Bloomberg News

Airbnb Agrees to Give New York Host Information in Tax Probe

May 22, 2014

Airbnb Inc., the short-term home rental service for travelers, agreed to comply with a New York state probe of it and hosts who may be violating state occupancy and tax regulations.

The San Francisco-based company, which charges a transaction fee to list a couch, bedroom or house available for short-term rental, will hand over information about its New York hosts on an anonymous basis, according to the accord. It agreed to furnish identifying details later for people deemed to be subjects of the probe.

The agreement will allow Attorney General Eric Schneiderman’s office to move forward with an investigation of what he describes as illegal hotels, accommodations that violate a state law generally prohibiting spot rentals of entire homes. People who rent out rooms rather than entire dwellings aren’t a target of the probe, Schneiderman said in a phone interview.

“It buys New York a year to examine Airbnb data and find patterns for egregious law breaking,” said Brian Solis, principal analyst at Altimeter Group, a San Mateo, California-based research firm focused on disruptive technology. Airbnb gets a year “to use New York as benchmark on how to improve its regulatory compliance, improve service for legitimate renters and better lobby on how to change the law.”

Raising Rents

Airbnb, said to be valued at $10 billion under a financing deal with TPG Capital, has been criticized by affordable housing advocates who say it drives up rents, particularly in cities where living space is scarce and housing costs high. Supporters of the company’s model say it boosts local economies in part by attracting travelers who might not stay at hotels.

Airbnb resisted Schneiderman’s investigation, which it called a “government-sponsored fishing expedition,” and won a ruling from a New York state judge blocking a previously-issued subpoena as overly broad. The attorney general’s office subsequently served the company with a revised version.

“This is a great result,” Schneiderman said of the agreement. “I think we’ve worked out something that’s going to be a model or a template for other jurisdictions where this issue has been raised.”

Hotel Alternative

The company, founded in 2008, now has listings in about 34,000 cities worldwide and has gained a following as an alternative to hotels.

Robert Habeeb, president of Rosemont, Illinois-based hotel manager First Hospitality Group Inc., said that Airbnb is not “on a level playing field” with the hotel industry because its hosts aren’t subject to the same regulations and taxes.

“If you’re going to rent accommodations to the public, you should be licensed, inspected and taxed,” he said in a phone interview.

The company is considered part of the “sharing economy,” one of a growing number of businesses that include ride-sharing services such as Uber, farming cooperatives and crowd-funded enterprises, said Yassi Eskandari-Qajar, a program director for the Sustainable Economies Law Center in Oakland, California, which supports “grassroots economic empowerment.”

“Airbnb threatens large, established companies, who can use the regulations to protect their business models,” said Michael A. Carrier, a professor at Rutgers School of Law-Camden and author of 2009 book “Innovation for the 21st Century.”

‘Regular People’

The company has said the majority of its hosts are “regular people, renting out their own home to travelers” for extra income, and that it’s open to accepting state law reforms that would allow it to collect and pay taxes.

New York state regulations generally prohibit rentals of entire private homes for less than 30 days. More than 60 percent of the service’s listings in New York City on Jan. 31 appeared to violate that law, the New York attorney general’s office found.

As part of yesterday’s agreement, Airbnb will inform hosts about the illegal hotel law as well as zoning, tax and other regulations. New York City hotel rooms are subject to a 14.75 percent occupancy tax.

Schneiderman’s original subpoena sought information on about 15,000 hosts who rent out accommodations in New York state, including their names, addresses, contact information, addresses of the homes and rental charges and communications related to taxes, according to court papers.

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

To contact the editors responsible for this story: David E. Rovella at drovella@bloomberg.net Fred Strasser


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