San Francisco-based Airbnb, the online accommodations marketplace that allows people to rent their homes or spare rooms for a weekend vacation or monthslong excursion, has been hailed as one of the frontrunners in the developing “sharing economy” ”” but the prestigious Silicon Valley distinction of being a disruptor has not come without the growing pains any new business seeking to upend traditional industry models would be expected to face.
“In 60 seconds you can suddenly be an entrepreneur, you can share your home, your car, anything in your life that hasn”™t been monetized before, you can actually share with somebody,” said Airbnb co-founder and CEO Brian Chesky in an interview with CBS recently. “It”™s really the notion that a person can become a micro-entrepreneur.”
Airbnb has made headlines for its sky-high valuations ($13 billion in 2014 with estimates of $20 billion in February) as well as for causing friction in large metro areas as it and companies like ride-hailing service Uber are dramatically changing long-entrenched industries like hospitality and transportation.
While hosts and travelers have made the accommodation sharing site a hit ”“ the company boasts more than 1 million listings across 190 countries in 34,000 cities with more than 25 million guests served ”“ the increased popularity has drawn the ire of communities and municipalities with concerns about the service”™s effects on quality of life, housing markets, safety and taxation.
- A Newtown cottage that rents for $250 per night through the accommodations marketplace Airbnb.
The controversy has not followed from the cities to the picturesque suburbs in New York and Connecticut with the same kind of fervor, but that is not to say its presence has not been recognized.
Last year in the town of Ridgefield, a complaint of “frat-like” activities at a residence being rented frequently by Airbnb guests prompted an inquiry by the town”™s zoning enforcement officer, Richard Baldelli.
“We found a variety of places within the town of Ridgefield that were operating as Airbnb facilities and we did everything possible to shut them down,” Baldelli said.
He notified the five or six Airbnb hosts operating at the time that they were doing so without a special use permit required by the town for bed and breakfast operations, which Airbnb rentals fall under, according to Ridgefield town code.
The permit can be obtained for a fee of a “few hundred” dollars and involves a public forum where neighbors and the town planning and zoning commission can present any concerns.
“We have to be worried about parking, we have to worry about if it is safe ”“ are they serving food? The health requirements for serving food are strenuous. For the public”™s safety and welfare, Ridgefield feels it is well-advised that someone wanting to do this bed and breakfast has to do this permitting process,” Baldelli said. “I go to some of these places and they don”™t even have smoke alarms.”
The issue came to a head and has not been revisited since the owner of a small garden and education center, Joe Keller, was issued a minor fine by the town for running an Airbnb rental and then failed to persuade the town planners to permit it.
“If we allow short-term rentals here, then theoretically every home that”™s in a residential zone can become a short-term rental,” Ridgefield Planning and Zoning Chairman Rebecca Mucchetti said during a board meeting in 2014 regarding Keller”™s Airbnb rental. “It opens the door to every other residential unit in town ”“ single-family homes, apartments; it doesn”™t matter, you name it.”
At $200 per night and with close to 200 nights booked in his last year of operation, Keller said the rental was a needed financial boost for his small business.
The matter was further complicated after it was found the building Keller listed on Airbnb had not been issued an original certificate of occupancy, but even with the certificate Keller said he would not go back to the board for a special use permit after the board”™s predisposition on the matter of Airbnb was made clear to him, he said.
“They have the antiquated notion of what a traditional bed and breakfast is.” Keller said. “There is no food involved whatsoever ”“ there might be a kitchen guests can avail themselves, but the idea of Airbnb is simply for lodging and lodging only.”
Baldelli said that following the town”™s crackdown on unpermitted Airbnb rentals, none of the contacted hosts returned to seek the proper permits. He confirmed that Ridgefield residents continue to list Airbnb rentals without the proper permit.
In nearby Newtown, where there are no special requirements for operating an Airbnb rental, Don, who declined to give his last name as many Airbnb hosts do for fear of being on the wrong side of local zoning laws, has been renting a small cottage for an average of 150 nights of the year for the last three years.
Don rents a two-bedroom cottage on his property for $250 per night through Airbnb and said he likes the service”™s format, which includes identity verification, privacy protections and rating systems for guests and hosts that show their respective track records.
Over several years and across hundreds of rentals, he has never had a bad experience, he said.
Like many Airbnb hosts, he said the experience has been excellent, with lasting relationships made with guests from around the world with clear benefits for both the host, who gains income from unused space, and the guest, who enjoys a personalized traveling experience off the beaten path.
If Newtown were to change its laws tomorrow, it would be a significant loss, Don said.
The battles over Airbnb have been hottest in major cities like San Franciso and New York, where Airbnb and hosts have been under fire from landlords and city governments regarding laws governing residential short-term leasing and the hospitality industry as well as taxes.
Last year in San Francisco, Airbnb hosts were fined by the city and faced with eviction by landlords until legislation was passed in October that permitted short-term lease rentals and added regulations, including requirements for hosts to register with the city, pay a hotel tax and have liability insurance.
“There are laws written for businesses like hotels, there are laws written for people for how to live with roommates and Airbnb is this thing in between. It”™s this third category: people acting as businesses,” Chesky said to CBS. “And so for many, many years there were no real laws written for it, so people tried to put somebody in one bucket or the other.”
New York Attorney General Eric Schneiderman in October released a report, “Airbnb in the City,” citing “widespread illegality across New York City listings on the Airbnb website.”
Schneiderman found that between Jan. 1, 2010, and June 2, 2014, up to 72 percent of Airbnb listings were illegal:
“Of the 35,354 private, short-term listings, data suggest that 25,532 of them violated either New York state”™s Multiple Dwelling Law and/or New York City”™s Administrative Code (zoning laws). Hosts generated approximately $304 million in revenue from these listings alone and Airbnb itself earned almost $40 million from these transactions,” according to a statement from Schneiderman”™s office.
The attorney general also called attention to the impact the short-term rentals have on long-term housing options ”“ often a point of concern from critics.
In 2013, more than 4,600 units were booked for at least three months of the year. Of these, nearly 2,000 were booked for a cumulative total of six months or more, rendering them largely unavailable for use by long-term residents, according to Schneiderman”™s office.
Airbnb has addressed some concerns, particularly regarding the issue of taxes. Earlier this month, the company sent a letter to members of the New York state Legislature requesting a change to current state and New York City tax rules that do not allow the company to help collect and remit hotel and tourist taxes on behalf of Airbnb hosts and guests.
“Airbnb has been working with governments around the world to help collect more tax revenue,” wrote David Hantman, Airbnb”™s head of global public policy, in the April letter to the Legislature. “We provide 1099 forms to help our hosts pay income taxes on the money they earn while sharing their space. We have also begun collecting and remitting hotel and tourist taxes in San Francisco, Portland, San Jose, Chicago, Washington, D.C., and Amsterdam and will expand this initiative to include other jurisdictions in the coming weeks and months.”
In New York, there have been incidents of people attempting to take advantage of the system by renting out rent-stabilized apartments. But for Sam Abady and his wife, Jane, a pair of empty-nesters, the income they make from renting a spare bedroom in their Bronxville home for $70 per night is necessary, he said.
“Our Airbnb income has been vital to our current circumstances. My wife and I are both professionals, but neither of us is in practice. Instead, we are engaged in research to write a textbook. As a result, we live on an economic knife edge. Income from Airbnb makes it possible to survive,” he said. “Without it, we would not be able to continue our academic work and make a contribution to scholarship.”
An Airbnb host for two years, Abady expressed little concern that he was in violation of any laws and said any pushback against Airbnb in New York City and elsewhere was a clear symptom of a changing of the guard in the hospitality industry.
“The justification or rationale will always be some nonsense, but fundamentally it is anti-competitive, and if it is anti-competitive it is anti-American,” he said. “It (Airbnb) represents the sharing economy; the sharing economy represents democracy in action.”
