Big Changes Ahead for Airbnb and Other Lodging-share Websites?

September 22, 2014

Airbnb revolutionized travel lodging by allowing anyone to rent out unused rooms, apartments, or houses to others looking to stay in popular locations for a low cost. Perhaps the best part of Airbnb, and part of what made it novel and successful, is its simple website. In doing so, the company essentially created a forum where people run a bed and breakfast out of their own home (learn how it all started here). Because the company avoided all the normal overhead of actually owning bed and breakfast or hotel, Airbnb was able to undercut the prices of many hotels in large popular cities like San Francisco (where the company started) and New York City. Airbnb’s website boasts over 17 million guests, who have stayed in Airbnb rentals in 34,000 cities in 190 countries. They also make a point to note the 600 castles available to Airbnb users.

Needless to say, Airbnb has been wildly successful, but are stricter laws regarding home rentals about to stifle that success? If San Francisco’s new law works well and other cities catch on, that just might be the case.

Under San Francisco’s new law Airbnb will begin taxing hosts (the people who own the property that is listed for rent on the site) and remitting these taxes to the city as early as next month. This tax, known as the transient occupancy tax, will raise Airbnb rates by about 14% in the city. The new law has come about largely because of Airbnb’s huge success. The tax seeks to close a loophole in the city’s land use requirements, which have always taxed hotel systems, but up until now have had no need to consider alternative methods of lodging. The new tax is just the start of San Francisco’s enhanced regulation of Airbnb-type rentals. The city is still holding committee meetings and hearings on the possibility of limiting the types of homes that can be rented through Airbnb (possibly requiring that all Airbnb listings to be vacant homes), and mandatory registration of Airbnb hosts, which would help curb the abuses to apartment leases that seem to be a significant problem with the Airbnb system. Portland is currently the only other city in the United States that has chosen to tax Airbnb hosts, but New York City is having its own struggles with Airbnb that could lead to tighter regulations.
If Airbnb thinks is having a hard time in San Francisco, they shouldn’t look to NYC for relief. Just last week a coalition, called Share Better, unleashed their campaign to bring down Airbnb in the city. Share Better is comprised of numerous community groups, including fair housing groups, hotel owners, activists, and community leaders, like Manhattan Borough President, Gale Brewer. Share Better asserts that Airbnb and other companies like it are draining the local hotel business, creating unsafe living conditions, and reducing the amount of affordable housing available in the city. Beyond that New York officials have noted serious issues with Airbnb, claiming that it entices tenants to violate the terms of their lease by “sub-letting” their apartment and gaining additional income off the space. Check out Share Better’s youtube attack ad for a better understanding of what the organization is getting at.
This campaign comes on the heels of another strike against Airbnb in New York, this time by its own hosts. Airbnb, as part of a deal made in May of this year, handed over to the New York Attorney General, Eric Schneiderman, the names, contact information, and other Airbnb specific statistics of 107 Airbnb hosts in New York City. This data was supposed to be used to investigate possible violations of rental law stemming from the website. Of these 107 hosts about 24 of them filed a lawsuit to prohibit the disclosure of their information, claiming that such actions by the company violate their privacy rights. This new suit by the Airbnb hosts is likely going to be difficult for Airbnb to stomach, since it coincides with the new law in San Francisco and the Share Better attack in New York City.
From the looks of it, Airbnb may have to face the legal repercussions of its revolutionary lodging website sooner rather than later, which could mean big changes for the six year old company and possibly a reduction in its staggering success.