Cities get wise to Airbnb — Featured on Financial Times

The following is an excerpt from a piece in the Financial Times that featured AllTheRooms.
To read the full article, visit their story, Cities get Wise to Airbnb.

By this time next week, Airbnb’s fate in New York City will be largely decided. The company will either have won a key victory, or in effect be banned from its biggest US market and locked in a high-profile lawsuit with the state.

New York’s proposed crackdown on Airbnb — which is waiting only for the signature of the state governor before becoming law — points to the way that slow-moving city bureaucracies are gradually catching up with the regulatory challenges posed by the disruptive sharing economy companies of Silicon Valley.

For Airbnb, which offers accommodation rentals in people’s homes, fixing its regulatory problems is a growing priority. The company has already struck tax deals with more than 200 cities and counties, with agreements that span from Washington state to Amsterdam, and remitted more than $110m in taxes.

“Airbnb is the only accommodation company that is in a strategic way going around cutting tax remittance deals with different jurisdictions to pay the tax directly,” says Rob Stephens, general manager of MyLodge, which provides tax and compliance services for accommodation hosts who rent through sites like Airbnb and HomeAway.

 

For the cities and states grappling with Airbnb, they have to balance the attraction of potential new tax revenues that could be drawn from Airbnb listings, with concerns about housing shortages and entrenched interests like hotel unions.

Tax revenues can be significant: Airbnb bookings would generate at least $440m in state taxes this year if fully taxed, according to a study by AllTheRooms, an accommodation search engine that tracks Airbnb listings.

However the authors of the study estimate that at least $260m of that revenue will go uncollected. In areas that do not have direct tax deals with Airbnb, it is up to the hosts to take the initiative to pay accommodation taxes — but they rarely do. In New York, Airbnb estimates that annual taxes to the state would be about $90m if the state were to fully legalise short-term rentals.

In an eleventh-hour effort to try to prevent New York’s new accommodation bill from being signed into law, the company laid out a set of policy proposals on Wednesday.

As part of those proposals, Airbnb will start implementing a “one host, one home” rule in New York and San Francisco that will eliminate multiple listings. Multiple listings have been a major concern for regulators because they often function like small, illegal hotels, with groups of rooms run by the same landlord.

 

However, as Airbnb’s negotiations with cities around the world pick up pace, the company knows that, even in cities where it has been severely restricted, enforcement can be a problem when its business remains in high demand.

 

These numbers point to the heart of the dilemma for a city like New York, which has grown into Airbnb’s third-largest market despite the fact that short-term apartment rentals have been illegal since 2010.

Enforcement is extremely difficult because the city does not know who the Airbnb hosts are. Other than posing as guests themselves — which is difficult because of the ID verification requirements — enforcers have few options without Airbnb’s co-operation.

So far, in fact, nothing has really stopped Airbnb from continuing to show listings, despite concerns in some cases about their legality.

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