Airbnb comes under fire in New York City

City Council thinks Airbnb is driving up rents, but no one knows what to do about it

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Whoever handles New York City Hall’s crowd control has a flair for stagecraft. Early Tuesday morning, two opposing lines circled the block, divided by the entrance gate: to the north, those opposing Airbnb, wearing yellow stickers and carrying signs protesting rising rents; to the south, those in favor, wearing Airbnb stickers and shirts. They were all there for a hearing provocatively titled “Short Term Rentals — Stimulating the economy or destabilizing neighborhoods?” It would stretch for over eight hours and hear the rental platform likened to everything from a marauding army to a miraculous lifeline.

New York has emerged as Airbnb’s largest market and its most contentious. The company says it has 25,000 active hosts in the city and argues that that the money guests bring in bolsters local businesses and helps New Yorkers pay their gallingly high rents. But after several years of rapid growth, the company is finding itself besieged on all sides by an unusual assortment of foes. The hospitality industry is angry that it’s losing business to hosts who pay no hotel tax. Landlords are angry that tenants are renting out their rooms and that they could be held liable if anything goes wrong. Tenant groups are angry that hosts could unknowingly violate their lease and get evicted. Neighborhood groups are angry about an influx of potentially obnoxious visitors. And affordable housing advocates are angry that Airbnb allows enterprising operators to gobble up apartments and rent them out to tourists, reducing the city’s critically strained supply of housing. All these issues burst into the open at Tuesday’s raucous hearing.

"Affordable housing is at crisis levels in our city, with vacancy rates in the single digits," said public advocate Letitia James. "Airbnb is exacerbating the housing crisis." In the packed balcony, onlookers responded with a mix of downturned thumbs and the fluttery jazz hands of approval popularized by Occupy Wall Street. "I ask the city to limit the deleterious effects of Airbnb’s illegal actions by better enforcing laws, through bringing on more inspectors, and using the law to enforce protection of these housing units."

"More enforcement" emerged early as a point of consensus on the council. Airbnb currently falls under the jurisdiction of the Mayor’s Office of Special Enforcement, a joint task force formed in 2007 to tamp down on the rise of illegal hotels. That was before the rise of Airbnb, and OSE’s staff of 10 investigators seems incapable of coping with the explosion in short-term rentals. It chiefly responds to 311 complaints (it received 1,150 illegal-hotel complaints last year, a 62-percent increase from 2013). Though the office has taken to using Palantir software to cross-reference complaints, it hasn’t gone so far as to look at platforms like Airbnb, said Elizabeth Glazer, who oversees the office.

City Councilman Mark Levine said that "it strains credulity" that a staff of 10 could manage the boom in short-term listings, and that by simply reacting to complaints, the unit was "responding to quality of life issues but not the crisis of affordable housing."

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It’s currently illegal in New York to rent out apartments in buildings with three or more units for under 30 days, according to a law passed by the state legislature in 2010. A report in October from the New York Attorney General found that 72 percent of Airbnb listings for entire units from January 2010 through June 2014 ran afoul of this and other codes.

In a letter sent to the City Council on Friday, Airbnb laid out a plan to change that law. "The law should be carefully amended to make it possible for regular people to occasionally share only the home in which they live, while not providing loopholes for illegal hotels to operate," the company wrote. This is, it should be noted, a popular view. A recent Quinnipiac poll found that 56 percent of New York voters want to be able to rent rooms in their homes to strangers. If the city legalized short-term rentals, Airbnb said, New York stands to gain $65 million in hotel and tourist taxes, which the company would collect on behalf of its hosts. At the hearing, the council did not take kindly to this proposal.

"This company is trying to create a sharing economy," Assemblywoman Linda Rosenthal began, twisting the term into a rhetorical weapon. "One in which their hosts run the risk of eviction and contribute to the loss of affordable housing while the company shares in the profits of its illegal enterprise. Like a marauding army, Airbnb is flooding the market in this city and cities across the country with illegal units, and after its incursion is complete, it comes to the government claiming ignorance and begs to be carved out of the laws that protect tenants and affordable housing."

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The problem, committee chair Jumaane Williams said, is that the person subletting an apartment a couple times a year that Airbnb so frequently invokes is only part of the story. In reality, the site has also become a platform for people who rent out multiple units to tourists year-round, diminishing the available housing stock and reaping tremendous profit.

David Hantman, Airbnb's global head of public policy, said that he also wanted to crack down on illegal hotels, but worried that the city was going after regular people who use the site intermittently. Williams denied this repeatedly and accused Hantman of using small-time users as a cover for commercial operators. The council demanded Airbnb provide data showing how many users were renting out their own places a couple times a year and how many were fly-by-night hoteliers. Hantman refused to do so until the city said its listings were legal. The council said it couldn’t say what should be legal until it had the data, and around and around they went.

Levine said they just wanted to go after a small group of bad actors.

"How small, 16,000 or a few hundred?" Hantman shot back.

"Share your data with us and we’ll give you an exact response," Levine said, to muted applause.

The best data we have on Airbnb users comes from a hard-fought subpoena by New York’s Attorney General. Released in October, the report showed that 6 percent of Airbnb hosts manage three or more properties and account for 37 percent of host revenue. More worrisome from an affordable housing perspective, the report found that nearly 2,000 units were rented for more than half the year in 2013, taking them effectively off the market. These rentals accounted for 38 percent of revenue.

"Share your data with us and we’ll give you an exact response"

In the hearing, Hantman said these figures are inaccurate now that Airbnb has purged 2,000 listings from the site for failing to meet quality standards, many of which he says were run by people with multiple listings. But at the hearing, data was presented from Tom Slee, a technology writer who routinely scrapes the site, showing that the number of full-apartment rentals in the last week of November had risen by almost 2,400 from the year before, and that about 30 percent of listings were posted by hosts with two or more units. Airbnb says this analysis is inaccurate as well.

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It’s true that New Yorkers use Airbnb to sublet their own homes while away or rent out extra space. I once — full disclosure — rented out my room in a two-family building on Airbnb while on vacation. I know people who have rented out spare rooms on a more sustained basis in order to keep pace with skyrocketing rents. Airbnb says 87 percent of its hosts are using the site like this, renting out their own home, usually for short periods, a statistic compatible with the Attorney General’s finding that 94 percent of hosts listed at most two units. But it’s also clear from what data we have that a significant portion of Airbnb revenue comes from a very small group of people renting out buildings on a semi-permanent basis. It’s an irony of the platform that it’s proven very attractive both to New Yorkers squeezed by rising rents and to New Yorkers with enough free capital to lease and rent out multiple units, driving down the vacancy rate and likely raising rents even further. So long as both types of parties provide "quality service," it’s not in Airbnb’s economic interest to sort them out.

The platform has proven attractive both to New Yorkers squeezed by rising rents and New Yorkers with enough free capital to lease and rent out multiple units

Outside City Hall before the hearing, I spoke with people who fell all along this spectrum — though no self-professed tycoons. There was a nurse who started renting out her two-floor house in the Rockaways after losing her job due to an auto-accident injury; she says she lives there along with her guests, running an informal bed and breakfast. There was a personal trainer who stays at his girlfriend’s Bushwick apartment while renting out his Greenpoint one, and visa versa; he says he’s using the money to start a fashion line. There was also a freelance journalist who permanently rented out a room in her Upper West Side two-bedroom after, she says, being unable to find a tenant who’d put up with a railroad-style apartment. There was a fashion designer who rents out his old Spanish Harlem studio after moving into a larger apartment across the street, a clear case of a unit that’s being permanently kept out of the housing market.

Then there was the Belgian freelance photographer from Jamaica, Queens who’d rented out his place twice, for one month each, so he could go on vacation. "For a lot of people, there’s not a lot of margin," he said. "Living check to check, it’s nice to have someone else on vacation pay your rent while you’re on vacation." What about people who rent buildings out permanently, driving up rent, I asked. "Hadn’t thought of that," he said. "But that’s capitalism, that’s the society we choose to live in, and money will rule." He paused. "Sure, it’d be nice if we could live in rent-subsidized housing, like we had in Amsterdam."

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The Attorney General’s investigation into Airbnb is ongoing, and the City Council appears primed for more hearings. Airbnb, meanwhile, is taking its fight to the state capital, lobbying for a bill that would amend the 2010 law and make its listings legal.

As the hearing wrapped up, around 6:30PM, an audibly weary Williams said that he thinks the council learned a lot. "And we may have set a record. I’m going to check to see, but this hearing has rivaled some of the education and police hearings I’ve been to."

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