The Battle Over Air BNB

| 17 Feb 2015 | 01:05

The apartment-sharing service has hit a wall in New York, with elected officials and regulators accusing its users of operating illegally

( BnB, the apartment-sharing startup that has attracted from lawmakers and regulators in New York, purged 2,000 listings from its website the day before a hearing on whether it woud have to give up data on users suspected of abusing the platform.

Attorney General Eric Schneiderman recently subpoenaed Air BnB for data on hosts he believes use the platform as a business model for operating illegal hotels and illegally renting apartments. On April 21, the day before a judge was set to rule on the subpoena, Air BnB removed listings it said had already identified as illegal.

But for State Senator Liz Krueger, whose 2010 "illegal hotel law" is central to the subpoena, such actions amount to 11th hour posturing in the face of scrutiny. She said Air BnB has refused to regulate itself effectively. "They are unbelievably irresponsible and bad at it," said Krueger, who called Air BnB's removal of the listings the night before the subpoena hearing last week, "more than transparent."

Air BnB spokesman Nick Papas said the purge has been in the works for months. "We took a hard look at our community in New York to identify these hosts and we took action," he said. "Earlier this year, we began notifying these hosts that they and their more than 2,000 listings would be permanently removed from the Air BnB community."

The illegal hotel law prohibits the subletting of an apartment for less than 30 days unless the owner is present during the rental. After investigating over 19,000 listings in New York, the AG's office found that 64 percent of them violate that law by advertising the entire apartment for rent, the overwhelming majority of which are offered for three nights or less.

Perhaps the most damning fact found by the investigation was that just 12 percent of Air BnB hosts make up 30 percent of the total listings in New York, suggesting that many use the service to book short-term stays in multiple apartments that are consistently ? and illegally - used as hotels. The AG's investigation found that five such hosts had at least 28 listings, with the worst offender listing a whopping 80 apartments for temporary stays.

A judge heard arguments on the subpoena from both sides on April 22, but has given no indication on when he'll rule if Air BnB has to comply.

Krueger said the 2010 law stemmed from constituents who reported being harassed by landlords to vacate their apartments, presumably so that they could be used more lucratively as ad hoc hotels. Constituents also reported unsafe conditions and quality of life concerns with strangers having access to residential buildings.

"This has really been escalating since about seven years ago," said Krueger, who noted the bill isn't targeting any one company, but instead is aimed at stemming the proliferation of these illegal hotels.

Krueger said Air BnB and other sites encourage customers to engage in illegal activity without informing them that they could be breaking the law and might be evicted based on their interactions with the website.

Most lease agreements in New York, she said, prohibit tenants from subletting their apartments without permission from the landlord. Leases also typically prohibit tenants from using their apartments for business purposes, like earning money off of them when they're not home. None of these points, Krueger said, are raised by Air BnB or similar websites when they interact with customers.

In all, Krueger said, tenants who use Air BnB unawares do so with great risk.

"You're breaking a whole bunch of different laws that come with financial penalties and are the basis for eviction, and these companies think they shouldn't even have to tell you about that," said Krueger. "There are now landlords who type in the address of their building, review, and go 'gotcha, this guy is renting out. That's not legal and I can evict him.'"

Papas said 62 percent of Air BnB hosts in New York said the company has helped them stay in their homes, and that the typical host in New York earns about $7,500/year using their platform. "A modest, but significant amount that can make a huge difference for families," said Papas.

Krueger spokesman Andrew Goldston said Air BnB may have to reevaluate the amount of revenue they expect to pull out of the city; the AG's investigation found 64 percent of listings that violate the law, leaving over a third of rentals liable only to the provisions in the host's lease.

"It's not like we want to kick Air BnB out of New York State," said Goldston. "Our law is not a blanket ban on Air BnB. Obviously they're valued at $10 billion dollars now and they want to expand out their business as big as it can go?but it's really unfortunate that they don't want to play by the rules and they don't want to warn [their customers] of what the rules are."