The Real Deal New York

The real reason New York State is going after Airbnb: OPINION

Short-term hotel rental startup threatens to disrupt traditional business model

May 05, 2014 12:30PM

From left: Eric Schneiderman and Airbnb founders Nathan Blecharczyk, Joe Gebbia and Brian Chesky

From left: Eric Schneiderman and Airbnb founders Nathan Blecharczyk, Joe Gebbia and Brian Chesky

New York State Attorney General Eric Schneiderman’s subpoena of Airbnb hosts is really about a battle between established industry players and one of many new companies angling to disrupt traditional ways of doing business, according to Zachary Karabell’s recent Slate column.

In Karabell’s view, companies like Airbnb represent a wave of new companies that threaten to disrupt both existing industries and existing laws. Much like fellow game changers Uber on the transport front and Aereo in the television world, Airbnnb uses technology to connect buyers and users without the traditional go-between, thus placing the hotel industry’s hundreds of billions of dollars at stake. What is needed, he argues, is a balance between using current laws and regulations to “protect the common good without choking innovation.”

“The only way that new models will avoid the snare of old-guard companies and ill-considered laws is for regulations and laws to adapt to new technologies and new business models, rather than be used as tools to inhibit them,” he writes.

Clearly, taxes are a concern for city and state officials. A spokesman for the AG earlier this year told NY1 News, “New York can’t afford to leave this much money on the table.” But Schneiderman — in his first public remarks on the legal wrangle in New York State Supreme Court — also vowed to protect the state’s “extraordinarily successful” hotel industry. In addition, he accused the San Francisco-based startup of misrepresenting its business model to investors as the company gears up for an initial public offering later this year. A court heard arguments on the case last month, during which Airbnb pushed for the subpoena to be dropped. But the judge overseeing the case did not issue a ruling or say when one might come. [Slate]Julie Strickland

19 Responses to “The real reason New York State is going after Airbnb: OPINION”

  1. May 05, 2014 at 4:07 pm, fr75006 said:

    The real victims here are not the evil, incumbent hotel owners but the citizens of New York who can barely afford to pay for their housing on a money basis — and who cannot and should not compete international tourists looking for more comfortable accommodation options. Innovation does not give people a blank check to commit criminal behavior — especially when it results from average citizens being excluded from the housing market.

    • May 05, 2014 at 5:39 pm, Marc said:

      No. A hotel went up where my building used to be kicked me out of my old apartment. The only way I afford rent is with my extra apartment on airbnb. The neighbors love my guests and one even stayed with them I Germany FOR FREE!
      Also the restaurant in the new hotel is $15 a drink and $40 for a meal.
      I show travelers the real spots to get a good classic new York bite to eat.
      NYC is a melting pot… If you don’t like it move to the suburbs.
      I love airbnb and am tired of the hotels monopoly on the tourist.
      You shouldn’t have to be rich to visit NYC…. airbnb gives a chance to the little guys like me to get a piece of the big apple.
      -born and raised new yorker

      • May 05, 2014 at 8:51 pm, guest said:

        your extra room on airbnb is legal and no one is disputing that.
        oy vey.
        you really are not reading this thread carefully.
        and if you are so “pro little man” why can’t you and your bleeding heart liberal friends see that all this “warehousing” of apartments is actually driving YOU out. You are the cause of your own demise.
        congrats.
        you fool….give them their 10billion dollar valuation…you and the likes of you are a means to their success and YOUR end..
        basta

  2. May 05, 2014 at 4:47 pm, Man Ray said:

    Actually, airbnb is the clearing house for criminal activity. It promotes transient hotel use of non-transient apartment buildings, motivating rental tenants to profiteer without their landlord permission, and outside the bounds of their lease and the law. Law-abiding neighbors within these rental buildings are regularly disturbed by confused transients and prostitutes. I urge everyone to report such illegal activity every time they see it. It infriges on others’ quality of life. It has little impact on the hotel industry, so airbnb’s cry of unfair is ironic, to understate the severity of the irony. Housing laws are neither arcane nor archaic, and the difference between residential use and commercial, transient hotel use are distinctly separate for good reason. The real worry is that the market shows itself to be much more heavily hotel-oriented than residence-oriented, and that re-zoning will occur as landlords demolish their apartment buildings in order to construct commercial-use hotels. That would actually be legal though, so no complaints if the process carries the day for hotels, although it would put law-breaking airbnb out of business.

    • May 05, 2014 at 5:18 pm, Ricky Bobby said:

      Awwww poor baby is upset because his big hotel industry is getting disprupted… stop crying and get with the times grandpa.

      • May 05, 2014 at 8:47 pm, go man ray said:

        Man RAy is right.
        Does getting with the times mean breaking the law?
        Bet you are one of those tenants who has 2 or 3 rentals that you lease out to pay your student loans off……

      • May 06, 2014 at 8:55 am, jake said:

        If you were in the 1930′s, you probably would have gotten with the times- and been a Nazi. Laws protect us from the inconsiderate and arrogant that think they are smarter. The MDL is clear and concise. I hope that the AG uses MDL 302 to crush the illegal buildings by getting them foreclosed. How long before a kid in a building is raped by an AirBnB user? Love the 20-somethings thinking that they have a new way- this is an old one.

    • May 05, 2014 at 7:21 pm, I'mMrRight said:

      Transients and prostitutes? Just stfu old man. I have hosted to over 100 guests over the years and they’re mostly young European and Australian couples who do no harm. I just checked in an old couple from the Catskills and the guy had had a stroke and could barely walk and said it’s the only way they could afford visiting the big Apple.

      • May 05, 2014 at 8:49 pm, guest said:

        do you own your apartment? answer honestly. if you don’t you most likely are in violation of your lease agreement AND the laws of the state of NY that say less than 30 days is illegal. Ah….the weekenders….and your quick 500 vig…..

    • May 08, 2014 at 8:34 am, Tom W. said:

      “I urge everyone to report such illegal activity every time they see it.” Congratulations! You hereby receive a shiny new Dienstauszeichnung badge and have been promoted to Gauleiter.

  3. May 05, 2014 at 5:02 pm, Mike said:

    There is no easy answer here – AirBnB is doing a real service and deserves an opportunity to disrupt business which hopefully benefits everyone involved. But they should obey basic rules in place to protect people (both travelers and local residents), pay taxes and ensure the rentals are legal (i.e. abiding by the terms of their lease and not simply a way to avoid taxes and legislation).
    A recent study by a travel magazine showed that approx. half the rentals on AirBnB were by multi-unit renters and thus not what is intended. Someone renting ten units is not the ones we feel sorry for – the one-off guy renting his apartment while away on vacation or renting a spare room so he can afford rent does deserve some relief. However, I live in a building where several tenants rent out their units and personally hate it. I don’t like strangers coming and going, many who have little regard for the building or neighbors.
    Further complicating things are the union – they control much of our city government and are fighting AirBnB because it costs them jobs. Probably the only time the union and hotel association can agree on anything!

  4. May 05, 2014 at 8:22 pm, Bob G said:

    You hosts enjoy your extra income. What you are doing is illegal. You will be getting with the times with your checkbooks. Are you paying the required lodging and income taxes? If not, you might want to look up tax evasion and see what the penalties are. Back taxes, interest and penalties will be your reward for “sharing”..

  5. May 05, 2014 at 8:25 pm, Bob G said:

    You can change your hand to Mr. tax cheat, Mr, Right. Maybe if you are lucky, they will offer you a tax amnesty if you pay before they find you.

  6. May 05, 2014 at 8:53 pm, guest said:

    All the airbnb users in NYC are drinking the Airbnb koolaid.
    You are helping them get their valuation and pricing yourselves out of the city you are fighting to be able to afford.
    Losers.

  7. May 06, 2014 at 1:47 am, Musashi said:

    All of You: STFU. Better not argue on a subjects you’re not 100% sure of. None of you CLOWN really know the reasons behind all this. Some have a brief idea, but still in the cloud. LOL. Airbnb isn’t doing anything wrong: it is an excellent online martketplace that have positive impact on short-term stay around the globe. Not everyone can afford paying that much money to stay at hotels in NYC. And each Lease Agreement is unique to its Landlord’s preferences and choices; some leases allow you to sublease the space without any written notice to be sent to your Landlord when some don’t. Some Landlords don’t even care about what you do with the apartment as long as you pay them the rent on time and deliver the apartment in same condition you got it at time of initial move-in. And what about the short-term Rental Business prior to Airbnb? Do we even remember that?

    What about Real Estate Businesses that specialize in short-term stay. their business model which is to lease apartments, furnished them, then sublease them on a short-term basic (less than 30 days of course)? What about the existing Vacation Rental Business? Common AG!!! Give us a break!

    We all know how Powerful Hotel Owners/Operators are lobbying the AG so he can fight Airbnb. Stop with the wreck!!!! Total BS.

  8. May 06, 2014 at 1:52 pm, Steven Unger said:

    The Good, The Bad and The Ugly
    Will the real airbnb please stand up?

    In a few short years airbnb has gone from promoting “couch surfing”, to “private
    room” rentals (mini-B&B’s), to unsupervised “entire place” rentals (which are really just vacation rentals).

    There is a fundamental difference between 1) “renting a room in your
    home” when you are present (already legal in New York) and 2) “renting your whole
    house” when you are not present.

    The Good

    The first group are airbnb “private room” rentals which do not generate horror
    stories, do not deplete the month-to-month rental market (except for long-term
    roommate rentals), help people stay in their homes, and usually cost less than a
    commercial hotel. I call this “the GOOD airbnb”.

    The Bad

    The second group are airbnb “entire place” rentals which are really just
    unsupervised vacation rentals. These generate the airbnb horror stories (because they are unsupervised), deplete the month-to-month rental market, raise rental prices,generally cost as much as commercial hotels and do not help the
    owners “stay in their homes”. These are currently illegal in New York
    and need to be held to a much higher standard. I call these “the
    BAD airbnb”.

    The Ugly

    In New York City and San Francisco airbnb faces special challenges because of the combination of a hyper inflated real estate market, the predominance of apartment, coop and condo buildings, and rent control.

    Every “entire place” “vacation rental” means one less month-to-month unit.
    Property owners rent short-term only when they believe they will make more
    money than renting month-to-month. Traditionally Vacation Rentals in resort
    destinations from Key West, Florida to Cannon Beach, Oregon have long been
    regulated to mitigate their impact on their communities. Organized Vacation
    Rentals in cities is a more recent phenomenon.

    When airbnb describes their “average” host they combine the two types of rentals
    which is deceptive. The profile of a “Private Room” host is very different than the profile of an “Entire Place” host. Airbnb could easily provide segmented statistics, they just choose not to.

    • May 06, 2014 at 2:27 pm, Tired of the Confusion said:

      Even the “entire place” or “private room” is muddied. I have 2 listings for 2 rooms in my private house (not apartment) that I own and in which I reside 100% of the time. One room is a bedroom on the same floor as my bedroom and my kids’ room. The other is a room with a separate entrance and bathroom, so that is an “entire apt” WITHIN my house.

      • May 06, 2014 at 7:52 pm, Steven Unger said:

        Most municipalities have a definition of a “dwelling unit”, an “accessory dwelling unit” (ADU) and a “legal bedroom”. If this is a room in your house with a door to the outside it would just be a bedroom. If the room has a kitchen as well as a bath and its own entrance it might be considered an ADU. I suspect legal ADUs are a very small number of airbnb listings.
        In any event, the more important question is whether you are residing in your property to supervise the property and the guest during their stay so that things don’t get out of hand.

  9. May 06, 2014 at 5:17 pm, Man Ray said:

    Hi Musashi – You express an unsurprising opinion; your answer shows the equivalent of a loud mouth on an empty head. In reality, several laws and often legal agreements are being broken by the people who rent out a class A multiple dwelling unit to transients. All are criminal, and most are open to civil action. Each lease is not subject only to a landlord’s preference and choices; many are subject to Rent Stabilization regulations, and all are subject to zoning law. Commercial hotel uses are being illegally created within non-commercial apartment buildings. The laws are created to protect residences from hotel behavior. Whether you think a business model is worthy, or that a poor apartment dweller should be allowed to break the law in order to make money is not only irrelevant, but part of the problem. However, I am considering renting a room in your mother’s house; it is your old room. Time for you to grow up and move out. Dummy.

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