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New York governor David Paterson signed a law on July 23 that banned "illegal hotels," giving New York City authorities new powers to shut down a range of hotels and hostels around the city that weren't supposed to be on the market to visitors in the first place. (You can read and comment on the law on the N.Y. Senate's website.)

Certain types of vacation rentals offered by individuals will get caught up in this net and will be considered illegal when the law takes effect on May 1, 2011. But this isn't the lion's share of unofficial rooms: Unlike most of the world, New York has an alternative-lodging sector dominated by large-scale landlords who have taken affordable apartments and long-term rooms off the market. Then they rent them at higher rates as hotel rooms, often while avoiding the safety regulations, labor laws, and taxes that legitimate hotel providers pay.

The new law doesn't help tourists figure out what's legal, so it's a huge pain for travelers. But B&Bs, couch shares, spare rooms, and anything listed on New York's official www.nycgo.com site are all still in the clear, according to the city tourism board. I'll tell you how to find a legal vacation in my story "Where to Find Legal Short-Term Apartment Stays in New York City."

Three Big Myths About Illegal Hotels

The new law is controversial, and there's been some misunderstanding about it in the travel media. The main criticism is that the law targets individuals who occasionally rent their apartments. They're getting caught up as collateral damage to some extent, but the law is designed to deal with a large-scale problem of illegal conversions by landlords.

Myth #1: The new law was pushed by the hotel industry.

"That can't be further from the truth," said Sarra Hale-Stern, a staffer for State Senator Liz Kreuger who worked on the new bill. "This is one of the top complaints that [state senators] have heard from their constituents in writing, in email, and over the phone."

Complaints started coming in during 2002, but the situation really heated up during 2005, Hale-Stern said. That's when Sen. Krueger and other officials convened the Illegal Hotels Working Group, which has been working for five years to put together this law.

"It was only in April or May [of 2010] that we started getting calls from lobbyists for the Hotel Association of New York, who initially were very concerned about this," she said.

Myth #2: Most 'illegal hotel rooms' are rented by individuals, just trying to get by.

"In New York City it's big landlords doing a lot of rooms at once," Jackie Del Valle of Housing Conservation Coordinators, a low-income housing advocacy organization said. "That's different from a lot of other cities. There is still some small-scale stuff, sure, but that's not the majority of what we're seeing and getting complaints about."

"Certainly what we're concerned about are the major operators who are renting out dozens and hundreds of rooms at a time, not Mrs. Jones who might be renting out her apartment for three weeks," said Hale-Stern, a staffer in State Senator Liz Kreuger's office who helped work on the bill.

But Mrs. Jones may still run afoul of the new law if her neighbors call to complain that her illicit guests are misbehaving, as enforcement will be driven by complaints.

Myth #3: This law penalizes individuals who are renting out spare rooms.

Under the new law, B&Bs are OK -- as long as the owner is living in the building, which is the traditional way a B&B works. Renting out a spare room or a sofa is OK. Home swaps are OK, too, as long as money doesn't change hands.

"If someone is there and has an extra bedroom, under the law they can rent out that bedroom," Hale-Stern said.

What's not OK is renting out your empty house or apartment while you're on vacation for less than a month. But in New York City, that's almost never been OK. The vast majority of owned apartments in New York are co-ops, which almost uniformly ban this kind of usage. Most condo boards ban it, too; ditto for most rental leases. Condo and co-op boards will likely come down on an owner breaking the rules before any new enforcement from the state hits them.

Zoning laws, meanwhile, generally prohibit "transient" use of residential property. Property owners complain on this YouTube video that this law infringes on their right to do what they want with their property, but they can't put a homeless shelter on their property or open a convenience store, either. That's what zoning is about.

Why Many New Yorkers Hate Illegal Hotels

The new illegal hotels bill came from the grass roots.

"We were just getting dozens and dozens of tenants coming in with a problem ... saying, 'on my floor in my building there's a youth hostel.' It ranged from noise issues, security issues, they would get knocks on the door, people who had lost their keys, and lots of partying," Del Valle said.

Chelsea resident Maryanne Marinac, for instance, found one day that the post office wouldn't deliver her mail because they insisted she lived in the "Marriott ExecuStay." (Read her story at The Villager.)

Although illegal hotels were generally already barred by city zoning law, the law was ambiguous and penalties were weak. So a group of local legislators convened an Illegal Hotels Working Group to try to stem the tide in 2005. I wrote about the problem in 2006 (see "Is Your New York Hotel Legal?") for this website, but for years solutions bounced around New York state's famously complex and dysfunctional legislative processes.

The New York Times came out against illegal hotels on July 9, writing "Rogue hotels offer a quick buck for the landlords and a problem for almost everybody else -- other residents who need affordable housing, the neighborhood that needs stability, the city that loses on hotel taxes and often even the visitor who goes home grumbling."

That last point is important. Even if you don't care about how New Yorkers feel, it's unwise to flout the law. Once you have, you're likely to get little sympathy from authorities. And since many of these guys know they're on the shady side, they are just as likely to not be 100% honest with any other part of their business, from managing your credit card information to making sure smoke detectors work.

I was burned by an illegal hotel back in 2003, when my in-laws thought they got a great deal at "Signature Suites" for my wedding. Now well known by the anti-illegal-hotels crowd, Signature Suites put my family up in a cramped, mildewed apartment that flooded in the middle of their stay.

The forums at Tripadvisor.com are packed with reports of vacation rental scams in New York. One traveler showing up at 200 Central Park South was told, "no apartment here, please leave.". A traveler at 162 West 80th Street found an apartment infested with mice and pigeons. Sure, there are some people who have had good experiences dodging the law to find apartment rentals -- but you're putting your vacation at risk, with little or no recourse.

Illegal Hotels: Why New York City Is Different

So why is New York so different from the rest of the world, where vacation rentals are plentiful and accepted?

New York City is an unusual place to live. Even in the depths of the "great recession," the residential vacancy rate is just a few percent. There are more people who want to live in New York than can afford to live there.

New York is, of course, also a fabulous, glamorous destination -- in part because of all those striving, struggling New Yorkers. As a result, there are a lot more people who want to visit New York than there are inexpensive rooms for them.

For years, New York has had various ways of artificially depressing rents so that Manhattan could maintain a middle class. Rent stabilization keeps rents for long-term residents from shooting up sharply, although it irritates landlords who could get higher rents for the same apartments at "market rate." Single-room-occupancy hotels (SROs), meanwhile, offer extremely inexpensive, protected lodging for low-income residents.

Over the past ten years, as Manhattan real estate heated up, some landlords got fed up with the returns they were seeing on those piddling rent-stabilized apartments. Tourists, paying by the night, could pay more.

Meanwhile, developers popped up condo towers on every vacant lot, expecting high returns and sky-high rents.

Then the Great Recession came. Some shiftier landlords realized they couldn't fill their brand-new apartment towers at the 2006-era rents they expected and some developers realized they couldn't unload a studio apartment for a cool million. So, rather than lowering their rents or purchase prices, they started stacking their condos with tourists paying high daily rates. According to the Real Deal magazine, that seems to be what has happened at buildings like 127 Madison Avenue and 17 Orchard Street.

This would all be well and good if those developers hadn't gotten their building permits under false pretenses. The city let those condos pop up to provide more housing for New Yorkers, not to provide hotels for out-of-towners.

"Part of it has a lot to do with the shortage of housing in New York. New Yorkers really pride themselves on their neighborhoods and their community. That's kind of taken away where you have a building where there's a just a number of tourists coming in and out," Del Valle said.

So Who's Running These Things?

A few names crop up over and over again in the illegal hotels biz.

Probably the most famous is Raziel "Raz" Ofer, who pled guilty in July 2009 to grand larceny for not paying sales tax on the hundreds of apartments he converted into hotel rooms through his WooGo.com website. WooGo still exists, and it's still renting out apartments at locations like 305 E 44th Street, which is according to the city a "walk-up apartment building" with open complaints about illegal hotel use.

The single most colorful illegal hotel landlord is Robert "Toshi" Chan, a true Renaissance man who is a TV actor, party promoter, and general bon vivant. His website is surreal. Unfortunately for him, his "Hotel Toshi" (www.hoteltoshi.com) in Brooklyn was recently shut down by the city for the usual reasons; it's not supposed to be a hotel.

But not all the illegal-hotel landlords are as flamboyant as Ofer and Chan. Kore Properties got in trouble last year for renting out properties on 73rd Street that weren't supposed to be hotel rooms.

More depressingly, the owners of various low-income SROs have turned out residents paying $300 a month for tourists paying triple that.

The Vacation Rental Promoter's Perspective

There's one group that this law really infuriates: vacation rental websites. On the website www.protect-vacation-rentals.com, several major vacation rental and other travel websites have come out against the bill, including New York Habitat, TripAdvisor, and HomeAway.

Rental websites just don't have the resources to keep track of local laws and regulations, said Carl Shepherd, spokesman for HomeAway.com and VRBO.com.

"There's no way you could run a company like HomeAway if every time you had a new listing you had to check about whether or not [any given city] allows dogs to stay in vacation rentals," the Austin, Texas-based Shepherd said.

Shepherd found the locals' concerns about vacation rentals completely alien. Converting midtown Manhattan apartments to hotels won't "change the tenor of the neighborhood," he said, and most of HomeAway's rentals consist of units owned by individuals just trying to make an extra buck.

"I haven't run across whole buildings being converted," Shepherd said, "That's typically not what we're seeing anywhere else in the country or the world."

Shepherd said the new law "puts everybody at risk" because it's still extremely unclear which individual rentals are legal and which ones are not. Since enforcement will be driven by complaints, there's no way to know where the state will enforce the law, he said.

"It does very much become a 'buyer beware' market," warns Chris Haywood, spokesman for the New York City tourism office. "Start with our site first [www.nycgo.com]."

So What's a Tourist To Do?

Here at Frommer's, we love alternative lodgings. We think staying in a place that isn't a major chain hotel lets you get closer to the true life of a city.

But we're not about to recommend staying in illegal lodgings that may be shut down at any time, when the local residents have clearly come out against the practice, and you may be putting your safety at risk. That goes against the principle of responsible travel that leads us to love "alternative lodging" in the first place.

Fortunately, the new New York City law leaves open plenty of options for budget and adventurous travelers.

1. Stay in someone's spare room. If you're not driving someone out of their home, New York says it's OK to stay. So staying in a spare room or on a couch (check out www.airbnb.com) is absolutely OK under the new law. And you'll be hosted by a New Yorker who will show you the ropes.

2. Stay in a B&B. B&Bs where the owner lives on the premises -- such as the many handsome B&Bs in Brooklyn, as well as well-reviewed Manhattan lodgings like Country Inn the City -- are A-OK under the new law, Hale-Stern said.

3. Do a home swap. If you also live somewhere desirable, home swaps are permitted in New York City. You'll get a free house-sitter, too!

4. Stay in a legal apartment-hotel. There are many apartment-style hotels in New York City. Check out the Affinia chain of well-reviewed suite hotels, as well as Flatotel, Korman's AKA, the Marmara, and Best Western Hospitality House.

5. Stay in a less-expensive location. If your major concern is price, check out the new cluster of hotels in Long Island City, Queens. Just across the river from Midtown Manhattan, brand-new buildings like the Country Inn & Suites and the Verve Hotel offer rooms for half of what you'd pay a five-minute subway ride away. And don't worry; it may be called "Long Island City," but it's still smack in the middle of NYC.

Talk to other travelers in our New York forum.