Airbnb Listings Mostly Illegal, NY State Contends
nytimes.com
nytimes.com
Brands are very lucrative assets. Maybe part of this shift is an Airbnb brand tax of 6% in place of a Hilton, Marriot, or SPG tax of 30%.
How much of the old model was there to protect monopolies and how much of it was there to provide for consumer safety? How do we incorporate the latter and eliminate the former? That's the real question in my mind.
when medallion costs $200K-$600K is it to protect monopoly or to provide for consumer safety? Tough question :)
Granted, alternatives would probably involve taxi companies wining and dining to get preferred treatment.
Once we've decided on having some sort of system to limit the number of taxis, there's going to be some form of selection. Apparently people thought auction was the "least worst" way (compared to some other selection method).
Auctions only confirmed the intrinsic value of medallion in that system - $2K/month rent pay for a medallion in SF before the auctions corresponds to something like $200K value of a rent-generating asset.
>Once we've decided on having some sort of system to limit the number of taxis
exactly, protecting monopoly as such a limit has nothing to do with consumer safety.
Edit: just googled - the medallion price in NY is $1M and in SF - $300K. Sorry for using obsolete data (holy macrel what a nice exponentially looking price ride of recent 3 years Uber has killed : http://www.aei-ideas.org/2014/06/chart-of-the-day-nyc-taxi-m... )
There's other reasons to want that. Congestion control is one of them. No comment on the validity of such a fear, though
We are paying less precisely because they are new drivers and BNB owners on the market.
I think you're oversimplifying. Not all regulations have to inexorably converge on the taxi/hotel model. Cities could ban non-resident Airbnb rentals and there would still be enough supply to have a major impact on the market. They could impose safety & insurance regulations on Uber/Lyft but stop short of the medallion system, which is the main bottleneck on supply & pricing.
In fact that's exactly what they've done:
[1] http://www.businessinsider.com/san-francisco-makes-airbnb-le... [2] http://www.reuters.com/article/2014/09/18/us-california-lawm...
Last time I got a regular cab, I waited 30 minutes for a middle-eastern guy who did not speak a word in english and tried to rip me off since I'm a foreigner. It's even worse in my country - Poland - where taxi drivers can very well be considered gangs, fighting for territories and being involved in illegal activities.
They are absolutely not "same old taxi drivers and motel owners", is the point I am trying to make here.
Really, though, I know it's awesome that the world (mostly) speaks at least some English, but it's hard to knock somebody living in Germany for not speaking it.
I am not knocking anyone. I was describing a rusty, not customer-friendly business model of the old cab companies compared to the service Uber gets me.
BTW mentioning ethnicity of the taxi driver wasn't necessary.
I've never been to San Francisco but AIUI Uber's main innovation in its original market was in being a taxi service that would actually come if you booked them. This has come up multiple times, from multiple people; it's like Google not having customer service or Amazon having no non assholes in management, except maybe in AWS.
Many guesses, no numbers, unfortunately. I'd need some numbers to really make up my mind.
No. We're paying because we need taxi service and a nice/convenient place to stay. The old system has been very strained and limited with regard to availability and service options - hour long waits for a cab and only very limited hotel/motel options with regard to the room/suite type/format and location.
Why? Also, who's getting exploited here?
That last one is the thing that makes me most surprised that Airbnb has so many libertarian supporters. It's the biggest attack on basic property rights and contracts in quite a while. Personally I don't have much sympathy for landlords, but I do think that if we are going to regulate to no longer allow such clauses in contracts it has to be applied universally, not just for people using Airbnb.
You could say that they could just go over to another service, but there are only so many of these new-age taxi operators. Unless the number of drivers is extremely limited, the same thing will happen to them as to people in other industries (say, cleaning houses):
The customer wants lower prices, the business wants higher margins, so the business squeezes the (badly-positioned) workers.
There's already been protestation with Uber's "misleading" ( it was heavily subsidised at first, but stopped recently) wages given to the drivers.
This is just another example of why the labor market is really not an efficient free market.
Part of the reason it's cheaper is because regulations have set up stagnant non-competing businesses who have no incentive to innovate or compete.
Flaunting the law and making a large set of people make light of the rule of law is a bad thing, and nobody should celebrate the savings from this.
There are places where sharing-economy companies and regulating local governments have worked together to make them legal and open up competition stimulating innovation. New York and the Bay Area, despite their reputations as innovators, haven't managed to do these things.
This assumes the law is in some way just in the first place. Many here would for instance argue that marihuana-prohibition laws are unjust, and that ignoring and bringing ridicule to such laws is a good thing. The same applies to laws prohibiting gay marriage, and many others.
Acting morally is a good thing, but what's legal isn't necessarily what's moral.
all those reasons are so obvious now, thanks! OTOH, it's interesting that from what I've seen a lot of people are "celebrating" the success of uber and lyft because of the lack of incentive to innovate or compete from the taxi/government side
For one thing, HOAs and landlords should have pretty liberal abilities to forbid short-term rentals and pretty much all have.
Renting out a room where the owner/tenant is present should be allowed on a limited basis (perhaps several weeks/months per year).
Renting out a full residence in a non-zoned area should be allowed on a more limited basis (perhaps up to 1 month per year).
Just like on Ebay, et al, "casual sellers" should be able to execute some limited amount of quasi-business activity before triggering all the business rules.
Finally, AirBnB-style rentals should be regulated more like BnBs (duh!) than hotels.
The question is, what's the right answer for these situations? And no kudos to AirBnB, et al for offering up no suggestions.
Why does it matter who you rent out your property to? Why does it matter whether you rent it out for 30 days a year or 300 days a year? Why does it matter whether you rent it out for 30 days to one person or one day each to 30 people? The last one is especially arbitrary, and the only reason it means anything at all is because the hotel industry uses it as a threshold for market segmentation.
Is it safety that matters? If so, let's drop all the "up to X days" bullshit and actually focus on safety. How can we check whether an AirBnB listing is "safe", whatever that means in this context, how do we compensate victims of "unsafe" listings, and how do we come up with a good incentive structure to encourage "safe" listings and weed out "unsafe" ones?
Is it taxation that matters? Of course people should pay taxes on all of their income. In fact, AirBnB income should be easier to track down than the proceeds from that MacBook you just sold on Craigslist. AirBnB keeps excellent records of all of your income (and their fees), after all. Then it's just a matter of getting those records into the hands of the IRS.
Is it zoning that matters? If so, why do we care about zoning at all? Over the last few decades, the only thing that zoning achieved in the United States is the complete segragation of residential areas from all other areas of modern life, so that everyone needs to drive a dozen miles to work and another dozen miles to get their groceries. Many cities are now beginning to toy with the idea of vibrant mixed zones, where people can live, work, shop, and play all within easy walking or cycling distances. A hostel next door suddenly doesn't seem like a bad idea after all. (Oh, it's not properly managed and people are shooting crack up their arms in the backyard? Well, that's a problem with poor management, not a problem with the mere fact that it's a hostel. Would you ban houses with basements because some basements have meth labs in them?)
So I refuse to believe that the right answer has anything to do with how long you should be able to rent out a property. It's your property, you should be able to do whatever you want with it within reasonable bounds (like paying taxes and keeping your property safe for other users).
As long as we keep focusing on peripheral issues that are framed by existing business models with conflicts of interest, we'll never get to ask the really pressing questions, such as reasonable safety and insurance standards for small-time landlords.
And yes, I agree with you that AirBnB's reactive (as opposed to proactive) attitude toward this issue isn't helping, either.
/rant
You're fighting a pretty losing argument here.
The answer to the first four of your rhetorical questions all seem to involve some version of "I don't want my property to lose value". Since I have little sympathy for that kind of sentiment, it seems selfish to me for you to force (i.e. legally require) someone else to do this or that with his property just because it might negatively affect the value of your property. As long as your neighbor doesn't produce loud noises or obnoxious smells that cross into your property, you have no right to interfere with his use of his property. Would you also seek to ban African-American tenants from your neighborhood? Because, you know, the racial makeup of the neighborhood does have an impact on property values.
Note that I'm not saying everyone should bear with a hostel next door. If you want to live in an all-residential neighborhood, you are absolutely free to go and live in a place where everyone voluntarily agress to HOA rules against business-like activity. All I'm saying is that this should be voluntary, not a legal requirement, and there are already plenty of places in the U.S. where such voluntary agreements exist. If Manhattan doesn't happen to be one of those places, well, too bad.
As for the other two two questions, yes, I do understand the rationale for such policies, but I think that they have been corrupted to serve a narrow range of entrenched interests, and that they are badly in need of more flexible rethinking.
No, but I haven't seen examples of negative externalities in that case.
What I'm against is the assumption that renting out your home should be illegal by default, i.e. illegal unless you meet a bunch of conditions. This makes it difficult to ask how we might target specific instances of negative externality.
IMO, when it comes to what you can do with your own property, the assumption should be legal by default, i.e. legal except when a specific way of using your property has demonstrable negative externalities, and even in that case, only illegal to the extent to which your actions cause such externalities.
Illegal-by-default is anathema to innovation, because it places a buden on innovators to demonstrate that they are causing no harm. It's like a subtler version of guilty-until-proven-innocent.
It is. You may do almost anything with your property.
It just happens that renting out is one of the things regulated because of demonstrated negative externalities.
> It's like a subtler version of guilty-until-proven-innocent.
That principle only applies to criminal law.
> That principle only applies to criminal law.
Of course you're right, literally. But only literally. Which part of the word "like" do you not understand?
Is it perfectly fine to treat people with a G-U-P-I attitude as long as you don't do it in the context of criminal law? What about Google canceling your Adsense account for reasons known only to them and refusing to talk with you at all? What about PayPal freezing random charities' accounts with no recourse other than shaming them on reddit? If that's okay, may I accuse you of killing my cat, just because you can't show me any proof that you didn't?
Generally I would argue that businesses that provide contracts to the wide world would have termination clauses : both parties can end the contract, with no warning, with no explanation necessary. Since you agreed to this, why would you be opposed to it ? Go to a competitor.
Killing animals you don't own is entirely different (it is criminal) and I don't understand why you're comparing the two, or why you feel both should carry similar laws.
1. The problem with what you are saying about weeding out unsafe listings is that pretty much any listing in a non-doorman building where there isn't someone in the apartment to oversee the guests is going to be unsafe and reduce the quality of life for the other residents, and those types of listings account for most of the illegal rentals. Essentially, you have a parade of people with keys to the building who don't live there, who are on vacation and don't really care how they effect the people around them.
2. It is taking a critical source of semi-affordable housing off the market: apartments in non-doorman, low-rise buildings. Renters can't compete with Airbnb on price, so more and more are getting snatched up to be run as hotels, increasing competition and driving prices up for everyone else.
I think the solution is almost exactly what the NY AG is pursuing: attempting to aggressively go after people renting apartments as illegal hotels so that it is no longer desirable to do operate them. Continue to allow people to "share" their homes by renting out a room or a couch, but restrict the "entire home" rentals to people who own their property and can legally do it.
In the end this boils down to a rights issue. We have lost our rights. The feds and the courts have adopted this twisted version of rights where they separate us from our property where convenient. When they cannot charge us they charge our property (see nsa/civil forfeiture) with a crime and seize it otherwise they charge the person or worse the customer. Its all about skirting the intent of the Constitution. Property tax laws insure no one truly owns the land besides the government, we effectively are all just renters.
So it comes down to, who has ultimate authority of a piece of land or improvements on it. Currently that has become government.
If anything, I think the typical suburban development where everyone is tied down with 40-year mortgages but nobody is actually home during the week is even more detrimental to the "quality of life of the neighborhood" than a bustling, noisier, more diverse place would be.
If you own a house in a nice quiet street, and someone buys the place next door and wants to turn it into an inn, you'd expect to be consulted about that, right? You'd presumably expect that if everyone else in the street also objects, then planning consent for that business should be denied. If your inn analogy holds, then AirBnB provides no such opportunity for consultation.
The problem of high ratios of short-term occupants destroying communities is well known. The canonical example in the UK is student lets - landlords buy up properties close to universities and let them to students, over time the long term residents are forced out, leading to more and more student housing. These areas attract crime and other social problems because the community is vacant. This is why many councils in the UK restrict the number of HMOs (Houses in Multiple Occupancy) in a given street or area, presumably this happens other places too.
There are good reasons for regulating something like AirBnB or Uber, and it will happen, it just takes lawmakers a little while to catch up.
A neighborhood is whatever its members make of it. If people don't like to have an inn next door, they have every right to speak up against it, organize if possible, and make life hell for the innkeeper so that he moves someplace else. But I'm not sure whether we need the heavy hand of the law to get involved in this at all. In your college town example, what are you going to do? Force students to live at least 5 miles away from campus? Nope, gotta make do with the people you've got, even if it means constructing a new funky subculture just for the student-heavy neighborhood.
I do agree that we need some sort of regulation. But I think those pages of law will be better spent on requirements of safety, taxation, etc. Even a proper enforcement of the fire code will probably wipe out a large percentage of the AirBnB listings.
And if you talk to people who live next to inns, they don't usually rate it as a net positive, particularly if the establishment serves alcohol. Intoxicated people make all sorts of messes that they don't clean up.
If the property is not suitable for partying at night, there should be a clause in the rental agreement (and corresponding details on the AirBnB listing page) that clearly says so. Someone like me who prefers a quiet night might even want to filter listings by that condition.
1. is it bad for individual "professionals" to invest capital on a small scale to provide services that people want at a greater or lesser price? Be it cars or houses.
2. If it is bad, why, and who for? Is it bad for consumers or bad for existing businesses?
Furthermore, unit owners in these buildings paid for their homes with an expectation, based on the law, that their building would not be used in this manner. By violating the law in this way, the AirBnB landlords are affecting the value of these unit-owners' property.
On one hand, traditional regulation keeps small or part-time players out of the market, because regulatory overhead is too high. The relative burden of regulation on large companies is much less, because they can amortize the cost across more business.
On the other hand, this only works if these smaller players get relief from regulations -- which means that they are operating outside the laws and regulations. For instance, turning an apartment building into a hotel via Airbnb sidesteps rules around zoning, tax collection, housing policy, etc. You could decide that these regulations are just annoying red tape, but they were put in place for legitimate purposes in the past and it seems like we ought to at least consider the impact before we throw the baby out with the bath water.
A third argument is that peer to peer marketplaces are changing the balance of power between producer and consumer. As a consumer, this sounds great -- but the person at the other end of the line is now an individual, not a giant corporation. When I have a bad cab ride, I go on Facebook and bitch about it, and life goes on. When I have a bad Uber ride, I give the driver one star and they may very well get fired -- and Uber will just replace them with one of the teeming masses hoping to make it rich driving strangers around for a living.
I suppose it discourages some, but it's not like there aren't small or part-time players in property rental. There are a lot of them! Small-time landlords who own a few rental units are everywhere; I know two such people in my circle of friends who do that. You can either do it as a part-time job, or hire a management company for a fee to oversee the actual management. The difference is that they do it legally. They own apartments in buildings where it's legal to rent out the units, and they rent them out legally.
Interesting, in that many people incorrectly call that program Sex IN the City, which the producers object to. They point out that the AND is deliberate - the City of New York is an integral character in the story, not just a location where the story (and sex) occurs.
In this dispute, the government is making a similar gambit - arguing that they need to be part of the conversation, via regulation and enforcement etc, not just the location in which the lettings take place.
In other words, the report title seems to mis-quote the name of the TV show. And in doing so it missed the opportunity to position the State more strongly as a central actor in this drama.
[1] And lest anyone observe the title may be a coincidence, note that Eric Schneiderman is the AG of New York State, not just the city.
Down one road we recognize this is a new kind of interaction enabled by technology, which leads to legalization, with light regulation to deal with new patterns of abuse that aren't handled effectively by existing rules. Reasonable taxes and fees so the new industry covers the additional costs it's imposing on government and pays its fair share to the city, state, and country.
Down the other road is heavy-handed regulation, and punitive taxes and fees that drive small entrepreneurs and the websites that enable their business model out of the legitimate market and into the shadows. AirBNB is legitimate, but if they stop servicing an area due to regulation, I'm sure a sketchier copycat will try to take over that market. The government misses out on taxes and fees from the grey/black-market transactions. Hosts / guests that have been abused or scammed will be reluctant to seek recourse through the legal system if it will mean admitting their own illegal conduct, and will have to either endure their suffering or try to self-help.
It's really the same story as abortion, drugs, or Bitcoins.
This surprised me not at all. I live in the Lower East Side and see an almost non-stop parade of groups of tourists with suitcases waiting to get let into apartments here. I know friends-of-friends who have four or five apartments that they rent out for this purpose.
People who operate these illegal hotels are attracted to neighborhoods like LES/EV/Chinatown, aside from them being trendy, is because there are a lot of non-doorman buildings that have relatively inexpensive rent. Unfortunately, those buildings are a critical source of semi-affordable housing in Manhattan, and more and more of it is getting snatched up by hoteliers.
I'm glad that NY is not taking the same approach as SF. People should absolutely be allowed to rent out a room or a couch, but the illegal full-time, full-apartment listings are terrible for residents who aren't aspiring hoteliers.