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BY HEATHER DUBIN | Crackdowns on illegal hotels and short-term rentals in the city have left owners of small bed and breakfasts — who pay taxes — in the lurch.
Under a new law, it’s now prohibited to rent out an apartment in a “Class A” residentially zoned building for less than 30 days. Passed in July 2010, this law was designed to eliminate short-term rentals and illegal hotels in residential or single-room-occupancy (S.R.O.) buildings, both of which have exploded since 2006.
Contributing factors, such as the economy, the ease of using the Internet and owners’ inability to sell buildings, prompted some landlords of S.R.O. and residential buildings to choose to rent out units on a nightly basis. Permanent tenants complained about what was happening in their buildings. Those complaints, plus concerns about unsafe conditions due to overcrowding and fire code violations, caused legislators finally to take action.
However, formerly legitimate bed and breakfasts in Manhattan, all in “Class A” residentially zoned buildings, are now also subject to this broad definition of the law, making their very livelihoods illegal.
After the law went into effect in May 2011, the Mayor’s Office of Special Enforcement created a task force comprised of a police officer, a firefighter and a Department of Buildings representative, to do enforcement against illegal hotels. As of April 2012, this unit had issued nearly 1,900 violations to landlords for illegally converting buildings into hotels, and had vacated 51 instances of illegal occupancy.
In addition, three bed and breakfasts in this borough have been targeted by the task force, and have been slapped with a total of $63,000 in fines, not including the cost of legal fees and an expediter.
One of these three is Ivy Terrace Bed and Breakfast, on E. 58th St., owned by Vinessa Milando.
Milando founded StayNYC, a small trade association of owners of bed and breakfasts in the city who want an exemption to allow them to offer short-term rentals legally. The group began with less than 10 members — mostly women and minority-owned businesses. Other than Milando, they all remain anonymous to avoid detection by the task force.
The handful of bed and breakfasts are scattered throughout Manhattan, with one in the West Village and another in the East Village, the latter which sustained extensive damage from flooding from Hurricane Sandy.
“I was very, very careful,” Milando said in a phone interview last week, describing how she assembled members for the group. “All of our members have an average of five rooms, and we are all licensed with New York City as small-facility operators,” she added.
They also pay New York City hotel and occupancy tax and New York State and City sales tax.
According to Milando, their small buildings have no residential tenants, and are exclusively used as bed and breakfasts. Her business, at 15 years old, is the youngest in their association.
When the city requested that bed and breakfasts pay hotel tax in 2002, many of them opted not to and went underground.
“Everyone in our group all gave the city our names and addresses, and agreed to pay the charges and hotel tax,” she said, adding that that was how they all originally met.
Rather than enforce hotel zoning regulations against these businesses, the city’s Department of Finance allowed the bed and breakfasts to be classified as small-facility operators — each member has less than 10 rooms. It might not seem like a lot of units, but it’s how these small business owners survive.
“That’s how we pay our taxes, and that’s who we are,” Milando said.
“We understand and sympathize with the city and the problem,” she added. “We’re not looking to repeal the entire law — we just want to continue business.”
StayNYC businesses do have a positive impact on the city’s bottom line, in that they contributed more than $4 million to the local economy in 2010.
This past January, a StayNYC member was hit by the task force for the second time in six months.
“Within two weeks, he realized he could not stay open anymore,” Milando said. “He’s since shut down and is trying to sell his building.”
A second member of the group also called it quits that same month after sustaining only one enforcement raid.
“They were following the letter of the law and could not afford to keep their building,” Milando said. The owners had raised their child in that building — which had been passed down through their family — but ended up leaving Manhattan. Both of the above former members owned their buildings for longer than 25 years.
“I lost two members in a 10-day period,” Milando said. “That’s money I don’t have to continue to fight with.”
Milando claims legislators had assured her the law would not affect StayNYC members — that large buildings and landlords with tenant complaints were top of the list for the task force. Unfortunately, this has not been the case.
To comply with the new law, a number of the bed and breakfasts have stopped taking short-term guests. While they can legally have guests for a 30-day stay, that reality is difficult.
“I can’t pay my bills for a 30-day guest. My taxes are almost 100,000 bucks,” Milando said.
Since May 2011, when the new law went into effect, she has lost more than $180,000 in business. This figure includes fines, legal fees and refunds, plus the cost of a lobbyist to advocate for their cause.
Some StayNYC members have removed their Web sites, unsure if they will be open to commit to future reservations, while others are taking guests so they can pay bills. Fines have recently increased, making business even riskier.
“What we’re all doing is living in fear,” Milando said, “No one is doing business as usual, and no one is comfortable. We’re all above-board-type people.”
Milando and StayNYC members have met with local city politicians, as well as several assemblymembers, to facilitate action for what they consider a “very small fix.” They have a petition on their Web site with 3,000 signatures, and have received donations to help them in their plight.
Last December, Milando met again with city and state lawmakers, but while “they did want to help us, they did not know quite what to do,” she said. A meeting of the bed-and-breakfast group with the Department of Buildings followed that was “not fruitful,” she said, adding, “We’re not in the codes.”
According to Milando, the department was unaware that the law had even changed, and as a result, “They were not going to spend anytime defining us.”
She met with a zoning attorney this May and learned it was beyond their means as small businesses to try to change the zoning resolution.
“They had some ideas, but they all cost over $50,000, and none were guaranteed,” she said. “All of it was maybe, all of it was political, and we have the political landscape changing.”
City Councilmember Daniel Garodnick has sat down with Milando more than once to hear her concerns.
However, she said, “While he wanted to help us find a way out, no one has been able to find a way out.”
Garodnick, though, did set up the meeting with Buildings for her with a phone call.
Milando also met with mayoral candidate City Council Speaker Christine Quinn’s staff. Like with D.O.B., the bed and breakfasts were under the radar of Quinn’s representatives.
“I have not met with any resistance, but they didn’t know anything about it or that our businesses existed,” she said.
Options on the table from separate meetings with the city and an attorney involve two different potential permits.
Yet, Milando said, “We may or may not be allowed to apply for them. A special permit per person would be over $50,000, and we would have to go through several city agencies, which would take about two years.”
None of the StayNYC members can afford that amount.
The other permit is for members in a historic district, but the departure of two members has made that alternative cost prohibitive as well.
“At the moment, having a lot of money is the only way out of this,” she said.
“We are still hopeful, because it does seem we have the support of the politicians,” Milando added. “But someone needs to take our hand, if they care enough, and lead us through this labyrinth.”
Last year StayNYC members lost $1.1 million in business, and about 3,850 guest beds were empty between September and New Year’s.
According to NYC & Co., the city’s marketing and tourism association, there are about 52 million tourists in Manhattan annually. With tourism booming, StayNYC members say there is a need for their services.
Milando encourages her guests to support local restaurants and neighborhood businesses. As a small business owner herself, she identifies with mom-and-pop shop owners.
“We’re not the big guy, we’re the small guy,” she said. “Small businesses in New York City are totally disappearing.
“If you want to save small businesses it can be done,” Milando said. “I believe we were unintended consequences [of the new law], and they have to fix the problem. I hope they do it soon.”
Meanwhile, several guests of one of the B&B’s interviewed by The Villager shared why they prefer the experience to staying in a traditional hotel. The owner asked that the name and location of the B&B not be published.
Susan E. Mennacher and Jan-Soren Woermer and their two children, from Munich, Germany, have been annual guests at the B&B for the past decade.
“We immediately grew attached to the owner and her place,” Mennacher said in an e-mail. “There is not a hotel in the city that can offer the personal warmth, the cleanliness and the wealth of creativity of her bed and breakfast.”
The place features living rooms and kitchens, allowing guests to cook in a homey atmosphere, and is also cost effective.
“I am originally from New York, and this is the perfect place to ‘play house’ with my children for two weeks a year,” she explained.
Her kids have told her that the B&B is what they like best in New York City.
A neighbor of the B&B, Andre Lucien, recently sustained damage to his apartment from a fire and wound up staying at the B&B for a month and a half.
“It’s a great resource in the neighborhood because she’s my neighbor, and she has helped me out in a time of need because I was displaced,” he said.
Lucien welcomed the opportunity to meet people from “the far-flung corners of the world,” saying that guests end up hanging out together.
“It’s communal, which makes the whole vacation experience a lot more personal,” he noted. “You’re interacting with people instead of just the lobby. You also get a flavor for the neighborhood instead of being in a big ol’ hotel. You’re right there in the ’hood.”