Tourists Save Money, Apartment Owners Cash In: ‘Hot’ Hotels Thrive Despite Hiked Fines

By Kaitlyn Wells on Oct 23rd, 2012

Illegal Hotel in Apartment

In this uptown apartment building a resident rents out bedrooms to tourists.
(Photo by Kaitlyn Wells)

When traveling, Lydia always searches for comfort and affordability. A University of Arkansas student, Lydia has visited Rome, Prague and Vienna. When she goes abroad, she rents an apartment; in New York she does the same thing.

“It’s less expensive than staying in a hotel and it’s also just a much more pleasant experience to stay somewhere that’s lived in,” she said.

Last year, more than 50 million tourists visited New York City, spending more than $34 billion on attractions and hotels, according to NYC & Company, the city’s official tourism organization. To save a few bucks in the most expensive city in the country, tourists are finding a new kind of accommodation: a New York City apartment.

But local residents who occasionally rent their homes to travelers like Lydia may be breaking the law.

It is illegal for New York residents to use their permanent “dwelling units” as short-stay hotels. But renters are allowed to have houseguests for less than 30 consecutive days as long as they receive no monetary compensation.

Last month the New York City Council Committee on Housing and Buildings voted to increase the penalty for illegally converting an apartment to a hotel. Instead of an $800 to $2,400 fine, the renter or landlord will be subject to a fine of $1,000 to $25,000 for each violation. An additional $1,000 may be imposed for each day the violation continues. The increase takes effect next month.

Between May 2011, when the law first went into effect, and June 2012, the Mayor’s Office of Special Enforcement received more than 1,000 complaints related to illegal hotels. It conducted 871 inspections and issued 2,587 violations.

The illegal conversion of apartments exposes visitors and residents to safety risks, according to the legislation. The city’s building and fire codes have specific standards for legal hotels, safeguards that many apartments don’t have. These include clearly marked exit paths, extra sprinklers and a secondary escape route in case of an emergency. The committee also says illegal hotels increase short-term visitor traffic in a building or neighborhood, creating public safety concerns and health risks, like bed bugs.

The city Health Department said in 2009 that Central Harlem, East Harlem and Washington Heights had the highest reported rates of bed bug infestation in Manhattan, but there’s no way to determine what percentage originated from tourists.

Airbnb.com, a website where people book and/or list short-term accommodations, cataloged more than 15,300 listings in New York City; more than 1,000 were in Harlem, East Harlem, Washington Heights and Inwood, as of this week. Airbnb.com listings must comply with all local, state and national laws.

“Given the growing number of people who rent their extra space, and the growing number of travelers who are staying with them, there’s obviously a demand in New York that has not been met by the hotel industry,” said Airbnb.com in an email. “It would be a shame for the City to stifle this new form of economic activity that New Yorkers have helped pioneer.”

Some renters believe the financial incentive outweighs the risk, though. One website user, who asked that her name not be used because she takes in boarders, has been an Airbnb.com member since November 2010. She lists two of her four bedrooms on the website, and occasionally rents out one as a “bed and breakfast.”

The tenant’s landlord gave permission to sublet the apartment, but does not know that she routinely rents out the room, the woman said. Rates range from $65 for single occupancy to $225 for four people, according to the listing. Located in Sugar Hill, the apartment overlooks “a long stretch of gorgeous park, on a quaint, quiet and intimate street,” the listing says. The tenant makes around $2,500 to $3,500 a month renting the two rooms; she pays $2,000 a month in rent.

Joe Hayward, 51, has lived nearby the illegal hotel in Sugar Hill for more than 10 years and doesn’t see a problem. “It’s awesome,” he said. “It’s a great place to live; it’s pretty safe.”

But not everyone appreciates the tenant’s short-stay hotel arrangement. “In a sense it does bother me,” said one resident, who asked not to be named because she knows about the illegal rental. “I heard there are bed bugs on that floor and we all think it’s that [person] and I don’t want them here.”

Uptown listings on Airbnb.com range from $20 a night for a private room to $650 a night for a two-story luxury townhouse. A one-bedroom apartment on West 161st Street between Broadway and Amsterdam Avenue in Washington Heights is listed at $120 a night. The furnished apartment includes free Wi-Fi, premium cable channels and access to the kitchen. It also includes fresh linen and towels. In comparison, the average daily room rate of a Manhattan hotel last year was $277, according to NYC & Company.

Lydia, an Airbnb.com user who asked that her last name not be used because she rents illegal units, said the practice is cheaper, allowing her to spend more money on travel.

In August, Lydia rented a one-bedroom apartment in Queens to visit a friend. She paid around $100 a night for 10 days, she said. With the average cost of a New York dinner at $43.46 (drink, tax and tip included), Lydia also saved money by sometimes buying groceries and eating in, she said.

The Committee on Housing and Buildings said it recognizes the economic realities of traveling and would consider allowing such rentals to operate legally. It is concerned, though, with protecting travelers and not reducing the supply of affordable housing.

With an apartment vacancy rate of 3.12 percent, according to the Department of Housing Preservation and Development, illegal hotel operations narrow the permanent housing market, the committee said. The committee acknowledged that it would not target private citizens who rent their spare bedrooms online. Instead, enforcement will focus on landlords who rent entire units to tourists instead of to low-income residents.

Last year, 50.9 million international and domestic visitors to New York City spent $34.2 billion, according to NYC & Company.

On average, 70 percent of Airbnb.com users visiting New York City spend the money they save on hotels in restaurants and stores, said Marie Ternes, an Airbnb.com spokeswoman. Visitors also spend 40 percent of their travel budget in the neighborhood in which they are staying.

“I have always really liked my experiences,” Lydia said. “In the future, I will look at Airbnb first.”

1 Response for “Tourists Save Money, Apartment Owners Cash In: ‘Hot’ Hotels Thrive Despite Hiked Fines”

  1. This really answered my drawback, thanks!

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