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Airbnb in the City – New York State Attorney General's Report [pdf]

50 points by ics 12y ago

psuter 12y ago
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*.
- apaprocki 12y ago
  I think the most important point for anyone in NYC: 72% Percent of unique units rented in apparent violation of the MDL or NYC Administrative Code. Revenue: $304 Million and Private Short-Term Rentals in New York City Incurred Over $33 Million in Hotel Tax Liability That is $33+ million in tax not being paid to the city to help pay for our city's services.
  - namecast 12y ago
    ....which works out to somewhere between one and two metrocard rides per city resident worth of annual lost tax revenue, and is only ~33% of the NYPD's annual settlement slush fund: http://www.reddit.com/r/news/comments/2j57fl/new_york_city_has_paid_almost_half_a_billion/ http://www.reddit.com/r/news/comments/2j57fl/new_york_city_h... . This isn't buying us much in the way of services, I'm afraid. Fellow NYC resident here, playing devils advocate: do you think the people renting these AirBNB units are contributing more or less than $33 million to the local economy by consuming local goods/services when they stay here?
    - uptown 12y ago
      "do you think the people renting these AirBNB units are contributing more or less than $33 million to the local economy by consuming local goods/services when they stay here?" You could argue that NJ visitors add revenue to the NYC economy when they ride the PATH into NYC, but that doesn't mean they get to hop the turnstile and ride in for free. Airbnb either needs to change the laws, or abide by them. Rationalizing violations citing the "greater good" won't fly in a city where travel and real estate are such valuable components of the economy.
      - namecast 12y ago
        Fully agreed. (And for the record, I'm absolutely not rationalizing their violations - just pointing out that "we're out $33 MM USD because lost tax revenue" is the wrong way to be looking at this. I think we should have some sort of safe harbour provision for people making X dollars a year off AirBNB, personally - once you're making more than the cost of your annual rent, time to pay some taxes.)
    - tptacek 12y ago
      That's a weird question, isn't it? Let X be the amount of economic benefit short-term tenants bring to NYC. X < X+33MM.
      - namecast 12y ago
        That's a weird way of looking at money, isn't it? Hypothetically: I have X dollars in my pocket for a trip to NYC. I can spend it on my hotel + the taxes that the hotel pays, or to an AirBNB host. All things being equal, let's assume AirBNB is cheaper for me because hosts don't pay these taxes, which means I get to keep a larger % of my X. If I go for the hotel, I'm paying a larger % of my X for the rental (some of which is allocated to taxes), and less stays in my pocket, which means that less will be available for me to spend on the local economy (though it should be benefiting us locals indirectly via taxes, or so goes the theory.) I'm not going to somehow magically find more money to spend in NYC if I choose to go with the hotel - I'm just going to spend less money, because I have less money, because I've spent more on my hotel. Your math assumes that somehow I have the exact same amount of money to spend whether or not I choose AirBNB or a hotel, and also that the same number of short-term tenants will visit NYC regardless of the cost they realize paying for AirBNB vs. a hotel - and that further that these short-term tenants will spend the same amount of money on goods and services regardless of their rental costs. I'm going to go out on a limb and say that's unlikely. :)
- reustle 12y ago
  > While generating $72.4 million in revenue for hosts Revenue, not profit
  - intended 12y ago
    opex for a house is not the same as an opex for a hotel, or the compliance requirements for similar facilities.
  - psuter 12y ago
    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.
gdilla 12y ago
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.
- bradleyjg 12y ago
  Do you rent out an entire apartment in a building with 3 or more units for 30 or fewer days at a time? If so, you are one of those people participating in rampant abuse.
  - baddox 12y ago
    What's special about the numbers 3 and 30?
    - bradleyjg 12y ago
      They were chosen as part of the legislative process to balance competing concerns. There's a line drawing problem involved in going from tourist hotels to furnished leases, but that doesn't mean that the two aren't distinct phenomenons any more than similar definitional problems mean there's no such thing as baldness.
  - gdilla 12y ago
    Uh, no... I live in a one bedroom apt and rent out my bedroom while I take the couch. If i'm present in the apt, it's perfectly legal (as long as the stays are less than 28 days).
- o0-0o 12y ago
  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?
volandovengo 12y ago
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 12y ago
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 12y ago
> 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 12y ago
dwg 12y ago
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 12y ago
  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.
  - bradleyjg 12y ago
    The linked document shows that the lion's share of revenue is being made on rentals located in some of the most expensive parts of Manhattan. They are no doubt cheaper than similarly located legal hotels, but there are four other boros and the whole rest of Manhattan that contain legal hotels, hotels that in many cases are cheaper than illegal hotels listed on AirBnB in the most expensive areas of Manhattan. I'd like to see the evidence that people would not visit NYC if they couldn't stay in Chelsea. > NYC government also seems to think they'll be able to put the genie back in the bottle -- 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. They didn't prove anything. We already knew flophouses were a viable businesses in the absence of effective regulation going back to the early 19th century. Businesses that privatize the profits and socialize the costs tend to be profitable.

50 points by ics 12y ago

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*.

apaprocki 12y ago
I think the most important point for anyone in NYC: 72% Percent of unique units rented in apparent violation of the MDL or NYC Administrative Code. Revenue: $304 Million and Private Short-Term Rentals in New York City Incurred Over $33 Million in Hotel Tax Liability That is $33+ million in tax not being paid to the city to help pay for our city's services.
- namecast 12y ago
  ....which works out to somewhere between one and two metrocard rides per city resident worth of annual lost tax revenue, and is only ~33% of the NYPD's annual settlement slush fund: http://www.reddit.com/r/news/comments/2j57fl/new_york_city_has_paid_almost_half_a_billion/ http://www.reddit.com/r/news/comments/2j57fl/new_york_city_h... . This isn't buying us much in the way of services, I'm afraid. Fellow NYC resident here, playing devils advocate: do you think the people renting these AirBNB units are contributing more or less than $33 million to the local economy by consuming local goods/services when they stay here?
  - uptown 12y ago
    "do you think the people renting these AirBNB units are contributing more or less than $33 million to the local economy by consuming local goods/services when they stay here?" You could argue that NJ visitors add revenue to the NYC economy when they ride the PATH into NYC, but that doesn't mean they get to hop the turnstile and ride in for free. Airbnb either needs to change the laws, or abide by them. Rationalizing violations citing the "greater good" won't fly in a city where travel and real estate are such valuable components of the economy.
    - namecast 12y ago
      Fully agreed. (And for the record, I'm absolutely not rationalizing their violations - just pointing out that "we're out $33 MM USD because lost tax revenue" is the wrong way to be looking at this. I think we should have some sort of safe harbour provision for people making X dollars a year off AirBNB, personally - once you're making more than the cost of your annual rent, time to pay some taxes.)
  - tptacek 12y ago
    That's a weird question, isn't it? Let X be the amount of economic benefit short-term tenants bring to NYC. X < X+33MM.
    - namecast 12y ago
      That's a weird way of looking at money, isn't it? Hypothetically: I have X dollars in my pocket for a trip to NYC. I can spend it on my hotel + the taxes that the hotel pays, or to an AirBNB host. All things being equal, let's assume AirBNB is cheaper for me because hosts don't pay these taxes, which means I get to keep a larger % of my X. If I go for the hotel, I'm paying a larger % of my X for the rental (some of which is allocated to taxes), and less stays in my pocket, which means that less will be available for me to spend on the local economy (though it should be benefiting us locals indirectly via taxes, or so goes the theory.) I'm not going to somehow magically find more money to spend in NYC if I choose to go with the hotel - I'm just going to spend less money, because I have less money, because I've spent more on my hotel. Your math assumes that somehow I have the exact same amount of money to spend whether or not I choose AirBNB or a hotel, and also that the same number of short-term tenants will visit NYC regardless of the cost they realize paying for AirBNB vs. a hotel - and that further that these short-term tenants will spend the same amount of money on goods and services regardless of their rental costs. I'm going to go out on a limb and say that's unlikely. :)
reustle 12y ago
> While generating $72.4 million in revenue for hosts Revenue, not profit
- intended 12y ago
  opex for a house is not the same as an opex for a hotel, or the compliance requirements for similar facilities.
- psuter 12y ago
  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.

gdilla 12y ago

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.

bradleyjg 12y ago
Do you rent out an entire apartment in a building with 3 or more units for 30 or fewer days at a time? If so, you are one of those people participating in rampant abuse.
- baddox 12y ago
  What's special about the numbers 3 and 30?
  - bradleyjg 12y ago
    They were chosen as part of the legislative process to balance competing concerns. There's a line drawing problem involved in going from tourist hotels to furnished leases, but that doesn't mean that the two aren't distinct phenomenons any more than similar definitional problems mean there's no such thing as baldness.
- gdilla 12y ago
  Uh, no... I live in a one bedroom apt and rent out my bedroom while I take the couch. If i'm present in the apt, it's perfectly legal (as long as the stays are less than 28 days).
o0-0o 12y ago
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?

volandovengo 12y ago

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 12y ago

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 12y ago

> 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 12y ago

dwg 12y ago

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 12y ago
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.
- bradleyjg 12y ago
  The linked document shows that the lion's share of revenue is being made on rentals located in some of the most expensive parts of Manhattan. They are no doubt cheaper than similarly located legal hotels, but there are four other boros and the whole rest of Manhattan that contain legal hotels, hotels that in many cases are cheaper than illegal hotels listed on AirBnB in the most expensive areas of Manhattan. I'd like to see the evidence that people would not visit NYC if they couldn't stay in Chelsea. > NYC government also seems to think they'll be able to put the genie back in the bottle -- 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. They didn't prove anything. We already knew flophouses were a viable businesses in the absence of effective regulation going back to the early 19th century. Businesses that privatize the profits and socialize the costs tend to be profitable.