New York’s attorney general has launched an attack on Airbnb which could curtail the group’s activities in his jurisdiction.
The company is set to become the test case for the sharing economy, after the attorney general subpoenaed the group for its transaction records for 15,000 New York hosts.
Attorney general Eric Schneiderman objects to the 15% hotel occupancy tax which is being missed out on and is seeking to enforce the local law which states that people cannot rent an apartment for fewer than 30 days if a permanent resident of the apartment isn't present. A judge is due to start gathering evidence, with a ruling due by 18 January.
Peers, an organisation which was set up to support the sharing community, recently set up an online petition calling for clarification of New York’s laws and, as Hotel Analyst was going to press, had 230,000 signatures. The group also organised a night for hosts and local activists in New York, at which people who rented out their apartments spoke about how they had used the money raised through letting out their residences to holidaymakers to fund their way through school and such like.
Ignoring the fact that you’d have to sell your apartment entirely to fund your way through the US higher education system, this was the sharing economy doing what it does best: caring through sharing.
Schneiderman's concern is that it is not sharing if you charge. The attorney general suspects that Airbnb can be used as a front for illegal businesses that are acting as hotels without paying the taxes or enforcing regulations designed to protect consumers.
Schneiderman's office said that, based on information given to it by Airbnb, the top 40 Airbnb hosts in New York have each grossed at least USD400,000 over the past three years, a total of over USD35m. The top 100 hosts in that time period have grossed USD54m.
Airbnb has drawn attention to the economic activity which it has bought to New York, which it is willing to put a number on – USD632m from 419,000 visitors – over two thirds of which was in the outer boroughs, not known for their hotels.
Airbnb also said that 90% of its hosts had only one listing, and in their primary residence. It would like, it said, to work with Schneiderman on cracking down on illegal hotels. CEO Brian Chesky has come up with a three point plan to work with the Schneiderman in this highly-lucrative market; including a right for people to rent homes without worrying about the illegal hotel laws that currently limit Airbnb. If they're allowed to do so, he says in a blog: “we believe that it makes sense for our community to pay occupancy tax, with limited exemptions for those who earn under certain thresholds”.
Any company which is acknowledging that 10% of its activities may be illegal is not a great start, but so far, Airbnb has the upper hand, having already won one battle in New York. The group had the USD2,400 fine made against a host overturned earlier this year, after the host was found to have been at the property for the duration of the contested stay.
At the time, David Hantman, head of public policy at Airbnb, said: “We know there is more work to do. This episode highlights how complicated the New York law is, and it took far too long for [host] Nigel to be vindicated. That is why we are continuing our work to clarify the law and ensure New Yorkers can share their homes and their city with travellers from around the world.
“But in the meantime, this decision was a victory for the sharing economy and the countless New Yorkers who make the Airbnb community vibrant and strong. As I said last summer, the sharing economy is here to stay, and so are we.”
HA Perspective: Intrigued by the antics of Airbnb – and by the need to rent what is effectively a suite, but at a tenth of the price – this correspondent used rival HouseTrip on a recent visit to New York. For a mere USD112 per night, I was able to stay a a five minute walk from the Guggenheim next to a subway stop and a pair of Starbucks and was given refreshments, some of them alcoholic, on my arrival.
As a one-room property, it was always unlikely that I would be sharing and, as the host and two of his children were meeting me to handover keys, this remained true. The host was happy that my flight had been delayed, as they had another guest checking out that day and wanted to be sure to have time to clean.
The host was equally happy I’d be leaving early on the final day as they had more guests arriving after me. The host was able to make me happy by being able to swipe my credit card using a gadget plugged into his iPhone there and then in the living room to cover any breakages.
In short, this host had done this before, with some level of professionalism. The apartment was devoid of any personal nic-nacs, but full of fresh towels and storage space. My research into one-bedroom flats revealed a vast choice of options – none of them sharing with the owners. Many of them came with access to private gyms and glamorous views over Manhattan. Join with me in saying: “investment property”.
HouseTrip has suffered less in terms of direct attacks from lawmakers than Airbnb, but it is watching the situation carefully.
There was nothing to indicate that my host was not being utterly law abiding and declaring his income to the IRS and no doubt the earnings were going to pay for his kids’ college education, after which they may go on to cure cancer.
While the attorney general has been busy thinking about tax, there is the wider issue of whether hosts own their properties – opening them up to accusations of illegal subletting – and what the neighbours think. The host I used wanted a USD300 breakages deposit, on the grounds that I might be a group of frat boys and, while I was very well-behaved indeed, the thought that I might not be must be something to perturb the neighbours, as an ever-changing retinue of people walked into their building.
For the consumer, there is no question that this works. For the hotel sector, particularly in markets such as New York, with its many barriers to entry – not least the high cost of real estate – there is no question that this is costing trade. I would not have stayed with friends or relatives, I would have stayed in a hotel had I not used this service. A hotel with illuminated fire exit signs, proper insurance and a licence for that bottle of wine I enjoyed on arrival.
The market must respond to the needs of the consumer, but must do so within the boundaries set up to protect them. Sharing is not always caring.