Update: Regulating Airbnb

By Danny Restivo (Published 11/29/17)

Editor’s note: Last year, we looked at how some states are working to regulate the sharing economy, specifically companies like Airbnb. This month, we are revisiting this subject to see how things have evolved from last year.

With the help of mobile applications, the sharing economy has reshaped the experience of both the consumer and the operator in a variety of industries. This disruption is most evident in the hotel and lodging industry where Airbnb has emerged as chief competitor to traditional hotels. As a result, city and state governments have tried to strike a delicate balance that allows residents to use Airbnb without infringing upon the market of the hotel industryairbnb

Airbnb is an online community marketplace valued at $30 billion. The application allows people in the United States–and over 200 countries—to list and book short-term housing accommodations. Founded in 2008 in San Francisco, it is now located in over 34,000 cities around the world, while remaining separate from well-established hotel chains and housing markets. Due to their slower moving nature, statutes and regulations have not been able to keep up with this new and innovative economy.

The epicenter of this evolution is most prevalent in New York City, where the fight between Airbnb and the hotel industry has the potential to lay the groundwork for future regulatory framework. With a high cost of living and a large tourism industry, Airbnb has become a popular application among New Yorkers seeking extra cash and tourists seeking affordable lodging. However, the debate in Albany may determine whether residence can use the platform in the future. The legislation that has been introduced both cracking down on and supporting Airbnb could set the tone for the rest of the US.

In the fall of 2016, New York Governor Andrew Cuomo signed a law levying fines as much as $7,500 for illegally listing a property on a rental platform like Airbnb.  The rental application quickly filed suit against New York, but settled after the state agreed to pursue the hosts and not Airbnb. The ruling comes after Airbnb said it would began cracking down on multiple unit homes who use the service. Critics said some property owners have used the mobile platform to push long-term tenants out, while issuing short-term leases, further exacerbating the city’s affordable housing problem.

In July of 2017, Assemblywoman Linda Rosenthal (D-Manhattan) introduced legislation that would force anyone advertising apartment units in New York City on home-sharing sites to include full location details. Currently, Airbnb typically withholds the hosts address information until a client finalizes a trip, making it difficult to crack down on a large number of Airbnb hosts. If approved, Rosenthal’s bill would allow regulators and enforcement agencies to easily identify illegal short-term leases.

In early August of 2017, the Hotel Association of New York City and a hotel worker’s union paid $500,000 to air a 10-day television advertisement that showed images of the Manchester bombing. The commercial also showed the bomber, who stayed at a short-term rental the night before. With ominous music and text-only, the advertisement claims Airbnb refuses to provide the addresses of the apartments and rooms to law enforcement, which endangers all New Yorkers.

Airbnb responded in a statement saying the Manchester bomber did not stay at an Airbnb, while the 9/11 and the Paris attackers stayed in hotels before committing their acts of terrorism. Airbnb responded with their own advertisement featuring a Brooklyn host explaining how the service offsets the cost of living in New York City.

Airbnb spokesperson Peter Schottenfels called Rosenthal’s legislation “a dangerous bill” that is “another favor for the hotel industry sponsored by their favorite taskmaster.” Schottenfels also noted the safety issues emerging from publicly releasing the addresses of thousands of people who are not home. “Forcing New Yorkers to publish their addresses online for anyone to see, especially while they are on vacation or visiting family will put thousands of lives at risk,” he said.

In an effort to counter Rosenthal’s bill, Assemblyman Jack Lentol (D-Brooklyn) introduced legislation that would allow short-term leases in New York City, while allowing Airbnb to collect and remit local and state taxes on behalf of hosts. His bill faces a number of hurdles before becoming law.

Previously, Airbnb and other short-term housing accommodation organizations operated within their own black market because they fell within a gray area between the housing market for long-term use and the hotel industry. As a result, legal battles about Airbnb not paying “their fair share” of state and local taxes or not adhering to “appropriate” regulations began to occur all across the United States. The Federal Communications and Decency Act, enacted in 1996, protects internet platforms from liability if their consumers participate in illegal activities or in Airbnb’s case, hosts not adhering to state and local laws. As a result, state and local governments have had to go after Airbnb’s hosts in order to hurt the larger business.

Back in 2015, New York City accused Airbnb of facilitating “illegal hotel operations.” To accommodate the city, Airbnb examined its user base and unilaterally removed thousands of questionable hosts that appeared to be abusing the system. However, issues between New York and Airbnb remained because a law that prevents Airbnb from becoming a legitimate business that collects taxes. Airbnb has expressed a willingness to accommodate the tax issue in New York.

Similar issues with Airbnb have played out in San Diego, Nashville, New Orleans, Washington, D.C. and San Francisco. Airbnb now offers a registration system that allows hosts to connect with the city’s licensing process within their respective city and state. Airbnb specifically reminds hosts that they may be required to pay certain taxes. However, Airbnb does not inform its users about every specific law and regulation that governs short-term housing accommodations.

DMGS will continue to monitor this issue as it evolves.

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