That knock on your Airbnb door isn’t room service—it’s New York’s top cop

October 7, 2013
October 7, 2013

The clash between the “sharing economy” and entrenched industries and traditional regulators is rolling on—and if you live in New York and have used Airbnb to rent out a room or home, you just got involved.

New York state attorney-general Eric Schneiderman has subpoenaed the company, which links travelers with hosts, to find out the identities of all 225,000 hosts in his state. Airbnb says it plans to fight the request, which it considers over-broad, when it comes to individual users, but cooperate with the state in an effort to weed out slum lords and illegal hotels using Airbnb to attract customers.

Airbnb had hoped it was out of the regulatory woods after an appeal overturned a fine incurred by an Airbnb host charged with violating New York City’s occupancy rules, which are designed to prohibit the operation of a hotel without paying the appropriate taxes or obeying regulations. The company, acting on behalf of the Airbnb host and his landlord, was able to argue that because the host’s roommate was living in the apartment at the same time, he didn’t violate the law by renting part of it out.

Still, in the wake of that decision, Airbnb announced plans to start paying the city’s hotel occupancy tax, which for most rooms will be $2 a day, plus 5.875% percent of the rent. That will make it slightly harder for the company to compete with traditional hotels on price, but will help insulate it from more legal troubles. That’s similar to the kinds of concessions other firms in the sharing economy will have to make as the traditional industries they are competing with urge regulators to treat newcomers the same way—consider, for example, regulatory battles between ride-sharing companies like Lyft or Uber and the taxi industry.

But the bigger issue for Airbnb is that the rental of entire apartments without the owner present is still illegal under New York state law, and likely more than half of Airbnb listings in New York City alone violate the statute. Hence Schneiderman’s interest. The company is pushing a change in the law to allow an Airbnb exemption, but it’s not clear whether or when the bill will be enacted.

And that doesn’t even deal with Airbnb’s third problem, beyond hotels that don’t like the competition and regulators who don’t want temporary tenements: It’s that many Airbnb hosts in New York City are probably violating their lease agreements by sub-letting, even temporarily. That’s a problem that will be much harder to deal with on a broad basis, but which will grow as Airbnb’s public profile grows.

All this uncertainty, and the increasingly eager intrusion of law enforcement, could lead hosts to stop advertising their apartments on the service. And that might slow Airbnb’s movement toward an IPO, cramping the company’s recent victory laps.

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