The battle over illegal vacation and apartment rentals in one of the world’s biggest travel markets is getting interesting.

The apartment share service Airbnb received an avalanche of bad press when it was reported by CNET on May 21 that a host had been fined, and then erroneously re-written by countless other sites that Airbnb was illegal in New York City. In reality, a judge sitting on the city’s Environmental Control Board found an Airbnb host named Nigel Warren guilty of breaking the state’s short-term housing law. Airbnb, while it did submit arguments to the court, was a big-name bystander rather than a party to the violation. But the impact of the ruling was still a blow to the company in its efforts to legitimize its service.

After the ruling Warren told reporters “I plan to talk to Airbnb before making any decision on whether to appeal.” Today David Hantman, Airbnb’s Head of Global Public Policy, wrote on the company’s public policy blog, “I am pleased to report that we will assist Nigel and his landlord as they appeal this ruling. We may lose again before we prevail, but we intend to fight this ruling until justice is done.”

Hantman writes that Warren’s appeal process will likely be drawn out, but that Airbnb is in it for the long haul. “We know the road at first will be hard,” he states. “So even if the City prevails at the ECB level, we will assist in the appeal to New York trial courts and beyond, if necessary.”

Airbnb’s listings, like those of many other apartment and vacation rental websites, in cities such as New York, Paris, San Francisco, Hawaii, London, and other major markets are filled with a large number of housing options that violate local residency and zoning laws, but the service of connecting hosts and customers is not in itself illegal. Warren, not Airbnb, was on the hook for the fines.

A new law

The day after the Environmental Control Board judge’s ruling, New York State Assemblyman Karim Camara, a Democrat who represents Crown Heights and parts of other Brooklyn neighborhoods, introduced New York Assembly Bill A 7495, which amends the definition of “class A dwelling” so as to authorize tenants of such a dwelling unit to sublease it for a period of less than 30 days. If passed, the bill would legalize rentals such as Warren’s where the host is renting his or her own apartment, as well as any secondary properties. Three other co-sponsors — two from the Bronx and one from Queens — have signed on to the bill.

Camara’s explanation for the bill states that the current law “has denied citizens of New York City the opportunity to rent out their extra space when they are out of town to help make ends meet.”

Airbnb would neither confirm nor deny that it played a role in drafting the new bill, and Assemblyman Camara was not available to answer questions about the bill.

A representative of Airbnb told Skift last week “We very much appreciate that Assemblyman Camara has started this important discussion. There is universal acknowledgment that the current law was intended to crack down on illegal hotels, not regular New Yorkers trying to make ends meet, so any legislation that makes that clear would be a great step for New Yorkers.”

“Everyone agrees that average New Yorkers were not the target of the 2010 law,” Hantman wrote on his blog, “and I am pleased to note that recently, legislation was introduced in the New York State Assembly and the New York State Senate to exempt from the 2010 law those individuals who are renting out their own homes.”

Who’s an average New York host?

New York State Senator Liz Krueger, one of the authors and sponsors of the bill that established the current law, told Skift that Camara’s bill, like a handful of others circulating will never pass as currently written and act as conversation starters.

Sen. Krueger has sat down with Airbnb on a number of occasions to discuss changes, but little has come of it. She told Skift, “It’s not a matter of us not being open to changing the law, but the ideas they have for loosening the law wind up making it unenforceable.”

And Krueger argues that the “average New Yorkers” make up a small portion of hosts.

“I believe that some of the companies with big PR operations are purposely mis-characterizing the types of listings on their website,” Sen. Krueger told Skift. “When you actually count through how many people are in it as a business, it’s clear they aren’t being honest about what’s happening on their site.”

The poster child for illegal hotels is SmartApartments, which the city sued and shut down in October of last year. SmartApartments managed short-term rentals in hundreds of apartments in New York’s most desirable neighborhoods (see here and here for evidence submitted to the court) and grew out of the successful Airbnb listings of a man called Toshi.

The difference between a large-scale illegal operation like SmartApartments and Toshi used to run and a listing like Warren’s is very clear. But in New York, the space between the two is vast.

“There’s a real disconnect between what they say their business model is and what’s really happening,” Sen. Krueger said. “Are you someone who lives in an apartment and occasionally rent it out while you’re away? That’s very different than taking a housing unit off the market.”

A search on Airbnb will show many host listings similar to Joe & Fab, who list seven units across Manhattan, or Seith, who has three units in the trendy East Village, or David, who has nine listings.

This is the flip side of the host renting out his or her place to make an extra few bucks or pay the mortgage. The units they are offering have been removed from the long-term rental market because the per-night prices landlords can get from tourists is much higher than they can get from a New York City resident on a yearly lease.

Krueger argues that considering the historic low availability of affordable units in the city the growing popularity of short-term rentals is morally questionable. “Every residential unit that gets pushed out of the system adds to a domino effect that creates housing problems across the city,” Sen. Krueger said.

“Your individual win in this business model is everyone else’s loss.”

Editor’s note: The author originally stated that CNET had rewritten its story to correct the initial error. That was wrong. The rewrites by other news sites — from Fast Company to NPR — introduced the error.