de Blasio Administration Sues Firm Running $20M Illegal Rental Operation In East Harlem

The Mayor’s Office of Special Enforcement is bringing a lawsuit against Manhattan real estate brokerage firm, Metropolitan Property Group (MPG).

The lawsuit also includes five current and former MPG employees, and 18 corporate entities affiliated with these employees for turning at least 130 apartments across 35 residential buildings, including one entire building in East Harlem, into illegal short-term rentals primarily through Airbnb.

“Illegal hotels take precious housing away from New Yorkers and destabilize our communities. My administration is cracking down on corporate operators to ensure residents and visitors are safe and are treated fairly,” said Mayor de Blasio.

“Over and over again, well-meaning visitors are being misled by sophisticated businesspeople into booking illegal rentals. Only with better data and cooperation from the booking websites can we efficiently identify and shut down these operations. Our top priority is preserving housing and a sense of community in New York neighborhoods, and we want guests to feel safe when they visit our city,” says Christian Klossner, Executive Director of the Mayor’s Office of Special Enforcement.

MPG and their employees advertised short-term rentals on Airbnb through approximately 250 listings via approximately 101 host accounts using various fake identities. Nearly 70 percent of locations advertised omitted the house number for the rental location. The platforms’ data shows the same contact information was often used to set up the distinct host accounts.

Users who advertise housing for rent on booking platforms were allowed to use fake identities, create multiple host accounts, and omit location information, obstructing enforcement as well as consumers’ ability to receive complete information and track reviews. In response to community complaints, OSE conducted inspections and issued violations in five buildings named in the lawsuit. OSE then utilized data obtained from the platforms via administrative subpoena to connect illegal activity to the ring of real estate professionals.

OSE was also able to determine the 18 entities affiliated with MPG and its employees received at least $20.7 million in short-term rental revenue through Airbnb alone from 2015 to 2018. MPG employees conducted 13,691 short-term rental transactions, involving over 75,000 guests who were not notified of the illegality of the rentals nor the lack of safety measures. Revenue from almost 3,000 short-term rental transactions were made payable to MPG’s headquarters.

OSE identified at least 138 listings on Airbnb advertising short-term rentals within the five Subject Buildings, located at 200 East 116th Street in East Harlem, which has entirely been converted to short-term rentals, 123 East 54th Street in Midtown East, 207-215 East 27th Street, 230 East 30th Street and 2118 3rd Avenue in Kips Bay. OSE estimates MPG has advertised and maintained short-term rentals in 30 other buildings in Manhattan since 2014.

OSE identified at least 138 listings on Airbnb advertising short-term rentals within the five Subject Buildings, located at 200 East 116th Street in East Harlem, which has entirely been converted to short-term rentals, 123 East 54th Street in Midtown East, 207-215 East 27th Street, 230 East 30th Street and 2118 3rd Avenue in Kips Bay. OSE estimates MPG has advertised and maintained short-term rentals in 30 other buildings in Manhattan since 2014.

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Based on data the booking platforms make publicly available, there are approximately 60,000 listings on the top five platforms for vacation rentals. OSE estimates 33 percent of listings are commercial listings.

The complaint filed in court today can be found here.

“These egregious violations are prime examples of just how serious the illegal hotel problem is in our city. I commend OSE for their stellar work and look forward to further strengthening our enforcement tools so that we may meet this challenge head-on. This Council will continue to combat the illegal hotel problem to increase public safety and protect our affordable housing stock,” said City Council Speaker Corey Johnson.

“Illegal hotels are dangerous and further diminish New York City’s already-scarce housing supply. I’m glad that the Office of Special Enforcement is being proactive in targeting bad actors,” said Manhattan Borough President Gale A. Brewer.

“Dubious commercial operators who bend the law to convert residences into illegal hotels pose a severe threat to the quality of life of my constituents. I am thankful to the Mayor’s Office of Special Enforcement for their continued efforts to protect our affordable housing stock and public safety measures on behalf of all New Yorkers,” said Senator Brad Hoylman.

“This most recent lawsuit by the Mayor’s Office of Special Enforcement demonstrates that illegal short-term rentals continue to be a serious problem throughout our city. It reveals an astounding breadth of illegal activity involving dozens of buildings, hundreds of units, and over 20 million dollars in revenue over the last three years through online platforms such as Airbnb. I thank OSE for the vital work they are doing to protect the health and safety of tenants and return desperately needed housing to the market. Clearly more must be done to tackle this persistent problem,” said Senator Liz Kruger.

“The defendants named today should be ashamed of the scheme they were allegedly perpetrated, which jeopardized the health and safety of tenants and guests, and worsened the city’s affordable housing crisis by taking units off the market in my district, and in other neighborhoods across the city. I applaud the Office of Special Enforcement for its role in keeping both tenants and visitors to our city safe, and for the clear message it is sending to bad actors: breaking laws to put profit over the safety of guests and tenants while wiping out our city’s affordable housing stock will never be an acceptable business model,” said Assembly Member Harvey Epstein.

“The scale of this most recent crackdown makes clear just how brazen Airbnb continues to be about encouraging its hosts to break New York law. Airbnb’s breathtaking disregard for the law is laid bare by OSE’s work here, with tens of thousands of renters being allowed to blindly rent units in violation of state law, with millions in revenue pouring in. As long as the cash pours in, Airbnb will continue to prop up massive commercial operators whose only end game is auctioning off our city’s housing stock,” said Assembly Member Linda B. Rosenthal.

“We cannot afford for landlords to utilize their rent-stabilized units as short-term rentals while our city is in the midst of an affordable housing crisis. This practice comes at the expense of both tenants who are displaced and visitors who are misled. This lawsuit moves us in the right direction and I thank the Office of Special Enforcement for challenging this predatory behavior,” said Council Member Diana Ayala.

“Enforcement is critical to stopping operation of illegal hotels, which take rent-regulated apartments in my district away from New Yorkers and contribute to the city’s ongoing affordable housing crisis. We cannot allow landlords to get away with one violation, never mind hundreds of them. I applaud the Mayor’s Office for once again making it clear that these practices are unacceptable,” said Council Member Keith Powers.

“When Manhattan real estate firms are making more than $20 million off of illegal listings on Airbnb, it’s clear that the illegal short term rental industry has clearly grown from a cottage industry into a full-fledged industrial operation. I want to thank OSE for filing this lawsuit against Metropolitan Property Group, which was illegally keeping hundreds of housing units off of the market, including many in my district. While this is a major victory for housing advocates, we won’t see real change until short-term rental companies begin to better police their own platforms and share data with city regulators,” said Council Member Carlina Rivera.

“As tens of thousands of New Yorkers sleep in homeless shelters, Metropolitan Property Group and related entities together reaped over $20 million by engineering thousands of illegal hotel stays in apartments that are supposed to be homes. The lawsuit filed today by the Office of Special Enforcement is an especially powerful example of their precedent-setting efforts to rid our city of these illegal hotels. I want to thank Mayor de Blasio and Executive Director Klossner for staying with the fight to protect our housing stock from illegal conversion – of profound importance as New York City continues to undergo an affordable housing crisis,” said Council Member Helen Rosenthal.

“Illegal hotels not only rob our city of vital affordable housing stock, they put renters at risk by circumventing safety regulations. The corporate entities that enable and facilitate these actions are bad actors putting New Yorkers at risk, and MPG clearly took deliberate action to mislead people, with far-reaching consequence. As a member of the illegal hotel working group, I thank the Office of Special Enforcement for taking on this vital case,” said Council Member Jumaane D. Williams.

“Illegal short-term rentals take affordable housing away from the New Yorkers who need them. With 61,164 New Yorkers homeless and more than half of renters spending more than 30% of their income on rent, we cannot afford to allow apartments to be re-purposed as illegal hotels. Thank you to the Mayor’s Office of Criminal Justice for doing the work to bring this practice to an end,” said Council Member Ben Kallos.

“We applaud the City, the administration, and the Mayor’s Office of Special Enforcement for their on-going efforts to protect NYC housing for New Yorkers. The depth and sweep of this lawsuit is breathtaking. Though this is a blow to the professional illegal hotel operators and belies Airbnb’s claims that its ‘hosts’ are merely middle-class folks trying to make ends meet, we fear it represents only the tip of the iceberg when it comes to the housing NYC has lost to illegal hotels,” said Tom Cayler, West Side Neighborhood Alliance.

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