Airbnb suffers setback in Jersey City as residents vote to regulate short-term rentals

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Brian Chesky, CEO of Airbnb

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Despite a multimillion-dollar persuasion campaign by Airbnb, Jersey City, New Jersey, residents voted overwhelmingly to impose greater regulation on short-term rentals in a move that is expected to hurt Airbnb’s presence in the city.

The measure, which was voted on Tuesday, passed with more than 69% of the vote, according to the latest results.

The new regulations come amid a wave of laws considered in cities across the world that seek to regulate the rapid growth of Airbnb due largely to concerns over how the company impacts long-term residents. With Airbnb expected to go public next year, such regulations could cool investors’ outlook on the company.

The regulations will require strict permits to operate short-term rentals, as well as impose limitations on which properties are eligible for short-term rental, prohibit using a property as a short-term rental for more than 60 nights a year if the owner is not present, ban rent-controlled properties from short-term eligibility and create permit fees for operators.

Despite the relatively small size of Airbnb’s 3,000-listing presence in Jersey City, the local battle was significant for the company as it faces a crackdown on illegal listings in its largest market, New York City. The new rules also come as Airbnb faces heightened scrutiny after the company officially banned “party houses” in response to a deadly shooting in California.

The $30 billion company devoted $4.2 million to fighting the regulations, according to The New York Times. Airbnb’s opponents, mostly the hotel industry and its workers union, spent about $1 million, according to the Times, making this the most expensive local referendum in New Jersey history.

“The people of Jersey City have spoken,” Jersey City Mayor Steven Fulop said in a statement Wednesday to CNBC. “We sent a message to Airbnb and all multibillion dollar companies that Jersey City and other similar municipalities cannot be bought.”

The regulations gained traction over concerns that the platform was allowing tourists to overwhelm residential areas, raising housing costs and mostly benefiting large-scale investors. Of the roughly 3,000 listings on the platform in Jersey City, 500 are operated by the top 10 hosts in the area, according to Inside Airbnb, an independent website that collects data from Airbnb’s platform.

“This is not only a big win for Jersey City, but it’s also a big win for all towns and cities big and small to be able to stand up to the corporations and say that our resident’s safety and quality of life greatly outweigh a $5 million campaign of misinformation from Airbnb,” Fulop said.

Opponents of the regulations point to the boost in Jersey City’s tourism economy, which benefits residents beyond those who list property on the platform.

“From the start of this campaign, we knew this was going to be one of the toughest fights we’ve faced, with the big New York hotel industry determined to fight home sharing, but we had an obligation to stand up for our community,” Christopher Nulty, a spokesperson for Airbnb, said.

The company says that Airbnb is a substantial source of income for numerous Jersey City residents and that the regulations were influenced by the hotel lobby.

“Cities from Buffalo to San Francisco, and Boston to Seattle have managed to pass comprehensive short-term rental regulations without punishing tenants or creating red tape and onerous registration systems,” Nulty said. “There are Airbnb listings in over 100,000 cities around the world and we will continue to do all we can to support hosts.”

— CNBC’s Brandon Gomez contributed to this report.

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