New York City Sued Airbnb Operators For Allegedly Posing As Fake Hosts
A $20.7 million lawsuit implicates a ring of real estate agents and companies posting multiple listings on sites like Airbnb, HomeAway and VRBO.
by Ankita Rao
Jan 14 2019, 9:17pm
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Most major cities in the US and beyond have grappled in some way with Airbnb’s impact on the housing market—especially as we learn more about how short term rentals can stress the housing market and heavily burden communities of color. But the friction between New York City and Airbnb has been particularly fraught, and is getting worse.
In the past week, the city’s Office of Special Enforcement (OSE), which operates under the mayor, announced two nuisance abatement lawsuits against networks of property owners who it says aren’t abiding by city rules, leaving guests in the dark about whom they are renting from.
New York restricts landlords from renting out units for less than 30 days unless the host is also present, a policy meant to protect long-term tenants and housing market prices by keeping more housing options available to actual city residents. Airbnb also has a “One Host, One Home” policy that says each homeowner can only have one listing on the site.
The city sued the Torkian Group, owned by brothers Behrooz and Hersel Torkian, for $1.18 million lawsuit last Wednesday, and identified at least 17 apartment listings now fully used as short-term rentals through Airbnb and Homeaway. Today the city announced another lawsuit for $20.7 million, alleging that a larger network of five or more property owners under the Metropolitan Property Group, a real estate firm, were illegally renting out 130 apartments through Airbnb, according to information sent to Motherboard by the OSE.
“Over and over again, well-meaning visitors are being misled by sophisticated businesspeople into booking illegal rentals,” said Christian Klossner, executive director of the OSE, in an emailed comment.
The lawsuit against the Torkian brothers is rife with alleged fraud and manipulation. According to the OSE, the Torkians allegedly supplied Airbnb guests with fake leases to show authorities who might be checking in on their stay. And there’s also evidence that the operators used fake names to pose as hosts on rental sites like VRBO. (The Torkian Group did not respond to multiple requests for comment.) The OSE got this data by subpoenaing Airbnb, TripAdvisor, and HomeAway.
"Well-meaning visitors are being misled by sophisticated businesspeople"
The city’s lawsuit against the Metropolitan Property Group, meanwhile, could prove more complicated. The lawsuit alleges that more than five employees, including CEO Sami Katri, posed as hosts using fake identities, advertised at least 250 listings on Airbnb, and failed to tell thousands guests that their rentals were illegal. The city’s complaint says that this ring of property operators duped guests into believing they were renting individual properties, while in actuality orchestrating multiple sites through their agents.
“The simple truth is when we can see the listing data the way the booking websites see it, we can easily see there’s illegal activity happening and connect the dots to find out who is behind it,” Klossner said.
But a lawyer representing Metropolitan told me that the lawsuit involves misleading data and formerly employed real estate agents who listed homes on Airbnb after they left the company. “The city should have done their due diligence,” said attorney Douglas Tick, who the firm hired on retainer. “They wrongly named agents and probably harmed an innocent company.” He said the company was blindsided by the allegations. (An OSE spokesperson told me that several of the agents mentioned in the report, including Katri, still work at the company.)
Airbnb, meanwhile, maintains that these lawsuits are focused on the bad apples, and that most of the hosts continue to use the site to make ends meet on their personal property, or occasionally share their home with guests, according to a spokesperson for the company. The company has also worked with Brooklyn-based assemblyman Joseph Lentol to try and craft a bill that it says would help make their “One Host, One Home” policy a citywide regulation that could be enforced by the government.
"There's a lot of hosts using Airbnb to make ends meet and we need legislation to protect them,” Liz DeBold Fusco, Airbnb’s northeast press secretary, told me on the phone. “We haven't seen the city work with us on this.”
But an understanding with the city may not be on the horizon any time soon, especially when it comes to the topic of sharing data. While Airbnb was required to hand over specific host and rental data in the recent OSE subpoenas, the company also fought back by suing the city when the New York City Council passed a law last summer that required the company to share its data. Airbnb has also said that the OSE is heavily influenced by the hotel industry, which has a vested interest in curbing the Airbnb market. An OSE spokesperson denied this claim.
So what should New York residents and Airbnb take away from these power plays? Murray Cox, who runs the independent investigative site Inside Airbnb told me that both the city and Airbnb’s attempts to curb bad actors fall short of the real problem. “Airbnb is very good at manipulating the narrative,” he said. “Airbnb will hand off the responsibility by saying ‘we need to be properly regulated.'” He said there are currently 13,000 homes being rented out via Airbnb full time in New York City, and only about 7,000 hosts have only one listing, according to publicly available data.
But the city’s attempt at litigating corrupt property owners, he said, will only work on a small scale. When it comes to the neighborhoods of color suffering from the impact of short term rentals, he said, “It’s not going to impact that at all.”
A real solution could lie in looking at other examples of how other cities have regulated Airbnb. Both Fusco and Cox told me that San Francisco’s rules—which require hosts to undergo a stricter registration process—has helped balance the city’s housing market while allowing the company to remain profitable in the city. After it implemented its new regulations in San Francisco last year, Airbnb lost several thousands of hosts.