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Investigation By New York State Attorney General Found "Widespread Illegality" In Airbnb Listings

Last week, the New York State Attorney General released a report that analyzed the short-term rental market in New York City. The report found several impacts, chiefly including:

"... widespread illegality across New York City listings on the Airbnb website, with data indicating that as much as 72% of Airbnb reservations over the last several years violated New York law... The report is based on data obtained by the Attorney General’s Office as a result of a May 2014 subpoena for information about potential illegal hotels using Airbnb’s site."

The report analyzed short-term rental in New York with Airbnb reservations data from January 1, 2010 to June 2, 2014. Findings and impacts cited by the report:

"Private short-term booking in New York City on Airbnb increased sharply during the Review Period, registering more than a tenfold increase. The associated revenue also spiked, nearly doubling each year. This year, revenue to Airbnb and its hosts from private short-term rentals in New York City is expected to exceed $282 million."

And, commercial hosts dominated:

"94 percent of Airbnb hosts offered at most two unique units during the Review Period. But the remaining 6 percent of hosts dominated the platform during that period, offering up to hundreds of unique units, accepting 36 percent of private short-term bookings, and receiving $168 million, 37 percent of all host revenue..."

The good news: a lot of people like and use Airbnb; both individuals and commercial entities. The bad news included two types of illegality. First:

"Most Short-Term Rentals Booked in New York Violated the Law. State and local laws in New York — including the Multiple Dwelling Law and the New York City Administrative Code — prohibit certain short-term rentals... 72 percent of units used as private short-term rentals on Airbnb appeared to violate these laws."

The second type of illegality:

"New York law does not permit commercial enterprises to operate hostels, where multiple, unrelated guests share tight quarters. In 2013, approximately 200 units in New York City were booked as private short-term rentals for more than 365 nights during the year. This indicates that multiple transients shared the same listing on the same night, as they would in an illegal hostel. The 10 most-rented units for private short-term rentals were each booked for an average of about 1,900 nights in 2013, with the top listing accepting 13 reservations on an average night."

Some people might think that this is no problem, because either change the law or force Airbnb hosts to comply with the law. The problem: other city residents have been affected with the decreased availability of traditional long-term rental units:

"Private Short-Term Rentals Displaced Long-Term Housing in Thousands of Apartments. In 2013, more than 4,600 units were booked as short-term rentals through Airbnb for three months of the year or more. Of these, nearly 2,000 units were booked as short-term rentals for a cumulative total of half the year or more — rendering them largely unavailable for use by long-term residents..."

Put simply: it seems that landlords (people and corporations) have found they can make more money from their rental property by using it as short-term rentals and by cramming into each rental multiple, unrelated guests.

What the folks at Airbnb are doing about the problems:

"In April 2014, in direct response to NYAG’s investigation, Airbnb publicly claimed it had barred certain large Commercial Users from accepting additional reservations. The time period covered by the Data does not enable us to gauge whether Airbnb’s purported reform lessened the domination of Commercial Users in the private short-term rental market."

With any new technology or service, there are intended and unintended consequences. While initially developed to help travelers find alternative, short-term rentals, the above impacts can be huge upon communities, residents, and workers. The report found:

"Gentrified or Rapidly Gentrifying Neighborhoods Primarily in Manhattan Accounted for the Vast Majority of Revenue from Private Short-Term Rentals in New York City. Bookings in just three Community Districts in Manhattan — the Lower East Side/Chinatown, Chelsea/Hell’s Kitchen, and Greenwich Village/SoHo — accounted for approximately $187 million in revenue to hosts , or more than 40 percent of private stay revenue to hosts during the Review Period. By contrast, all the reservations in three boroughs (Queens, Staten Island, and the Bronx) brought hosts revenue of $12 million — less than three percent of the New York City total..."

This report raises lots of questions. Is similar illegal activity happening in other cities? If so, to a lesser or greater extent? Have residents seeking affordable, long-term rentals been forced to move out of neighborhoods and cities? What are the impacts upon schools and local businesses from this displacement? What are the impacts upon voting? I don't know the answers to these questions. Maybe a reader will post some answers and/or links to documents. The report did cite one impact:

"New York City is Likely Owed Millions in Unpaid Hotel Taxes from Private Short-Term Rentals. A number of taxes may apply to private short-term rentals... In particular, New York City assesses a hotel room occupancy tax of 5.875 percent that applies to private short-term rentals. Excluding fines and penalties, the total estimated liability for hotel room occupancy taxes associated with the Reviewed Transactions is over $33 million. Few Airbnb hosts appear to have filed the paperwork with New York City necessary to remit hotel room occupancy taxes, nor did Airbnb collect any of the hotel taxes owed..."

According to its website, Airbnb is in 34,000 cities and 190 countries. In a time of strained government budgets, you can bet that politicians won't leave $33 million on the table unpaid.

Download the report, "Airbnb In The City" (Adobe PDF).


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