The Airbnb attack in New York sparked an underground home equity market

The year-long attack on Airbnb in New York City has exploded the underground apartment rental market, and a handful of thriving startups are attracting high-profile investors eager to secure deals that comply with the city’s new regulations.

The last autumn, The New York City Council imposed Local Law 18, a stiff home-sharing regulation that forced Airbnb to remove most of the then tens of thousands of Big Apple rentals on its site.

Now hosts are struggling with cumbersome registration and new rules, including the awkward requirement to stay at home when guests are present – unless the rental period is longer than 30 days.

In response, a patchwork of private, invite-only groups with names like “Friendbnb” and “Gypsy Housing NYC” spread across Facebook, Instagram, WhatsApp and Craigslist. They usually collect fees through apps like Venmo or Paypal.

One of them, called “NYC Short Term Sublets,” claims to focus on “short- and medium-term stay seekers” with clients who “come to New York for extended periods for work, theater performances, film festivals or just general tourism.”

As of April 2023, the group has amassed 17,300 members on Facebook and has added 630 posts in the last month alone.

Meanwhile, in June, New York startup Ohana leased a 2,000-square-foot loft in the newly renovated Domino Sugar Factory in Brooklyn.

There, every day you can find a handful of workers in their 20s hunched over Mac computers and browsing about 40 social media groups that, according to recent data, contain about 60,000 posts.

Ohana, which focuses on rentals longer than 30 days, doesn’t hesitate to lure both landlords and tenants from any group using any app. Sparks may fly regularly.

“Hey, guys. “I’m sorry, but this group has been infiltrated by some lame startup started by these Chads who pay people to post in the group,” wrote Ricky Berrin, founder of a WhatsApp group called “NYC Home Sharing.”

“We are asking you to report anyone who posts on a site called Ohana,” he added.

Elsewhere, Craigslist sent Ohana a cease-and-desist letter for recruiting potential hosts off the classifieds site. But Ohana investors see it as a badge of honor, according to CEO Ezra Gershanok.

“Companies like mine often get leads this way,” Gershanok told The Post. “Airbnb (targeted Craigslist) started and investors love seeing it because it has been proven to be a successful strategy.”

In June, Ohana raised $3 million from several former Airbnb executives and Zillow real estate marketplace co-founder Spencer Rasoff. This is in addition to last year’s $1.2 million round from startup accelerator Neo.

The money funded the hiring of more than half a dozen students and graduates who speak Mandarin, Hindi and Hebrew to appeal to both landlords and tenants, including international students.

Since founding Airbnb 18 months ago, Ohana has recruited more than 1,200 hosts from Airbnb alone and is sourcing 500 hosts each month from social media and the Internet, Gershanok said. He paid over $2 million in rent.

Gershanok, 25, worked briefly at McKinsey & Company and founded Ohana with his childhood friend, Jacob Halbert, 25, a former engineer at Apple.

Their increasingly sophisticated operation is causing confusion among groups like NYC Home Sharing, which owner Berrin calls “an informal solution to a problem that has arisen since these new restrictions were introduced.”

Berrin said a makeshift group was created in 2021, but demand has skyrocketed since the passage of Local Law 18. WhatsApp limits private groups like his to 1,024 members. Berrin said Home Sharing services in New York are already at capacity, with a waiting list of more than 1,000 people. He recently increased his salary by $5, to $25 a month.

In a follow-up email to The Post, Berrin wrote: “The group was not created to circumvent the law,” adding “and I would guess that most of the posts are actually about rentals of a month or more, including foreclosure leases and annual rentals.”

“People posting on the platform should comply with all local regulations,” he added. As for Ohana, Berrin said he kicked them out because they were “clearly violating the spirit of the group and many people complained that they were spamming their accounts.”

HostU, launched in April 2023 by Northwestern University student Bella Le Sage, is also looking to cash in on the buzz by creating a site focused solely on providing students with access to housing.

The Chicago startup has expanded into New York with an undisclosed investment from Edwin Marcial, a former chief technology officer at Intercontinental Exchange (ICE) who now runs a technology fund called Thirteen Castles.

“We believe that local law18 and other regulations are positive for our business,” Le Sage told The Post, adding that hostU is in the process of closing its second round of fundraising.

Meanwhile, Austin, Texas-based Furnished Finder, founded in 2014, is now a major player in New York’s 30-day delivery market.

Last year, it hit former VRBO CEO Jeff Hurst when private equity firm Summit Partners acquired a majority stake in the company.

Hurst also confirmed that Furnished Finder’s business has increased in New York since the passage of Local Law 18.

“Our growth has doubled the demand and supply of tenants, and I’m sure these are hosts who previously exclusively used Airbnb,” Hurst said.