Founded in 2008 and operating in 35,000 cities worldwide, AirBnB is an increasingly popular alternative way to stay when out of town, often at a fraction of the price of traditional hotel rooms. The site enables users to find a room to rent (or to rent out their room) in a private house; however, like many of the new mobile platforms that facilitate consumer services in long-established industries, AirBnB is facing continued regulatory and legal obstacles, especially in New York City. The online company has been in trouble with the authorities in several cities for violating zoning laws that prohibit unlicensed rentals and ducking hotel taxes. Recently, AirBnb received a major victory when the New York Environmental Control Board overturned a tenant’s $2,400 fine for violating short-term-rental laws. Despite this recent victory, it is only a small step toward clarifying the vague short-term-rental laws, as the ruling only addressed a specific type of short-term rental: those in which a permanent occupant of the apartment is present during the rental.

Shortly after receiving this favorable ruling, AirBnB was once again under attack. Concerned about hotel occupancy taxes and possible evictions by greedy building owners, Attorney General Eric Schneiderman subpoenaed data from the 225,000 New Yorkers participating in what has become the biggest online apartment-sharing service. Although the site has 225,000 users in the city, the subpoena would only affect 15,000 users as it is only calling for data from those renting out their apartment. It was issued after several rounds of negotiations with AirBnB lawyers, but AirBnb is not going down without a fight, and has been criticizing and fighting the the subpoena as unreasonable, over-broad, and an unfounded fishing expedition.

The basis of the subpoena, a 2010 regulation banning renters from subletting apartments for less than 30 days, is meant to protect renters by preventing landlords from adopting slumlord-like practices, such as short-term rentals and avoiding taxes. However, AirBnB claims that not all of its hosts are bad actors, and that it is also concerned about weeding out illegal hotel operators and slumlords, who it says have no place on their site. While it fights the subpoena, AirBnB remains committed to making its community stronger, including working with the city and state to “collect taxes, weed out bad actors proactively, and help handle complaints from neighbors with a dedicated hotline.” The company seems confident that they can come up with a compromise that will protect user’s privacy while weeding out bad actors. While AirBnB is a popular alternative to the traditional options in the hospitality industry, it has quite the uphill regulatory battle before it can earn a spot as a legitimate and legal business in the industry.

–Sara Whaley

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One Response to AirBnB: The Illegal Hotel Alternative Everyone’s Using

  1. Zachary Loney says:

    While I am a huge fan of AirBnB (used it for housing during both summer clerkships), I am glad that you are painting a more even-keeled picture of why New York City is pursuing this case.

    New York City’s unique character and demand have highlighted what is likely less common in other cities. According to this article the top 40 AirBnB hosts in NYC made over $400,000 each (over $35 million) and the top 100 grossed $54 million collectively. These are probably not people renting out a spare room or their apartments during events or vacation weekends.

    It seems that the two sides have a path to a common ground here. The City has asked for the records of those renting out their entire apartment, but that still includes 15,000 member accounts. AirBnB would (presumably) prefer not to aid slumlords or tax dodgers. If AirBnb could identify those users with multiple apartments for rent on the site, that would likely reduce the number of member accounts for the city to investigate. Additionally, cross-referencing the AirBnB rental information with complaints lodged with the City could help target the investigation further.