Inc. recently published an article with the following mention of AllTheRooms.com. To read the full article, you can find it on their site here, Taxes Are a Huge Part of the Battle between New York City and Airbnb.
Sharing is caring, or so the old adage says. But the sharing economy doesn’t always leave everyone feeling warm and fuzzy, and it’s never been more evident than in the push-pull relationship between large cities like New York and short-term rental sites like Airbnb.
First up on the list of grievances big cities have with vacation rental sites is lost tax revenue. The number of missing tax dollars is truly astounding. A study from AllTheRooms.com, a vacation rental and hotel search engine, found that the total 2016 tax revenue from room rentals brokered through Airbnb would amount to almost $440 million if they were taxed at the same rate as traditional hotels.
New York, the report says, is the biggest loser, as they’ll miss out on $110 million in revenue this year, followed by Hawaii (51 million), Texas ($19 million), and Massachusetts ($17 million). In total, just $117 million will be collected in the 26 states where Airbnb has successfully set up tax arrangements.
“Vacation rental sites like Airbnb, HomeAway, VRBO, and others have so thoroughly disrupted the travel and tourism industry that tax and regulatory authorities in many municipalities still haven’t figured out how to treat this entirely new category of accommodation,” said Joseph DiTomaso, AllTheRooms.com CEO. “It goes beyond taxes too. Traditional hotels are governed by a number of specific regulations that cover everything from tax to discrimination to cleanliness; most states just have not caught up with the pace of innovation when it comes to regulating vacation rentals.”
In fact, one expert who’s been studying this phenomenon closely says tax revenue is just the tip of the iceberg when it comes to the difficulties that stem from a vast number of vacation rentals in major cities.
“I only see that as potential tax revenue,” Marti Weithman, a Supervising Attorney for MFY Legal Services’ Housing Project said of the projected tax impact of Airbnb. “As far as New York is concerned, and based on what we’ve seen in other cities, this potential tax revenue would not come close to building ourselves out of an even bigger problem which is a shortage of affordable housing, and that’s what we’re seeing all across the city.”
Weithman, who prior to her most recent stint at MFY was the Director of the Goddard Riverside Law Project, told me that some of the far more troublesome and hard-to-quantify byproducts of Airbnb’s dealings in big cities are its impacts on the availability of rental housing units for New Yorkers.”
“New York City has been in a housing emergency for several decades,” she explained. “Our vacancy rate has been below 5 percent; currently, it’s between 3.4 and 3.6 percent. The New York State legislature imposed this emergency based on the extremely low vacancy rate, and the presence of these short-term rentals is really exacerbating the problem.”
Weithman’s firm co-sponsored a study which found that the majority of Airbnb listings in New York City are illegal and 8,000 units were considered “impact listings,” defined as entire home or apartment listings rented out illegally by commercial hosts, either multiple units for at least three months a year, or single listings rented for at least six months a year. The report says that the growth of short-term rental sites like Airbnb has effectively reduced the available rental housing stock citywide in New York City by 10 percent.
“Not only is it socioeconomic issue, but it’s a safety issue for tenants and tourists alike. Commercial hotels must comply with strict fire code regulations designed to ensure the safety of a transient guest unfamiliar with the building layout; codes that include requiring a secondary means of egress, posting of emergency plans on the back of room doors, designated fire wardens, illuminated exit signs, and other measures. And when you have such a high turnover rate in guests coupled with structures that aren’t intended for this traffic, it creates a real problem.”
So where does this leave Airbnb, particularly in the wake of New York’s state law that now imposes strict fines on New York City residents who advertise their apartments for unlawful short-term stays?
“Airbnb is in a difficult place in New York City, which is its biggest market in the country,” Weithman explained. “New York State and City have strong laws that protect our residents and tourists and preserve our housing stock, and have committed elected officials and housing rights organizations that will continue to fight against illegal short-term rentals.”.
Whether or not the fines effectively discourage the illegal activity in New York remains to be seen, but it’s quite clear that issues between large municipalities and room-sharing sites run much deeper than one single issue, and that could mean it’s a battle that will wage on for a long, long time.