Subletting Startup Kiki Faces Consequences in NYC

Auckland-founded Kiki Club, a peer-to-peer subletting startup, launched in New York City in 2023. Their goal was to simplify subletting for renters traveling for extended periods.

However, Kiki’s business model clashed with local short-term rental laws, ultimately leading to its shutdown in June. The New York Mayor’s Office of Special Enforcement (OSE) has announced that Kiki agreed to pay over $152,000 to settle these charges.

The Vision and the Violation

With backing from Blackbird, Kiki aimed to rival Airbnb by simplifying the subletting process. They promised a solution allowing users to sublet their spaces for up to six months. The platform employed a matching system similar to dating apps, connecting listers and renters based on their preferences.

The startup ran afoul of NYC’s short-term rental laws, specifically Local Law 18, enacted in 2022. This law imposes strict rules, permitting short-term rentals only if the host registers with the OSE and meets criteria such as residing in the same unit as the guests.

Many Airbnb hosts found these regulations too cumbersome, leading to an 85% drop in short-term rentals, according to Inside Airbnb.

Furthermore, booking services must utilize the OSE’s verification system to confirm host registration or exemption. Unverified transactions incur a penalty of $1,500 or three times the revenue earned, whichever is lower.

Details of the Settlement

The OSE stated that Kiki failed to submit quarterly reports of short-term rental transactions for eligible listings and did not verify nearly 400 short-term rental transactions.

Christian Klossner, executive director of the OSE, stated, “This settlement sends a clear message: ignoring city laws will be costly for companies facilitating short-term rentals. Kiki Club acted as a clandestine conduit for unregistered and illegal short-term rentals, directly undermining the city’s efforts to protect tenants and preserve permanent housing.”

While Kiki neither admitted nor denied the findings, they paid the penalties. A Kiki spokesperson previously acknowledged in an interview with SmartCompany that the company operated in a “gray regulatory area.”

Moving Forward: London Launch

Despite the significant consequences in New York, Kiki continues its operations. In June, the startup announced its launch in London.

It’s vital to note that the UK also has regulations concerning illegal renting. Renting to individuals without the right to rent in the UK can lead to imprisonment or hefty fines.

Hopefully, the startup has learned from its experiences in New York and will ensure its London-based platform complies with all applicable laws.