Misty is a singer who lives in Spanish Harlem with a roommate. She sporadically travels from the city for gigs. The cost of rent in New York City is such that leaving an apartment empty, to her, seems “almost a crime,” and renting out her room for the few nights when she’s away is one way she makes ends meet. She uses the newly popular short-term rental website Airbnb to advertise her place, and has had half a dozen bookings over the last year.
“It’s been a third job for me—I don’t know what I would have done,” said Misty, sitting on a park bench as the two children she watches in her second job as a nanny had lunch.
Airbnb is a cleanly designed website where users can rent rooms by the night in their own homes, providing a secure experience for both guests and hosts. Reviews of both guests and hosts, and measures like withholding payment to hosts for 24 hours after the visit begins, help keep everyone accountable and satisfied. The site is popular worldwide. Since the San Francisco–based company’s launch in 2008, the site has expanded to half a million homes in 192 countries. In New York City, the site started in 2009 with 30 hosts; now it has about 15,000 hosts. According to the company, the city had 416,000 Airbnb guests in the last year and generated $632 million in economic activity.
The hotel industry is not pleased with Airbnb’s success, and neither are local governments that stand to lose millions in hotel taxes. Misty’s last name is withheld because New York Attorney General Eric Schneiderman may target with fines and prosecution the tens of thousands of hosts who have used Airbnb in the state.
Schneiderman has subpoenaed Airbnb for extensive personal records of all of the hosts who have offered their apartments for rent in the last three years. The subpoena requests hosts’ names, addresses, guest history, revenue, and tax documents, but also bank account information to verify whether hosts are using ghost accounts. In New York the legality of these types of short-term rentals is iffy. Rules vary by jurisdiction across the country, partly because Airbnb is a new business concept.
Though the state isn’t going after Airbnb itself, Airbnb is fighting the subpoena in court and asking the state legislature to clarify the law. In October the company filed a motion in the state Supreme Court to quash the subpoena. “No matter how benevolent their intent, officials in the United States are not empowered to comb through any and all non-public records to root out perceived or suspected wrongdoing,” Airbnb’s lawyers wrote. A coalition of tech companies—including Facebook, Google, and Amazon—have filed in support of Airbnb.
Paul Avelar, an attorney with the libertarian law firm Institute for Justice, said the hotel industry is using a common tactic of existing companies that want to smother incoming competition. Economists call it “regulatory capture.” Avelar said, “They use the power of the government to prevent lower cost competition from entering the marketplace.” The attorney general’s office did not respond to a request for comment.
In post-recession America, individuals who live on tighter budgets are making it more common to share possessions like houses and cars. Airbnb, potentially a multibillion-dollar company if it goes public, is the behemoth of the emerging “sharing economy.” A sharing cousin is Lyft, where members pay to share car rides in their neighborhood. At their best, these companies are filling economic inefficiencies: A singer who leaves an empty apartment on a weekend in New York can find someone who needs a room to foot the bill. But individual hosts are a new category of business, and local governments aren’t sure how to regulate them. New York is a test of freedom in the sharing economy.
The Airbnb sharing economy has something hotels don’t; because transactions are based on sharing, they are more relational. Airbnb hosts, in striving for good guest reviews, will take hospitality beyond fresh sheets and a continental breakfast. One weekend this fall, I traveled up to the Catskills with three friends; we booked a middle-of-nowhere cabin on Airbnb. Our host chopped wood for the campfire and wrote out lengthy details about hikes and fishing spots nearby. When the temperature dropped that night and we couldn’t figure out how to light the gas heater, my friend texted him and he quickly wrote back, walking us through step by step. He told us to visit a farm stand down the road, which turned out to be a gem packed with fresh donuts, squash, and apples.
Hosts I interviewed in New York have taken guests out for drinks. Sometimes guests will leave thank-you gifts for them. Guests can also be odd or frustrating; one host came home and found her kitchen cabinet and living room completely rearranged, and something broken. (Hosts can file complaints about guests, and get money for damages.)
“There’s that weird connection—you’re staying in my bed,” said Marion, a host on the Upper West Side. “My long-term goal was to have a home that was welcoming to people, even with Airbnb. … I don’t ever want it to become about the money.”
Marion keeps her Airbnb money in a separate account that she only uses for rent or home improvements. Using Airbnb, she has enough income that she doesn’t need a roommate and has been able to provide a place to stay for family and visiting missionaries. She said she is careful about how much she rents out her place. She wants to be considerate to her neighbors, and she emphasizes that in her “house rules” for guests.
With a recent public relations campaign in the face of its legal issues, Airbnb stresses that hosts offer something hotels never can; a home wherever they go. CEO Brian Chesky, at a recent keynote at the company’s gleaming San Francisco headquarters, mentioned that many New York hosts opened their homes for free on the site after Superstorm Sandy displaced many New Yorkers.
The talk about hospitality is warming, but Airbnb is a for-profit company; it has a financial interest in shielding the identity of its highest earners, who are likely renting out their places full time. For every transaction, Airbnb receives a small percentage from the guest and the host. The slice of Airbnb hosts essentially running full-time hotels out of their homes is escaping hotel regulations that make a night at a hotel more expensive.
The attorney general argues that hosts typically don’t pay New York City’s 14.75 percent hotel occupancy tax; but it’s not clear at what point Airbnb hosts meet all the conditions of a hotel and owe a hotel tax. Airbnb’s Chesky has said that the company would support figuring out a tax structure for hosts earning over a certain threshold in New York. On average, according to the company, New York hosts earn $7,530 a year using Airbnb.
Still, the Institute for Justice’s Avelar said even those full-time rentals should be permissible, from a property rights standpoint. Property owners should be able to rent for two days, two months, or two years, he said.
Many of the New York City hosts don’t own their apartments, and they often share a building with neighbors who may encounter a stream of strangers. The usual neighbor arguments against Airbnb hosting are that guests are loud, leave garbage, or fill streets with cars. But Avelar said neighbors can typically address those complaints through any number of zoning ordinances; the state doesn’t have to go after anyone who rents out their home in the first place.
“So far there hasn’t been any real justification for blocking these rentals,” Avelar said. The laws are “horribly vague and shot through with exceptions,” he said, and the subpoena sweeps in “a lot of perfectly innocent behavior.”
The attorney general’s office met with Airbnb representatives this fall, before issuing the subpoena, but the two sides talked past each other. The attorney general said Airbnb was unwilling to collaborate on sharing information of users who might be breaking the law. As a third party, the company said it was not the attorney general’s “investigative arm,” and suggested the state investigate violations on its own. Airbnb said it had offered to issue legal guidance to its users for how to comply with state law but the attorney general provided none.
Meanwhile hosts continue to host, even if they’re a little bewildered. Misty stopped hosting when she first heard about the legal issues, but researched more and thought she was within the law. Airbnb has communicated regularly with its New York hosts about what’s going on, informing them about the legal proceedings but essentially telling them to carry on as usual.
“Of course, if I realized I was completely breaking the law, I would stop,” said Misty.
Marion said it’s unrealistic for New York to expect that hotels will fill the demand for temporary housing in the city. And many of her guests, especially families, told her they could only afford to come to the city because of Airbnb; it allows them to stay for, say, a week. (“No one’s going to pay for a hotel for seven days,” she said.) And guests can cook at home instead of eating out every meal. Marion said she is willing to pay a tax for her guests, but it shouldn’t be “to punish people” for sharing.