A Milestone in Airbnb's Awkward Relationship With New York
The legal framework around renting an apartment in New York City on Airbnb has been, to put it mildly, ambiguous. The city has laws that address hotel occupancy, but your second bedroom isn't a hotel, right? Say you rent your home instead of owning it; does the landlord need to know that you're running a small income-generating gig out of (and off of) that property? And are you supposed to pay special taxes on that money?
Here is how Airbnb addresses some of these sticky questions on its FAQ:
Your state or locality may impose a tax or taxes on the rental of rooms or the related rental fees. We expect all hosts to abide by their local laws, agreements, tax authorities, and any other applicable regulations. You are responsible for managing your tax and other regulatory obligations.
Also: they suggest you contact a tax professional or "city compliance department."
In the early days of the sharing economy (which Airbnb helped to define), you could pretty safely assume two things about this advice: Most people weren't listening to it, but most cities weren't paying attention, either.
That is officially no longer the case, particularly in New York City. Earlier this year, an administrative law judge in New York fined an Airbnb host $2,400 for violating hotel laws, an event that rightly jarred many of the 15,000 people in the city who use the service. Last week, the ruling was thrown out, but even that "victory" is ambiguous. Airbnb host Nigel Warren escaped on a technicality that will offer little reprieve to thousands of Airbnb hosts in the city: Warren's roommate happened to be home at the time of the rental in question.
And so this left hosts in an awkward spot, and local politicians still seething, and Airbnb still in need some permanent solutions to cover its business model.
In this context, Airbnb CEO Brian Chesky posted a note on the company's website on Thursday offering Airbnb's most detailed framework yet for how it wants to make things right with the city. The company is calling for a new law that would make clear that "regular people" should be able to rent out their homes. It's offering to create a 24-hour neighbor hotline to field complaints about the "bad actors in our community" (much of the griping so far has come not from hoteliers, but from people who don't want their private apartment buildings filled with anonymous partying tourists). Lastly, Chesky says this:
Our hosts are not hotels, but we believe that it makes sense for our community to pay occupancy tax, with limited exemptions for those who earn under certain thresholds. We would like to assist New York City in streamlining this process so that it is not onerous.
This is a big deal and hints at what's to come in other corners of the sharing economy. As this industry grows up – like, well, when all of us grow up – parts of it will inevitably have to start paying taxes. And, at that point, it will become Airbnb's role to do more than just nudge its members to look up local tax laws on their own.
Of course, the mess of all of this is that even if Airbnb works out such a deal with New York City, it (and any number of other "sharing" businesses) will have to do the same, market by market, in other cities where the tenancy laws look different. For now, though, the sharing economy is entering a new phase that's less about the novelty of all these crazy new business models, and more about the gritty work of turning them into indisputably legal enterprises.