The Airbnb/New York spat is coming to a head

By Cale Guthrie Weissman , written on April 21, 2014

From The News Desk

This morning the New York Post reported that the office of New York State's Attorney General Eric Schneiderman is filing an affidavit claiming that two-thirds of Airbnb's New York listings are considered illegal under New York occupancy laws. This comes one day before both the state and the company give opening statements over a proposed subpoena from the Attorney General asking for documents of all New York Airbnb users.

This, of course, isn't new; It's just the latest in the drawn-out spats between the sharing economy's golden child and the state of New York. The latter continually maintains the company is acting illegally, which first subpoenaed these documents last year.

Since then the two entities have been in a war of PR hand-waving and flat out name-calling. When the Attorney General first demanded the nearly 15,000 records, Airbnb promptly responded with a report enumerating all of the ways the company was financially aiding the city. Schneiderman's office still didn't back down, with today's submission aiming to finally bring the conflict to a head. If the court decides in favor of the state, Airbnb will be forced to comply and fork over the records.

This latest data submitted by New York comes from the Investor Protection Bureau of the New York State Attorney General, which manually combed through thousands of Airbnb listings with the help of a New Jersey data analysis company, and then analyzed the type of listing to deem whether it was illegal or not.

It found that 63.6 percent of the listings collected purported to offer "entire apartments." As another recently-filed New York state affidavit explains, it's illegal for any "residents of Class A buildings to rent out their apartments for any prior of time less than 30 days, unless they are also present in the apartment." The data, therefore, deduces that any listing that is for less than 30 days and offers an entire apartment is illegal.

Of course, none of this should come as a surprise. It's well-known that there is a tenuous legal balancing-act currently underway between micro-entrepreneurs who operate within the sharing economy and legacy laws that were intended for larger corporate-like businesses. San Francisco is facing a similar problem, but has been working to create legislative workarounds to appease both the city and Airbnb. New York appears to be staunchly against drafting legislative reforms to let Airbnb persist the way it is now.

The company, which is said to be raising a new round that could value it at $10 billion, has not been completely circumventing these issues. When it first began, Airbnb refused to partake in hotel taxes, but has since shifted its stance and agreed to pay a 14 percent San Francisco hotel tax. As Pando's Carmel DeAmicis wrote regarding its decision to pony up to the tariff, "Airbnb can’t grow into that massive valuation by being a hospitality alternative. It has to become as mainstream as The Hilton." The next hurdle the startup needs to overcome in order to grow out of adolescence is to deal with New York's Attorney General.

The company fervently maintains that what Schneiderman is asking for is over the top. Airbnb is aware of the hazy legal grounding on which it stands, but thinks this means it's time for a much-needed reform. In a statement emailed to Pando, the company wrote:

The current short-term rental law was designed to target illegal hotel operators. The authors of the legislation admitted that Airbnb hosts were not the target of this law. The Attorney General’s attack on thousands of New Yorkers demonstrates why the law should be modified -- not repealed -- to ensure regular New Yorkers can share the home in which they live.

It also pointed to the fact that internally the company has been working  to weed out the bad actors -- that is, those operating full scale hotelier schemes. The state was able to discover numerous accounts purporting have many always-available apartments in New York -- which doesn't really seem like the way the sharing economy is supposed to run. The Post reported that more than 200 of the listings came from just five "hosts." I profiled one such large-scale illegal undertaking last December.

In response to these accusations, Airbnb revealed today that it suspended the accounts of egregious offenders, many of whom the Attorney General had named in its affidavit.

As per its usual reaction, Airbnb also points to the economic benefits its platform is having on the city, while maintaining that the majority of users are honest New Yorkers looking to make extra cash on the side. The Attorney General counters this claim saying, in a statement to Pando, that Airbnb is "resorting to name calling and public relations to confuse the issue."

Whether the court will uphold the subpoena or not will help provide a sense as to the future of the platform in New York. Tomorrow is when we'll begin to see the end of this extended game of chicken.

[illustration by Brad Jonas for Pando]