Illegal hotel fines could skyrocket

Despite long-sought City Council bill, lawmakers see big demand for renting out private apartments

James Oddo, left; Erik Dilan, right; center, an illegal hotel at 318 W. 75th St. that was busted in May.
James Oddo, left; Erik Dilan, right; center, an illegal hotel at 318 W. 75th St. that was busted in May.

Even after Albany outlawed hotel uses in residential buildings last year, the practice made popular with services like Airbnb remains rampant, according to the findings of a new City Council report. So in an attempt to further curb short-term stays — which lawmakers say are dangerous and restrict the rental housing market — the City Council is expected to pass a law today vastly increasing fines for violators.

The Council’s Committee on Housing and Buildings, at a hearing this morning at 250 Broadway, approved the proposed law that would impose fines up to $25,000 for repeat violators. It will take effect 60 days after being signed into law. That’s much more severe than the state law passed in May 2010, which levies penalties between $800 and $2,400 per violation.

Yet just minutes after the committee approved the measure 8 to 1, the committee chairman, Brooklyn Council member Erik Dilan, who voted with the majority, acknowledged the demand for renting out apartments remains. “We don’t want to kill that market,” Dilan told The Real Deal. “How do you protect the tenants in the building, and how do you allow for a market that is growing? If we knew how to do it, we would do it.”

Dilan said the committee is committed to figuring out a solution.

The City Council bill was first introduced in March 2007, but has undergone changes since then, making it more amenable to the hotel industry.

Sign Up for the undefined Newsletter

Under the new law, when a person converts more than one unit in a building or converts a single unit more than once, the individual can be slapped with an “immediately hazardous violation,” which brings with it potential Building Code fines of between $1,000 and $25,000. The informal hotel operator could also be hit with an additional civil penalty of up to $1,000 per day while the violation is uncorrected.

Lawmakers claim the illegal hotel uses create an immediate hazard because the building may lack the required number of exits as well as sprinkler systems. In addition, an illegally converted apartment is likely to not have the proper certificate of occupancy. Furthermore, the renting of the rooms puts more pressure on New York’s tight rental market, which the city’s 2011 Housing and Vacancy Survey says has a vacancy rate of just 3.1 percent.

“Despite these safety risks and concerns, there are indications that a significant incentive exists for individuals who choose to temporarily rent out their permanent residential units as illegal hotels,” a report from the Council’s Committee on Housing and Buildings, said.

The state law, which was passed in July 2010 and took effect in May 2011, forbids renting apartments for fewer than 30 days in Class A residential buildings.

In the year between May 2011 and June 2012, Mayor Bloomberg’s Office of Special Enforcement, which inspects illegal hotels, received more than 1,000 complaints, the committee report says, and issued 2,587 violations.

James Oddo, the Republican Council member from Staten Island on the committee, was the one dissenting vote. He said his no vote was less about opposing the new law and more about supporting the small business owners renting out the units. “[It’s] a message to the industry that we understand they need help and that we as an institution here in the Council need to go up to Albany and advocate on their behalf, so that we grow that industry,” he said.