By Ken Hegan for MSN

Airbnb_Logo_Web_LargeBah, it was only a matter of time.

Airbnb, that great gift to thrifty travellers, has been ruled illegal in New York City.

Airbnb is a crowdsourcing hospitality site that lets you rent (or rent out) a private home for the night. It’s a great way to avoid the nightmare of finding a reasonably priced Manhattan hotel room.

Unfortunately, New York wants to ban Airbnb like it’s a bucket-sized soda container.

According to CNET, New York officials are fining local guy Nigel Warren $2,400 for “violating a law that makes it illegal for property owners to rent out homes temporarily — essentially mimicking hotel stays.” The 2010 law prevents New York residents from renting their property out for fewer than 29 days.

Warren rents an East Village condo that no doubt costs a small fortune. The median rent in Manhattan is $3,200 a month. So last year Warren started using Airbnb to help cover his own rent. He rented his place out 3 times before his landlord caught wind and the city shut down his side business.


Screenshot from Airbnb’s iPhone app

When New York officials slapped Warren with the fine, they argued that New York apartments “may only be used as private residences and may not be rented for transient, hotel, or motel purposes.”

Mr. Warren’s not impressed. He told CNET:

“While I’m disappointed with the ruling, I’m relieved the penalty is far less than what the original fines seemed to be. I’d say it’s now a pain in the ass, which is much better than life-altering…I like what Airbnb does, and I don’t want this ruling to stand in the way of what I think is, overall, a great startup.”

In a statement on behalf of Warren and all their other clients, Airbnb said Warren was “targeted by overzealous enforcement officials. It is time to fix this law and protect hosts who occasionally rent out their own homes. Eighty-seven percent of Airbnb hosts in New York list just a home they live in–they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law.”A massively successful startup, Airbnb is ranked by Fast Company as one of the 50 most innovative companies. They estimate Airbnb’s value to be $2.5 billion. Airbnb is taking a big bite out of legitimate hotel business. This writer says his Airbnb listing earned him $20,000 (and a restraining order from his landlord) in nine months. Tech experts estimate that these private room rentals will generate $1 billion in local New York economic activity, in 2013 alone.

When I described Airbnb last year, the only major problem I could see was that occasionally the home owner is still home for the night and staying elsewhere in the house. Which would be dangerous (for them) because I tend to commit “accidental sleepwalking night stabbings.” Unfortunately all that fun disappears if the New York ruling spreads to other cities.

The New York ruling could be one of many to come. In San Francisco (Airbnb’s home turf), the company’s tax and tenant law violations are now headed for hearings. The dispute is over an estimated $1.8 million in the 14% hotel taxes that Airbnb is not charging its guests. A 2012 Airbnb study found that guests spent $15 million in San Francisco neighborhoods outside the central hotel district. But those rentals weren’t taxed, and the city’s hungry for their pound of flesh.

For now, Airbnb’s website says you can “rent from people in 34,183 cities and 192 countries.” We’ll see if those numbers drop in the weeks to come.

What do you think…should it be legal or illegal to rent your home to strangers?

— Ken Hegan

Read more of Ken’s travel stories here

Twitter: @KenHegan

Images courtesy Airbnb