No Vacancy

Credit: Taber Andrew Bain

If you’re unfamiliar, Airbnb is like a mix of eBay and Couchsurfing: people list their property on the site, and vacationers rent that property. Property owners can make money when they’re not at home, and vacationers have more choice when visiting a city—a win-win, or most would think. Of course, being a stranger-to-stranger system, there have been some disastrous results in some cases.

Trashed apartments and scummy owners aren’t why Airbnb is in trouble now. Instead, it’s the fact that renting out a residence for a period shorter than 29 days is illegal in New York City. The law was passed in 2011 to prevent landlords from purchasing residences and using them as hotels, skirting the regulations that apply to hotels. The law applies to the property owners, not Airbnb, but Airbnb is understandably frustrated that, in the largest city in the United States, landowners must break the law to rent out rooms. After a decision fining a landowner for renting on Airbnb, Airbnb stated:

“This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed. But more importantly, this decision makes it even more critical that New York law be clarified to make sure regular New Yorkers can occasionally rent out their own homes. There is universal agreement that occasional hosts . . . were not the target of the 2010 law, but that agreement provides little comfort to the handful of people . . . who find themselves targeted by overzealous enforcement officials. It is time to fix this law and protect hosts who occasionally rent out their own homes. 87 percent of Airbnb hosts in New York list just a home they live in—they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law.”

Of course, the 87% that Airbnb mentions leaves up to 13% who are using Airbnb to skirt hotel regulations. And even within that 87% that use their own homes, it’s not entirely clear that they aren’t skirting hotel regulations. In one case, a man named Chris Dannen started renting out the spare rooms in his apartment on Airbnb. Dannen made over $20,000 in just over 9 months, ending with Dannen’s landlord issuing a restraining order for violating the lease. The landlord would go on to list his own property on Airbnb.

This is just the latest example of the “Share Economy” coming into conflict with inflexible regulations. Social media has made it easier and easier for strangers with extra X to match up with strangers who need X. RelayRides, a car sharing service, suspended service in New York because of insurance regulations. TaskRabbit, an informal employment app, has drawn attention as possibly causing violations in labor laws. Sidecar, a ridesharing app, has attracted similar attention. Many view this as traditional interests—hotel groups, taxi groups, etc.—using their political power to squelch young competitors. And this may sometimes be true.

However, as such social networking-fueled ventures expand, treating their less formal transactions as outside the purview of the law could create huge issues. In a hypothetical scenario where Airbnb is so popular that it takes over all vacation accommodation in New York, things like health regulations and racial discrimination laws would be much more difficult to enforce due to the sheer number of individual “hotels.” These regulations work because hotels care about their reputation and exist as a single entity with dozens and dozens of rooms. As more and more “hotels” have only a few rooms, the number of hotels will increase, and enforcing any public accommodation regulations will become a huge burden.

And yet, the idea of the government telling individuals who they must let into their homes—or how to clean their homes—is about as unpopular as an idea could be. This applies similarly to Rideshare services and the use of one’s own car. The ultimate question is where to draw the line between “worth regulating” and “too casual/personal.” It seems like New York, when it comes to services like Airbnb, has simply decided that it’s all worth regulating.

–Jacob Schumer

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3 Responses to Airbnb Goes Down in New York: The Policy Implications of your Couchsurfing

  1. Ryan says:

    It seems that the point of Airnb is that customers who don’t have money, such as law students, can go to New York for cheaper without the guarantee of health standards, etc. Since you’re staying in another person’s home, you would probably just hope that the person has a somewhat-sanitary living situation. By not allowing any rental of properties for under 29 days, New York is basically ensuring that tourists must stay in hotels or similar establishments. It probably has the right to do so, but I just don’t think it’s a good policy.

  2. Brooke McLeod says:

    Interesting issue. It reminds me of this pending case:

    http://www.nytimes.com/2013/05/26/us/clash-over-who-is-allowed-to-whiten-your-smile.html

    While restricting how a person can use their home may be unpopular, it is still an economic regulation that the state has every right to enforce. This just seems similar to someone selling a product from their home without being licensed, which has traditionally been regulated by the state. Here, the state isn’t trying to tell you you can’t have guests. It is keeping you from putting a room in commerce in violation of its licensing requirement, which was put into place to upheld health standards, protect consumers, etc. Thus, I am not really sure that the New York decision is a bad one.

  3. Mike Dearington says:

    Great post, Jacob – given the cost of alternative accommodations in NY, and the growing popularity of the company, this is certainly a contentious issue.