fact that it’s completely ridiculous that such a device actually exists that necessitates a statute, and that there are people out there that would install such a device, when weighed against one another, those two things seem pretty difficult for me to stomach. You know, a landlord deliberately depriving his tenants of heat, (and landlords do some pretty awful things in New York to get their tenants to move out, especially when they’re paying under-market rent), that’s a $1,000 fine, whereas, posting an Airbnb listing could be up to a $7,500 fine. I mean, does that seem like it makes a lot of sense to you?

Jasper: No, not really.

Brandon: So, those sorts of things are a bit concerning, and I feel that the city is sort of missing an opportunity here. You know, by taking such a hard-line approach to it, to saying, “Look, Airbnb is not welcome in New York, plain and simple,” they’re not realizing the benefits.

So, not just for hosts, but there are common-sense compromises. If the city were to say, “Look, let’s apply a nominal tax to Airbnb, say, 3%, 4%, that we pass on to guests. We’ll just bake it into the price. We’ll work with Airbnb, we’ll get it built in there.” If you think about all the revenue that could generate for the city to build more affordable housing units, that seems to me like a common-sense compromise. And I struggle with the fact that the city is not coming around on this sort of thing, and I can only speculate that this is largely driven by the HTC and other members of the hotel lobby.

Jasper: Interesting. Well, I’ve got a few points here. First of all, I looked into an article recently that showed the number of rooms that had been sold in Amsterdam over the last five years or so, and to my surprise, the number’s been going up every single year. So, to me, it seems like Airbnb actually doesn’t affect the hotel industry that much, and I think the reason for that is that I think Airbnb creates a lot of incremental travel. There’s people who are now traveling because either they can afford it because they’re using Airbnb to make money, or they now travel because they enjoy it much more to stay at an Airbnb, and it’s often also more affordable. And the other thing is, I think a lot of people who are staying in Airbnbs, they’re not coming from hotels. Their alternative wouldn’t be a hotel, but would be staying with friends or family.

Brandon: Yeah. Look, I absolutely agree with you, and I think a lot of that is true in New York, as well. I think if you’re the HTC, you’re threatened because it introduces a variable into your pricing model. It’s, what is this going to do to the market, both short-term and long-term, especially in places where there, frankly, is not the same competition that hotels are used to. So, you know, if you hop on Google Maps and you look at Queens, and you just type ‘hotels’, you’ll see not very many pins drop. So, if suddenly people have a lot more choice, it’s true, a lot of people, I would say, that stay in Airbnbs are not conventional hotel travelers.

Now, I know that Airbnb is sort of making a push into that market with its business travel friendly listings, but I think the concern for the HTC is, what’s the long-term on this, and are there going to be short-term disruptive effects. It’s almost like when Uber dropped into New York and all the guys that were holding taxi medallions sort of freaked out, saying, “What is this new thing? What’s this going to do? We don’t know, so we’re afraid of the unknown.”

Jasper: Right. It’s like, there’s a saying that says people prefer the devil that they know versus the devil that they don’t know.

Brandon: Exactly.

Jasper: Hosts, I can’t emphasize how important it is to share recommendations of things to do or eat near your listing beforehand. Your guests won’t have to go through TripAdvisor, Foursquare, or Yelp. They won’t have to scratch their head and think about possible places right in the moment. I’ve been using Hostfully to create an online and printable guidebook to show my guests my favorite coffee places in Amsterdam. They use my recommendations, and I’m getting fewer questions from my guests as a result. I’ve also included screenshots of my guidebook on my Airbnb listing as a way to differentiate my listing from others. So, make your own guidebook at hostfully.com/pad.

So, are you aware of the fact that in Amsterdam and London, Airbnb’s going to actually enforce the legislation on their platform?

Brandon: I have. I’ve heard that there are temporal restrictions. It’s something like 90 days or so. Now, that sort of thing, to me, makes sense. You know, if the city were to say, “Look, we’ll apply a nominal tax, we’ll give a nightly restriction,” basically, what that does, in essence, is if you say, “Look, you can’t rent out for more than 90 days,” then a commercial operator’s not going to have a listing available 365 days a year.

You know, Airbnb has been promoting its ‘one host/one home’ policy in New York, and I think that’s another common-sense approach. They require you to verify your ID on the platform. If a host uploads his or her driver’s licence, I can’t imagine it would be that difficult for Airbnb to match the address listed on the government-issued ID with the address of the listing. I think that’s sort of a more common-sense approach. Although, you, probably, having seen it firsthand, could speak a little more to whether or not that has been effective, or a good thing or a bad thing. What do you think?

Jasper: Well, I mean, I think it’s a pretty good system because, if you think about it, the reason why the city doesn’t like Airbnb is because they’re worried that people are taking properties off the market, right, like you said. But, the big advantage of Airbnb, I think, it enables people to use resources more efficiently. So, for example, if I live in my apartment and I go on holiday for a month, then it’s a shame that my apartment is empty because, like you said, there is a shortage of housing in New York, but Amsterdam is very similar. By sharing your house, you’re basically using the space more efficiently.

Brandon: Sure. I mean, I think that’s sort of the mentality behind Airbnb. It’s not, how do we convert existing apartments into profit centers, it’s, how do we use otherwise fallow assets for the benefit of everyone. And I kind of wish that the… not ‘kind of’. I absolutely wish that the state and the city would come around and realize that most hosts are not having a detrimental effect on the housing market.

By and large, these are people who are traveling for business, going on a brief vacation, only renting out for a handful of dates at a time, and that’s not an apartment that would otherwise be, say, available on the general market in a way that would be rentable on a long-term basis. This might be a management consultant who’s gone for two weeks, or a freelancer who needs…and I know this is within the bounds of the law, but needs to rent out a second room for two or three weeks to make bill payments, and I think that should be completely permissible.

Jasper: Yeah, absolutely.

Brandon: From my mouth to God’s ears, I suppose.

Jasper: Yeah. So, I think the system that they have in Amsterdam now… And, by the way, they also collect taxes automatically to the city. So, this is something that they don’t do yet in New York, but I know they do it in lots of other places, which is something that, as a host, you don’t even notice it. You can’t even see it on the platform. It’s the guests who book, they automatically pay like a tourist hotel tax.

Brandon: And that’s great.

Jasper: Yeah, and I think that’s… Yeah, I think that’s fair enough because, you know, you pay the tax when you’re in a hotel. I mean, this is one of the arguments that the hotels bring up that I actually agree with. If you make hotels pay the tax, or the guests that are staying in the hotels, I should say, then that should be the same for Airbnb.

Brandon: Yeah, I think that makes sense. It seems like a practical, reasonable solution. You know, I’m sure this is… I’m not privy to these calls, certainly, between Airbnb and lawmakers, and I’m sure they’re happening even now, but I’m sure that this has been sort of a sticking point. In New York, if you look at the history in the news, it has been discussed, a proposal of, “Hey, look, what if we applied a tax?”

And I was at the New York City Bar for a panel discussion on this about a year and a half ago or so, and the city was saying, “Look, yes…” Or, excuse me, the Airbnb rep there was saying, “Look, this would produce an additional $40 million a year in revenue for the city that could be used toward affordable housing.” And there was pushback, saying, “Look, that would only produce x number of affordable housing units.” And a few months later, I came across an article or two where state lawmakers were giving quotes, saying, “What would an additional $80 million do for the city?”

There’s a big delta between those two numbers. I mean, the Airbnb representative’s saying $40 million, and then a state lawmaker’s saying $80 million. So, it seems like it’s being discussed, and that might be a little bit of a sticking point.

Jasper: Right, okay. Because, yeah, I agree with you, that’s a very obvious thing to do, right?

Brandon: Yeah. I mean, but you have to think, that’s one of the things that makes Airbnb competitive. It’s the fact that, if they do want to enter this sort of hotel space, by not applying taxes on the guest end, you know, you have to think about it from the guest’s perspective. If I’m going to travel to New York and I can say, “Look, I’m willing to try this new Airbnb thing out, even though I’m generally a hotel loyalist. What’s the price difference between the two?”

And Airbnb, although it now has been around for a few years, the experience differs from home to home, and a hotel is, I guess, a bit more of a known commodity. So, if you look at those two and you say, “All right, look, with the tax baked in, I’m only saving 5% in the Airbnb,” maybe you’ll go to the hotel. Airbnb probably doesn’t like that because then they’re less competitive. Although there are Airbnbs for all budgets, you know, it’s what sacrifices are you making. Am I staying in a six-floor walk-up versus a midtown hotel?

Jasper: Right. I definitely think Airbnb wants to remain a platform that’s affordable. And I think they want to have that image that they’re more affordable than hotels because you can tell by the pricing algorithm that they launched a while back, because pretty much everyone is saying that their listings are being underpriced when you turn on the Airbnb smart pricing.

Brandon: Yeah. I mean, if you compare Airbnb’s smart pricing to the leading dynamic pricing engines out there, if you look at, say, Everbooked, RoomDots, Beyond, I’d say it’s consistently much lower on Airbnb, and that makes sense. Airbnb certainly wants to drive transaction volume. They make money off every transaction. Here in New York, and I believe everywhere, it’s 3% off the host and 6% to 12% on a sliding scale to the guest. If they drop prices by 10% or 20% and they’re driving 20% more bookings, Airbnb actually makes more money, even if the host doesn’t. So, I get what they’re doing, but that’s not necessarily a good thing for hosts, and I think you’re starting to see pushback there.

Jasper: Yeah, well, they have two interests in mind, right, the host and the guest, so they’re not a very good price advisor.

Brandon: Yeah. You know, the other thing I’ve heard recently, actually, and I can’t verify this, is that for hosts that use Airbnb smart pricing, they’re prioritising those listings in search positioning, which, I have an opinion on that. I don’t think it’s the greatest thing in the world. I think hosts should be free to price as they see fit and not be penalized for not drinking the Kool-Aid, if you will.

Jasper: Yeah, no, that’s not a good idea, if they do that. I don’t know if they do that, but I hope they don’t.

Brandon: Yeah, I certainly hope they don’t, as well.

Jasper: So, let’s talk a little bit about MetroButler, the company that you founded. Well, first of all, why did you found it?

Brandon: So, sort of by accident. You know, I was doing this for friends as a hobby. I had a little bit of residential property management experience. My family owned a multi-unit complex in southern California where I used to live, and I managed that for them, basically as a favor, and then when I came back to New York, I had been doing this for, say, three or four friends. You know, they all wanted to get on Airbnb, but they were really concerned. Friends who were, say, traveling to Singapore for three weeks, and they said, “Well, what happens if I get a booking, and then I get another booking? How do I check that person in? What if something goes wrong? What if someone blows up my toilet or lights my carpet on fire and no one’s there?” It was sort of that need for boots on the ground.

And I’d been doing it as a hobby while I was, actually, at the time, I was awaiting results for one of the bar exams, and so I had time to kill, and I figured, “What better way to make a little bit of cash?” And my friends seemed to be willing to pay sizeable sums of money. They said, “I’ll give you a third of the proceeds, no questions asked.” You know, we don’t charge that now, but I thought that was generous. I said, “Why not?”

And I started doing it for friends, and through friends, a mutual friend of mine and one of my friend clients called me up and said, “You know, I travel often for work. Would you come take a look at my apartment?” And so, I did, and he said, “So, look, I’ve kind of brought you here under false pretenses. I have no interest in renting out my apartment. I’m actually about to move pretty soon, but I do want to give you a small investment. Forget about this law stuff.”

I had been at this big international firm, I was living in Europe shortly before this, and you know, it was a lot of paper pushing, long hours, and he said, “Forget all that.” He said, “Why don’t you turn this into a business? There’s clearly a market need for it. I imagine there’s demand. I’ve looked at the numbers.” This guy was in private equity. And I said, “Sure, why not? It seems fun.”

He introduced me to my now partner, and we raised about a half a million dollars a few months later. We’ve grown pretty substantially since. We’ve got quite a few properties under our belt. We have several full-time employees, over 20 contractors, a few companies that we’re partnered with, we get corporate sponsorship. The ecosystem has really evolved since that time and, you know, the machine’s just buzzing along.

Jasper: Yeah, that’s very cool.

Brandon: It’s done very well.

Jasper: Yeah, the ecosystem has definitely kind of exploded.

Brandon: Yeah. And, you know, it’s funny. Actually, come to think of it, I think there’s… I hate to go back to this and I promise I’ll leave it here, but I think that’s another thing that the city of New York really overlooks. Yes, the economic impact of Airbnb is certainly weighed in. You have a lot of people traveling who can say, “Look, I can now go to New York for $150 a night by staying in an apartment, whereas, I couldn’t before because I couldn’t afford a hotel.” And I think the city looks at these people and they’re saying, “Look, yes, they patronize our businesses. They go to restaurants, and shops, and bars, and cafes, and so on and so forth.” What I don’t think they realize, or they’re not adequately weighing in, is the job creation.

So, if you think about someone like myself, I have full-time employees, I have several contractors. There are tons and tons of cleaning companies in New York, people that sort of are tangential to Airbnb, that service this. Like, if you think about all the cleaning companies and people who work to service Airbnb apartments, their livelihood is now partially contingent upon home-sharing, and I think that’s sort of lost in the mix there. But, if Airbnb were sort of effectively shut down tomorrow, I don’t know that I could continue having my employees on payroll.

Jasper: Yup. No, that’s very true. There’s a lot of people that, either directly or indirectly, make money thanks to Airbnb. So, if they’re banning it, it really affects a lot of people.

Those who are listening in New York and they are interested in the management company, how do people sign up, and what are the fees?

Brandon: Sure. So, there are two simple ways. The easiest way is just to go to our website, which is metrobutler.com. There is a sign-up button in the top right-hand corner, and that is for our full-service option. If you want us to do everything, soup to nuts, we will clean before and after, we’ll manage your guest communication 24/7, we can coordinate maintenance, we provide sheets, towels, soap, shampoo, conditioner. Anything incident to Airbnb or any channel that you can think of, we can do it. So, that’s been our conventional model. For that, we charge a 25% commission.

And for people who are a bit more hands-on with their listings, we also offer what we refer internally to as ‘light services’, which are a la carte offerings. And if you go to metrobutler.com/book, you can book individual services. So, that’s things as basic as key deliveries, you can book individual cleanings, you can do sheet rentals, supply restocks, on an a la carte basis. All the pricing is listed right there, right on that page, and it varies depending on the size of the apartment. So, we make recommendations, but it’s really at your discretion, you know, if you want to book a two-hour cleaning, a three-hour cleaning, a four-hour, but we do provide a little bit of guidance there.

Jasper: Awesome. So, if you’re interested, metrobutler.com is the website. Of course, I’ll put everything in the show notes.

And, with that, we’ve come to the end of this episode. So, Brandon, thank you very much for sharing your insights about the regulation in New York City.

Brandon: My pleasure, and thank you so much for having me on.

Jasper: Absolutely. And, of course, next week, there’s another episode, so we’ll see you all then. Bye-bye.