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A yearslong conflict between Airbnb and New York City escalated on Thursday after the home-sharing platform sued the city to undo stringent new restrictions that limit short-term rentals.

A new law, passed by the city in 2021, sought to prevent illegal short-term rentals by requiring hosts to register with the city. Short-term rentals — for fewer than 30 consecutive days — have largely been barred if hosts are not present, according to state law, though the city and Airbnb have disagreed about how expansive such prohibitions and other complicated city codes should be.

The city said it would start enforcing the law in July.

In the lawsuit filed on Thursday, Airbnb called the new scheme “extreme and oppressive” and said it clashes with a federal law that has shielded many tech platforms from liability for content posted by its users. Three Airbnb hosts also filed similar lawsuits, arguing that the rules were so complicated that nearly all hosts, even those who intended to be present when guests were around, would be unable to use the platform.

The city said it was reviewing the lawsuit.

“This administration is committed to protecting safety and community livability for residents, preserving permanent housing stock, and ensuring our hospitality sector can continue to recover and thrive,” Jonah Allon, a spokesman for the mayor, said in a statement.

Why It Matters: The lawsuit pits tourism against the housing crisis.

New York City remains one of Airbnb’s most important markets. The platform said in the lawsuit that its net revenue in 2022 from short-term rentals in the city was $85 million; and as of Jan. 1, there were at least 38,500 active listings.

The platform asserts it is important to the city’s tourism industry and helps residents earn supplemental income.

But with the city facing a dire housing shortage, short-term rentals have become a frequent target for local activists and politicians, who say many of the listings amount to “illegal hotels” that take affordable homes off the market. Influential groups associated with the hotel industry have also fought Airbnb and similar platforms.

The lawsuit may also be another flashpoint in the debate around a federal law, Section 230 of the Communications Decency Act, which has come under fire by some lawmakers who say it is too broad in the protections it provides technology companies. Airbnb said in the lawsuit that the city’s rules improperly “seek to hold Airbnb liable in its role as a ‘publisher’ of posts by third parties” in violation of the law.

Online platforms like Airbnb must verify that a listing was properly registered with the city before collecting fees. Hosts could face penalties of up to $5,000 for violating the rules and Airbnb could face penalties of up to $1,500 for transactions involving rentals that were not properly verified.

Background: New York City and Airbnb are familiar opponents.

Existing rules on when hosts can offer short-term rentals are regularly flouted, which has prompted complaints from city officials, housing advocates and the hotel industry, who say Airbnb has not done enough to clamp down on illicit rentals.

In 2018, Airbnb sued after New York City tried to force it and other platforms to share more data about hosts, resulting in a settlement in June 2020.

The conflict is emblematic of how many cities across the nation have sought to regulate similar online platforms. Many have turned to registration schemes similar to the one in New York City with apparent success: Data shows a modest to significant decrease in the number of listings after such a scheme went into effect in Santa Monica, Boston and San Francisco.

What’s next: The city may fight back, or not.

Litigation in other places may foreshadow what happens in New York.

A legal challenge brought by Airbnb against Santa Monica over its registration scheme resulted in a settlement with the city in 2019. And this year, officials in Santa Monica have begun looking at expanding the ability of hosts to list rentals on the platform.

Mihir Zaveri covers housing in New York. @mihirzaveri

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