NYC judge said to order Airbnb host to stop 'profiteering' off rental

After a woman reportedly earns $6,500 per month off Airbnb for her rent-controlled Manhattan apartment, a judge issues her a temporary injunction to halt immediately.

Dara Kerr Former senior reporter
Dara Kerr was a senior reporter for CNET covering the on-demand economy and tech culture. She grew up in Colorado, went to school in New York City and can never remember how to pronounce gif.
Dara Kerr
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Airbnb launched a major marketing campaign in New York City over the summer where it posted positive-messaging posters in the city's subways. CNET

It looks like the jig is up for Noelle Penraat, a woman who has reportedly been renting out her New York City apartment on Airbnb for a substantial profit.

Manhattan Supreme Court Judge Carol Edmead issued Penraat a temporary injunction to stop renting on Airbnb immediately, according to The New York Post.

Penraat has reportedly been renting her government-subsidized, rent-controlled, four-bedroom apartment located on the city's swanky Upper West Side for nearly three years. She allegedly made $61,000 off the rental in just nine months, Edmead said, according to the Post.

Penraat's "own records indicate that she has been profiteering from a rent-controlled apartment partially subsidized by another government program," Edmead wrote in her ruling, according to The Post.

This appears to be one of the first injunctions issued against an Airbnb host, but it likely won't be the last. Cities worldwide are grappling with how to best regulate so-called home-sharing services, like Airbnb, VRBO and HomeAway. These companies offer platforms that let people rent out their rooms or entire homes on a short-term basis. For this service, the companies either charge a flat fee or get a cut of each rental. The prospect of people profiteering off rent-controlled apartments or low-income housing is one of the major issues regulators have with the sites.

Penraat was sued by her landlord earlier this year, according to The Post. The 62-year-old woman is reportedly legally entitled not to pay rent increases each year because she is a senior citizen who has a yearly income of less than $50,000. Her rent is said to be fixed at roughly $4,200 per month, while she was allegedly making an average of $6,500 per month on her Airbnb rentals, Edmead said, according to the Post. Airbnb declined to comment for this story.

Penraat has lived in the Upper West Side apartment all of her life and claims she needed to make the extra income to support herself, according to The Post. She was present during all of her room rentals and said that means she wasn't breaking the law, which allows for visitors. Edmead, however, disagreed.

"Unlike a typical sleepover these guests are not staying for free," the judge ruled, according to The Post.

Airbnb has been the focus of criticism over the past year. Irate city residents, regulators, housing advocates and landlords have lashed out at the company in cities like New York, Portland and New Orleans. They say taking apartments off the market for short-term rentals means cities lose the tax revenue hotels would pay, while also reducing rental stock and exacerbating the housing crunch. Also, most short-term rentals are illegal under many cities' laws to protect long-term renters from being pushed out by their landlords.

Still, Airbnb proponents tout many benefits from the service. Not only does it help hosts make ends meet or pay off their mortgages, they also say it brings cities more visitors who might not be able to afford high-cost hotels.

Airbnb is currently working with regulators across the US to amend local laws and make short-term rentals legal. San Francisco passed such a law in October, which included collecting a 14 percent hotel tax from Airbnb hosts, creating a host registry and letting people sublet their homes on a short-term basis for up to 90 days per calendar year.

New York, however, doesn't appear to be anywhere near passing a short-term rental law. City and state regulators have continually butted heads with Airbnb over the past year. Attorney General Eric Schneiderman issued a scathing report on the service in October that said 72 percent of Airbnb rentals he looked at from January 2010 to June 2014 "appeared to violate" state and local laws.

It's likely Penraat's apartment was included in this group of allegedly illegal Airbnb rentals. Now, with the temporary injunction against her, Penraat can no longer rent out rooms in her apartment, according to The Post. Judge Edmead also reportedly ruled that Penraat's landlord now has the grounds to evict her.