In Boston, Airbnb instructed to remove thousands of illegal listings

Airbnb is eyeing a major IPO next year, but this year it faces increasing regulation in cities across the country.

The home-sharing company had to comply with strict new regulations in Boston on Sunday that require hosts to register their listings with the city. Boston regulations are designed to prohibit so-called investor units, or properties intended to be residential that are used exclusively or primarily for short-term housing. Such units, lawmakers say, inflate the housing market and drive out long-term residents.

The city’s crackdown on Airbnb listings comes amid a wave of similar proposed laws in cities around the world. Such regulations could put a damper on the business model of one of the last tech darlings of the decade that has yet to be made public.

The new rules require hosts to own the properties they rent out and live there for at least nine months of the year. They also limit listings to one per host and require hosts to register their units with the city annually and pay an annual license fee. Appropriately licensed listings will display a “police number” above the cancellation policy section, such as this ad in the Dorchester neighborhood of Boston.

The regulation was first adopted in July 2018 and then came into force in August 2019 after a Airbnb legal challenge has been settled.

“Across the city, rents are becoming increasingly out of reach,” Boston City Councilwoman Michelle Wu said in an emailed statement. “By removing corporate loopholes for de facto hotels in residential neighborhoods while preserving landlords’ ability to benefit from home sharing, the regulations are designed to help more Bostonians stay in their homes.”

“As per our legal by-law, we are prepared to work with the City to take appropriate action against listings that have not provided a license number, so that they are no longer available for short-term rental,” said said an Airbnb spokesperson. “But it’s important to note that this is a long-term, collaborative process.”

Boston joins a growing wave of cities imposing new regulations on short-term rentals from Airbnb and other providers. Cities around the world are looking for ways to address concerns about the impact of these rentals on long-term residents. With Airbnb set to go public next year, such regulations could dampen investors’ outlook on the company.

A court in Ontario, Canada two weeks ago ruled in favor of Toronto’s short-term housing laws, which require hosts to live in the properties they list on Airbnb. Last month, residents of Jersey City voted overwhelmingly to impose tougher regulations on the home-sharing app, after the $30 billion company spent $4.2 million to fight regulation. San Francisco lawmakers imposed strict regulations short-term rentals in 2018 that halved the number of Airbnb listings in the city. Since then, other cities in Europe and the United States have followed suit.

Both New Orleans and Portland, OR, has implemented regulations similar to Boston’s that are set to go into effect Jan. 1.

Airbnb is shaping up to be one of the most anticipated public markets launches of 2020. Unlike the much-hyped debut this year of losing unicorns Uber and Lyft, which struggled in the public markets, Airbnb says EBITDA has been profitable for the past two years.

However, increasing regulations in cities around the world could hurt Airbnb’s operations and decrease investors’ appetite to invest. The company will also have to navigate regulatory review without its COO Belinda Johnson, who announced she would step down in March next year. Airbnb CEO Brian Chesky credited her for working successfully with regulators.

– CNBC’s Deirdre Bosa contributed to this report