New York and Airbnb have never really been best friends. Airbnb provides short term rentals of apartments/homes with lower prices than hotels. It allows owners of apartments to make extra money, and is appealing to travelers trying to save money and get the “real” experience of living in New York.

Recently, New York’s legislature passed a bill that would heavily fine hosts on Airbnb and other short term rental sites that post listings that would violate the state’s law on short term rentals. The new law has a penalty of $1000 for the first violation, $5000 for the second, $7500 for the third and subsequently.  This law is punishing those who are listing, not renting.  A heavy fine is imposed for those just advertising.

Updated in 2010, New York’s short term rental laws prohibit most apartments in New York City for being rented less than 30 days. This means the majority of listings on Airbnb and other sites would be considered illegal, since most people book them for less than 30 days.

Gov. Cumo has until January to make his decision about the bill. Though some argue that this bill is not legal. The Travel Technology Association, an advocacy group whose members include Airbnb, stated that the new law, “possibly infringes upon free speech and threatens to undermine the legal foundation upon which Internet providers and platforms rely for protection.”

If this bill is passed, it will have a huge impact on Airbnb, as New York City is its biggest market in the United States. Hosts may stop listing their apartments, or some may just continue on. Airbnb has taken steps to stop this bill from being passed. It has launched a million dollar ad campaign to oppose the bill, stating it would hurt the middle-class New Yorker.

Airbnb has two options right now. If Gov. Cumo signs the bill, Airbnb can continue on operating as it always has, lose half its listings, and anger the state government. Or Airbnb can play nice and start working with government officials to remove and prevent illegal listings from appearing. The second option will earn them the good will of government officials but hurt their profits.

Where do you stand on this issue? What has your experience with Airbnb been like? What do you think Airbnb should do?