Bloomberg News

Airbnb Set to Challenge New York Rental Probe Subpoena

April 22, 2014

Airbnb App

Used throughout the world in cities including Paris, Tokyo and Mexico City, Airbnb Inc. has been fighting a probe by the state into whether property managers or brokers have been using the service to skirt the law and avoid collecting or paying lodging taxes. Photographer: Andrew Harrer/Bloomberg

Airbnb Inc., an alternative to hotels in thousands of cities, plans to challenge a New York state demand for information into whether the online, home rental service violates housing and occupancy tax laws.

An Albany state judge is scheduled to hear arguments today on the company’s bid to quash New York Attorney General Eric Schneiderman’s request for information about people who rent out their homes, a move which Airbnb described as a “government-sponsored fishing expedition.”

The court clash pits the San Francisco-based technology business that supporters say should be welcomed as a boost for local tourism against housing advocates who argue the service is driving up rents and turning affordable accommodation into illegal hotels.

Airbnb, which is said to be valued at $10 billion under a financing deal with TPG Capital, provides a marketplace for short-term rentals of homes throughout the world. It said it expects to generate $768 million in economic activity in New York City this year. InterContinental Hotels Group Plc (IHG:US), whose brands include the Holiday Inn, has a market value of $8.3 billion.

60 Percent Illegal

Under New York law prohibiting illegal hotels, residents may not rent out their entire homes for fewer than 30 days. More than 60 percent of New York City Airbnb listings on January 31 appeared to violate that law, according to an affidavit filed with the court yesterday by Sumanta Ray, director of research and analysis for the attorney general’s investor protection bureau.

Some hosts offered multiple properties including one entity listing 80, according to the affidavit.

“Airbnb is simply looking out for its bottom line at the expense of a law that protects quality of life for building residents and safety for tourists,” Matt Mittenthal, a spokesman for Schneiderman, said in a statement yesterday. Airbnb has resorted to “name calling and public relations to confuse the issue,” he said.

David Hantman, head of global public policy for Airbnb, said in a statement on the company’s website yesterday that the majority of its hosts are “regular people, renting out their own home to travelers” and that it wants to be able to collect and remit taxes under the law.

The Washington D.C.-based Internet Association, representing e-commerce companies including Amazon.com Inc., eBay Inc. and Twitter Inc., called the attorney general’s probe “unwarranted” and “unjust.”

Economic Returns

“Airbnb generates positive economic returns for cities around the world, adds millions of dollars to local economies, and brings more people to New York,” Internet Association President and CEO Michael Beckerman said. “Airbnb should be welcomed by business and government leaders hungry for a boost in local tourism, not pushed out by politicians seeking to protect incumbents and special interests.”

Housing advocates and tenant groups counter that services like Airbnb threaten to drive up rents and turn affordable housing into illegal hotels.

“New York City’s affordable housing crisis has reached epic proportions and websites like Airbnb have only exacerbated the problem,” Jonathan Westin, Executive Director of New York Communities for Change, said in an e-mailed statement.

Founded in 2008, Airbnb is backed by venture-capital firms including Sequoia Capital, Greylock Partners and Founders Fund.

At $10 billion, Airbnb joins the ranks of the most highly valued private U.S. technology companies, which includes Dropbox Inc. and Palantir Technologies Inc.

The case is Airbnb Inc. v. Schneiderman, 5593-2013, New York Supreme Court, County of Albany (Albany).

To contact the reporter on this story: Christie Smythe in Brooklyn at csmythe1@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Joe Schneider, Fred Strasser


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