Crain's New York Armed with new fines, NYC is struggling to collect from illegal Airbnbs by Joe Anuta

Crain's New York
Crain's New York
Armed with new fines, NYC is struggling to collect from illegal Airbnbs
Joe Anuta
10/25/2017
ROOM FOR IMPROVEMENT Owners of some transient dwellings dispute city fines or just don't pay them.

 

When Gov. Andrew Cuomo signed a bill late last year to stop Airbnb hosts from turning their apartments into de facto hotels, bigger fines were supposed to deter a practice elected officials argued took much-needed apartments off the rental market.

But more than six months after city inspectors’ first round of enforcement, the de Blasio administration has collected only a fraction of the issued fines, which added up to hundreds of thousands of dollars, according to a Crain’s analysis. In large part, the trouble is rooted in the city’s long-flawed collection system—where cases and appeals can take months to process and landlords have little reason to pay up—which could ultimately defang efforts to curb illegal home sharing.

Between November and May, the mayor’s Office of Special Enforcement targeted 16 properties in its first wave of inspections, issuing violations for operating an apartment as a hotel room. Inspectors also fined owners for building-code violations, like missing sprinklers and improper egress routes, and—beginning in February when the new law went into effect—for advertising units online. Few owners have paid up.

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Inspectors concentrated early efforts on a series of Manhattan properties owned by Hank Freid, who racked up hundreds of thousands of dollars’ worth of so-called Environmental Control Board fines, which are adjudicated through an obscure city tribunal. Many of the infractions simply haven’t been processed yet, and hearings aren’t scheduled until later this year and early next—at least nine months after the violations were issued. Meanwhile,

Freid is suing the city on the grounds that he is allowed to legally operate his properties as transient dwellings, further tying up the violations.

The owner of Hotel 31 is also locked in litigation. The court date for its nearly $50,000 worth of ECB fines is Feb. 18. The Hotel St. James, on the other hand, had its hearing last month. A trial officer ordered the owners to fork over more than $45,000. As of last week, they had not done so, according to court records. Thousands owed by the owner of 622 W. 136th St. and more than $60,000 owed by 454 E. 47th St. similarly have gone unpaid.

Delay and don’t pay

A big problem is that the city’s process for collecting ECB and similar fines is inadequate. As of last year, there were more than $1 billion worth of violations outstanding, and more fines are going uncollected every year. City

Councilman Ben Kallos penned legislation that was supposed to give the city more power to collect, but it hasn’t worked.

“We are not seeing the money,” Kallos said, “and thus we are not seeing a change in behavior.”

Unless landlords are selling or refinancing—which would prompt lenders to force them to pay outstanding fines—they have little incentive to clear up the violations. They still can secure building permits, and the fines simply vanish after eight years, when the statute of limitations kicks in.

The handful of Airbnb violators who have paid up have tended to be small owners renting out a few rooms, not the operators of illegal hotels that were supposed to be in the city’s crosshairs.

The mayor’s office did say it has had better luck of late. Of the $9 million in fines issued in 2016 and so far this year, roughly $2.5 million has been collected. More can be expected as cases make their way through the system. “We are calling out bad actors and aggressively pursuing our cases in court,” a spokesman said in a statement. “Justice isn’t served in a day, but it’s on our side.”

 

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