Free Speech

New York Tries to Regulate Home Sharing by Regulating Speech

Update: This article was originally published on June 23, 2016. Last week, New York Governor Andrew Cuomo signed into law a bill regulating short term rentals by banning the advertising of specific types of rooms for rent. This ban, in addition to controlling the emerging sharing economy, represents a significant threat to Free Speech and the First Amendment. This article has been updated to reflect the bill’s change in status.

In a novel approach to regulating the sharing economy, New York – encouraged by the AFL-CIO – has decided to regulate speech.

The New York Legislature passed, and Gov. Cuomo just signed, a bill that bans listing entire homes or apartments through services like AirBnB and HomeAway, by prohibiting “advertising that promotes the use” of multiple dwelling units for any such short term rentals.

While the law certainly harms consumers by reducing their lodging options, its regulation of speech is far more concerning.

The law makes it illegal for property owners to advertise, through mediums such as the Internet and newspapers, that they have apartments or houses available for rent. If property owners are caught violating the law, they face civil penalties ranging from $1,000 for first time offenders and $7,500 for third and subsequent offenses.

According to publicly available records, the Hotel and Motel Trades Council (HTC) of the AFL-CIO was one of the primary supporters of the bill. The HTC lobbied aggressively for the bill’s passage, even engaging at least two different lobbying firms.

The new law would ban commercial speech. Commercial speech, while still protected by the First Amendment, is not entitled to the same level of protection as other forms of speech, according to the Supreme Court.

Speech is commercial if it is an advertisement, if it refers to a specific product, and if the individual speaking is economically motivated. Commercial speech is determined not just by the speaker’s intent, but also by the content of the speech. In the case of home sharing, the property owners wish to communicate that they have rooms available for short term rentals. The speech refers, usually, to specific products (the rooms), and the home owners are motivated by the desire for extra income.

If advertising one’s house or apartment is commercial speech, New York still has a high burden to meet for federal courts to sustain the proposal. New York may regulate economic interest if it can prove it has a substantial interest in the regulated activity, in this case home sharing, that the regulation directly advances that substantial interests, and that the regulation is reasonable.

The debate around home sharing seems to focus on two primary arguments: Home sharing takes apartments off the market that would otherwise be offered to permanent tenants; and offering entire apartments or houses for rent violates New York’s Multiple Dwelling law. As to the first argument, opponents of home sharing make the secondary argument that a number of AirBnB hosts are “full time” hosts, which takes apartments or homes off the market and improperly inflates rental rates by artificially keeping housing supply low. Very little raw data supports this point.

In fact, much of the data is contrary. According to a report from Penn State University’s Center for Hospitality Real Estate Strategy, a mere three percent of all AirBnB hosts in New York are “full time” hosts.

As to the second argument, that offering rooms for rent violates New York’s Multi Dwelling law, the bill cites the definition section of the Multiple Dwelling law. Rarely, if ever, does a definition section provide any operative law. It merely defines terms found in the rest of the law. The specific section cited certainly does not rise to the level of prohibiting certain activity in a Multiple Dwelling unit for purposes of regulating speech.

Housing concerns, and the price of housing, do not rise to the level of a “substantial government interest,” though, that would justify regulating home owners’ speech. There are very few examples where the Supreme Court has agreed that a bill regulating speech either properly controls the content of commercial speech or is narrowly tailored. That is to say, the Supreme Court has a history of striking down laws that regulate commercial speech.

For example, the Supreme Court has invalidated laws regarding the price of pharmaceutical products, the alcohol content of beer and the price of liquor.

The bill reveals a shift in tactics, trying to control disruptive technologies by controlling the way in which people communicate information. The bill does not harm companies like AirBnB, or HomeAway. Similarly, if the tactic is expanded to include other disruptive technologies like Uber, Lyft, TaskRabbit or Postmates, the victims of this government overreach will not be companies, but will be the individuals who benefit the most from the technologies. The victims will be the consumer and the technologies’ partners.

The New York law attempts to regulate the sharing economy by regulating lawful speech. It will have a chilling impact on the speech of property owners and consumers. It will regulate, and prevent, innovation and the sharing economy by preventing people from communicating about the benefits of both.

In Depth: Free Speech

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