
Airbnb in the City – New York State Attorney General's Report [pdf] - ics
http://www.ag.ny.gov/pdfs/Airbnb%20report.pdf
======
dwg
Missing tax revenue is one thing, but it's also worth checking out the summary
of safety laws and complaints in the appendix. Much public discussion focuses
on legality from a tax perspective, but there are legitimate concerns related
to the ability of the existing infrastructure to safely/sanely handle a huge
rise in transient rentals.

I'm a supporter of AirBnB. The way I look at the problem is not as a "fight"
between innovation and politics, bur rather as a chance for an innovative
player like AirBnB to come up with a solution to the concerns that would "push
the envelope" in everyones favor. I'm sure by this point they have already
amassed a ton of expertise on the issue. Now they need to start delivering
solutions to keep their business moving forward.

~~~
nostromo
I wonder if Airbnb is really hurting the tax base at all.

One of the best things about Airbnb is it has made travel more accessible to
the young and the working-class. When those people visit NYC, they shop, they
eat out, they see shows. All of those things are taxed.

I would bet that the sale tax for all of those things would more than make up
for a loss in hotel tax revenue, if you presume that some percent of visitors
would not visit if they had to pay for a traditional hotel.

Unfortunately few legislatures and regulators think this way. They spend too
much time thinking about how to take a larger portion of the pie and not much
time thinking about how to make the pie bigger.

NYC government also seems to think they'll be able to put the genie back in
the bottle -- I think they're wrong. Airbnb has proven this is a huge market
-- if they go under, they'll be replaced by a solution that is harder to
regulate.

~~~
mesh
Do you have a reference for this?

In my recent case, I went to a tech conference in LA, and shared an AIRBNB
with 3 others. Normally, combined we would have paid $750 a night in hotels
($250 each), but instead we spent $500 total a night.

However, we didnt use this extra money to go out. Instead, since we now had a
kitchen, we didn't go out as much (and spent) way less that we would have had
we stayed in a hotel.

Overall, I would say we spent about $2500 less total in LA by staying in an
AIRBNB, as opposed to if we would have stayed in a hotel.

Now, for the larger economy this is good, as I now have money to spend
elsewhere, but, I think you could argue that at least in this case, the LA
economy lost money.

~~~
spikels
The argument would be that by making it cheaper to visit means more people
would go (supply up -> lower prices, higher demand). So even though you spent
less, more people are visiting and spending and thus total visitor spending
rises.

This seems to be the case in NYC[1]. Despite growth of AirBnB visitors,
visitor spending and even hotel occupancy are up. And it's possible these
stats may miss many AirBnB visitors - not sure hot they are collected but
likely based of hotel occupancy.

[1] [http://www.nycgo.com/articles/nyc-statistics-
page](http://www.nycgo.com/articles/nyc-statistics-page)

~~~
opendais
I'm concerned you casually ignore:

Visitors (international and domestic) to New York City in 2009: 45.8 million
Visitors (international and domestic) to New York City in 2008: 47.1 million

Guess when AirBnb became Airbnb.com and popular in NYC? 2009.

I realize correlation != cause but you are claiming a similar argument. Now,
you could blame the recession...except it was 2008 when it was at its worst.

~~~
spikels
That's just cherry picking the one down year. 2009 was the worst of the
recession and AirBnB was tiny in 2009 relative to today. As AirBnB grew so did
visitors.

Visitors (int'l & domestics)

2013: 54.3 million

2012: 52.7 million

2011: 50.9 million

2010: 48.8 million

2009: 45.8 million

2008: 47.1 million

More interesting is that visitor spending and hotel prices and occupancy also
did well. I agree that while none of this is definitive proof on anything.
However it is not consistent with AirBnB seriously harming either hotels or
visitors. Appears to be a win-win.

~~~
opendais
Over 6 years = 54.3-47.1=7.2 2002-2007 = 46-35.3=10.7

Hmm. Now you can blame the great recession but growth did slow.

So lets take 2011 to 2013 [after the Great Recession]: 54.3-50.9 = 3.4 And
2003 to 2005: 42.7-37.8 = 4.9

Notice the difference?

You can't claim this supports your position without cherry picking the data.
Its completely worthless.

~~~
spikels
"If you torture the data long enough, it will confess to anything." \- Ronald
Coase

~~~
opendais
My point is the data is worthless to support your claim. Comparing time
periods isn't "torturing the data".

------
gdilla
I'm an AirBnB host in NYC, and this report makes clear that there is rampant
abuse in NYC by landlords acting as hotels. This drives up rents for residents
as it reduces supply of long term housing and inflates landlords expectations
on what they can charge. I like Airbnb for how well it enables buyers and
sellers to come together and transact. I don't know what a good solution is.
Either charge hotel tax or get rid of hotel taxes for actual hotels so they
can better compete on price? I don't know.

I'm not sure Airbnb is doing themselves any favors by not cooperating with the
AG, however. The 'Commercial Users" are operating secret hotels and getting
away with it.

~~~
o0-0o
I live in Manhattan below a previous AirBNB host that was thrown out of our
building by management. Her _guests_ flooded my apartment twice, causing
thousands of dollars of damage to my property. How do I go about getting
reimbursed for these items?

~~~
smackfu
Well, from your perspective, I don't see why it matters whether the damage to
you was done by your neighbor or by your neighbor's guests. It's still the
neighbor's responsibility.

~~~
tptacek
It does matter. Revolving-door short term tenants drastically increase the
risk of incidents like this, as you'd find out immediately if you tried to
insure against them. Renters are routinely required to carry some degree of
insurance. If Airbnb adoption meant near-universal requirements to carry
punishing insurance coverage, that's yet another externality they'd be
inflicting on the market.

(I like Airbnb but see how fraught it is, too).

~~~
mbreese
It does matter, but less to you and more to your insurance company.

It's more like the your renter's insurance company would sue the neighbor's
company for a claim. However, since the neighbor was renting out the apartment
as an Airbnb property, then their standard renter's insurance was probably
invalid at the time. So now your insurance company would sue the neighbor
directly and may not be able to pay.

The long term implications are that renter's insurance costs will go up for
everyone in that market.

I've long thought that the biggest problem with Airbnb wasn't the tax issue,
or even landlords abusing the system and running mini-hotels. It was
insurance. I suspect that none of the hosts who aren't physically present (and
even some who are) are violating their insurance policy, and if there is a HOA
or other sort of shared space, that insurance policy would also be violated.

If hosts had to actually pay the true costs of insurance, the cost savings
between traditional hotels and Airbnb would be much smaller. Now, if Airbnb
actually offered the insurance to the hosts, or maintained it themselves, that
would be something. But that would be fraught with fraud issues over such a
wide market.

But insurance isn't a sexy topic...

~~~
tptacek
The problem is that nobody can predict whether a tenant is going to abuse
their lease to host short-term tenants for money. When their insurer refuses
to pay up because they lied about how they use their space, there won't be any
recourse through the tenant; bankrupt is bankrupt. The way around this is to
require tenants to obtain expensive coverage on the _presumption_ that they'll
Airbnb the space.

------
psuter
Very factual and concise (the report is 15 pages excluding appendices). As may
have been known, the AG does not apparently care about users renting out
shared rooms (or at least, one at a time). Some salient points below.

    
    
        > 1,406 hosts (six percent) acted as "Commercial Users," running larger
          operations that administered from three to 272 unique units
    
        > In 2013, over 4,600 unique units were each booked as private short-term
          rentals for three months of the year or more. Of these, nearly 2,000 units were
          each booked as private short-term rentals on Airbnb for at least 182 days — or
          half the year. While generating $72.4 million in revenue for hosts, this
          rendered the units largely unavailable for use by long-term residents. [...]
          Units dedicated primarily or exclusively to private short-term rentals accounted
          for an increasing share of revenue over time.
    
        > [The] 10 most-booked private short-term listings on Airbnb in 2013 [...] averaged
          1,920 booked nights *each*.

~~~
reustle
> While generating $72.4 million in revenue for hosts

Revenue, not profit

~~~
psuter
Of course, just like my rent is not pure profit for my building management
company. The real question is, at what price were these units put up for rent
on Airbnb, and how does it compare to market rents? The GA report says they
cannot know because of the data anonymization.

------
volandovengo
AirBnB has added a crazy number of prompts letting you know that you are
probably in violation in the law when you attempt to list a place in NYC.

Between income tax, hotel tax + the likelihood of the govt or management
company coming after you, I think AirBnB is looking a little less enticing to
regular people in NYC to rent their homes.

------
sammyo
What happens to AirBnB when the the NYC hosts file a class action suit to
recover the 33 Million?

Found a very inexpensive Brooklyn AriBnB for one night JFK run and it was
clearly a hostel for international students. At least six beds in the room,
was never sure how many rooms.

------
7Figures2Commas
> As depicted in Figure 3 below, the 300,891 reservations that appear to
> violate the building use and zoning laws yielded approximately $304 million
> for hosts during the Review Period. Airbnb itself earned almost $40 million
> in fees from these transactions. _This represents approximately two out of
> every three dollars Airbnb received in connection with the Reviewed
> Transactions._

> 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. See Appendix A. 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 for the Reviewed Transactions.

If it ever files to go public, the Risk Factors section of Airbnb's S-1 is not
going to be pretty.

Obviously, it could get very ugly for Airbnb and its hosts in cities where
officials don't offer a free pass like San Francisco. Right now, it looks like
New York City is out for blood and is not going to follow San Francisco's
lead. But even if you assume that Airbnb and hosts receive get out of jail
free cards in many cities, as regulation catches up to the market, it's quite
possible that Airbnb will see less supply _and_ less demand.

On the supply side, hosting is only going to get more complex and costly. That
will obviously convince some hosts to leave the market. Many of the illegal
commercial operators who have been violating the law and not paying taxes will
either move on or get shut down, and limits like the ones imposed in San
Francisco will also work to reduce the legitimate inventory.

On the demand side, the need to deal with red tape and tax compliance will
likely remove some of the savings that hosts have been able to pass on to
their guests. Obviously there's a segment of the guest market that prefers the
Airbnb experience, but there's almost certainly a large(r) segment that
chooses to use Airbnb primarily because of cost.

This is the irony of many of the "sharing" economy and "on demand"[1]
startups: once their primary competitive advantage is removed (reduced costs
from flouting of laws), the economics of their businesses could change for the
worse, literally overnight. For those already operating at a large enough
scale, an implosion is a real possibility.

[1]
[https://news.ycombinator.com/item?id=8468863](https://news.ycombinator.com/item?id=8468863)

~~~
smackfu
I'm not clear why AirBnb isn't passing through the taxes. I know their system
supports it. We recently rented from AirBnB in Portland Oregon and we paid an
extra $65 in "Occupancy Taxes" on a $521 stay.

~~~
krschultz
That is a Portland specific thing. AirBnB is now negotiating city by city tax
handling, they just worked something out with SF recently. It doesn't sound
very scalable, but now that AirBnB is the incumbent, it's a barrier to entry
for anyone that tries to disrupt them.

Funny how that works, exploit a loophole in a law, and when you get big
enough, then make it way more expensive for everyone else to come in after you
and cite it as a competitive advantage.

~~~
apaprocki
They can't do the same with NYC because the entire premise of AirBnB is
illegal in NYC unless specific conditions are met. Since 72% of listings are
technically illegal, there is no way they would shed 72% of listings just to
make the remaining 28% tax compliant. This is why many view them negatively --
they blatantly facilitate illegal transactions. The fact that they are doing
tax deals with other cities only underscores that they clearly know their
users are violating NYC law.

