A Blog by Jonathan Low


Jan 21, 2015

Airbnb Blamed for Rising Housing Costs in New York City

Share the pain. That is the argument that a growing number of New Yorkers are making about Airbnb's impact on jobs and housing costs.

The dispute centers on Airbnb's operations in one of its most important markets, New York. 6 percent of the hospitality company's New York hosts generate 37 percent of its revenues - and 72 percent of its rentals are illegal under New York law.

The impact, opponents argue, is that landlords are holding rental apartments off the market because they can make more money from them as Airbnb properties - and that New York suffers a double whammy because that means a decrease in tax revenues as well as depressing job creation in the hospitality sector, which is a crucial source of income to lower income New Yorkers.

The larger issue may be that the sharing economy went from being an innovative income supplement to an income and tax revenue destroyer, raising questions about the socially beneficial foundations of its offer. This, in turn, may change the way that authorities look at it - and calls into question its growth potential, a crucial question as it contemplates an IPO.

Uber faces the same threat. But it may be that it is better that the companies face this challenge now than after investors are encouraged to put their faith and funds in a business model whose foundations prove to be based on a false premise. JL

Kaja Whitehouse reports in USA Today:

Housing advocates and some city officials are blaming Airbnb for rising housing costs, arguing that the $10 billion start-up has given landlords an incentive to keep apartments vacant to make way for short-term rentals.72% of Airbnb rentals in NYC are illegal.
Hundreds of New Yorkers descended on City Hall here Tuesday to battle over the future of apartment rental website Airbnb.
Affordable housing advocates, hotel industry workers and Airbnb hosts all stood on City Hall steps to make their stories heard ahead of the City Council's first oversight hearing on Airbnb and its impact on housing prices.
Housing advocates and some city officials are blaming Airbnb for rising housing costs, arguing that the $10 billion start-up has given landlords an incentive to keep apartments vacant to make way for short-term rentals.
They are calling on Mayor Bill de Blasio to crack down on the San Francisco-based company, which has been bandied about as a potential candidate for an initial public offering.
The crackdown threatens to slow Airbnb's growth in Manhattan, and potentially other large cities that see the online home-rental company as a threat to housing prices and the hotel industry.
Audrey Smaltz told the City Council her rent-stabilized building in Midtown Manhattan has suffered because of Airbnb, Booking.com and Hotels.com. The entire fourth floor is now made up of short-term rentals, she said. And once a tourist wandered out onto her balcony.
In October, New York Attorney General Eric Schneiderman issued a report saying one-third of the revenue from NYC Airbnb rentals was going to commercial renters, or people who were renting out multiple units. Some 6% of NYC hosts were responsible for 36% of short-term bookings and 37% of the revenue, the report found.
Schneiderman also found that 72% of Airbnb rentals in NYC are illegal — thanks to a state law that says apartments cannot be rented out for less than 30 days without the owner also being present.
Airbnb is requesting that the law be changed to allow people to rent out their primary homes — akin to recent changes in San Francisco. Airbnb's head of public policy, David Hantman, has suggested New York collect taxes on hosts and renters to help pay for enforcement against commercial operators.
Airbnb has also battled with its hometown of San Francisco on similar issues, which has resulted in new rules, set to take effect on Feb. 1, that will restrict rentals to permanent residents and limit rentals of entire homes to 90 days a year.
But in New York, some politicians argue Airbnb shouldn't be allowed to have a say over the rules because it has been breaking them for too long.
"Like a marauding army, they have blanketed the city with illegal hotels," said New York State Assembly member Linda Rosenthal. "And now they come to us after they have invaded our city and say, 'We're reasonable. Why don't you deal with us?' "
Hotel industry workers, including labor unions, also came out to protest.
"We need to support our union," said Ozzie Solorzano of Valley Stream, N.Y., while waiting on a long line to enter the City Hall grounds where the different sides were giving speeches. "Our hotels and the industry is being diluted" by Airbnb, he said.


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