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Comment by nostromo | Hacker News Reader

I wonder if Airbnb is really hurting the tax base at all.

One of the best things about Airbnb is it has made travel more accessible to the young and the working-class. When those people visit NYC, they shop, they eat out, they see shows. All of those things are taxed.

I would bet that the sale tax for all of those things would more than make up for a loss in hotel tax revenue, if you presume that some percent of visitors would not visit if they had to pay for a traditional hotel.

Unfortunately few legislatures and regulators think this way. They spend too much time thinking about how to take a larger portion of the pie and not much time thinking about how to make the pie bigger.

NYC government also seems to think they'll be able to put the genie back in the bottle -- I think they're wrong. Airbnb has proven this is a huge market -- if they go under, they'll be replaced by a solution that is harder to regulate.

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Do you have a reference for this?

In my recent case, I went to a tech conference in LA, and shared an AIRBNB with 3 others. Normally, combined we would have paid $750 a night in hotels ($250 each), but instead we spent $500 total a night.

However, we didnt use this extra money to go out. Instead, since we now had a kitchen, we didn't go out as much (and spent) way less that we would have had we stayed in a hotel.

Overall, I would say we spent about $2500 less total in LA by staying in an AIRBNB, as opposed to if we would have stayed in a hotel.

Now, for the larger economy this is good, as I now have money to spend elsewhere, but, I think you could argue that at least in this case, the LA economy lost money.

My argument is that I suspect Airbnb is increasing the total number of tourists.

It's classic economics: price reductions increase volume.

Yes, but you ignore the fact it increases the costs of NYC's public housing operations & secton 8. :/

I'm pretty sure if its "break even" [in terms of tax revenues] it isn't "break even" [in terms of tax expenditures].

If you raise the cost of real estate, you are raising the cost on 175,000+ apartments NYC pays for & 29,000 property owners that take Section 8.

You are also probably one of those people that complain "welfare" is too expensive. Well, if you keep creating economic conditions that raise the cost of welfare and keep campaigning to lower taxes...guess what happens?

The argument would be that by making it cheaper to visit means more people would go (supply up -> lower prices, higher demand). So even though you spent less, more people are visiting and spending and thus total visitor spending rises.

This seems to be the case in NYC[1]. Despite growth of AirBnB visitors, visitor spending and even hotel occupancy are up. And it's possible these stats may miss many AirBnB visitors - not sure hot they are collected but likely based of hotel occupancy.

[1] http://www.nycgo.com/articles/nyc-statistics-page

I'm concerned you casually ignore:

Visitors (international and domestic) to New York City in 2009: 45.8 million Visitors (international and domestic) to New York City in 2008: 47.1 million

Guess when AirBnb became Airbnb.com and popular in NYC? 2009.

I realize correlation != cause but you are claiming a similar argument. Now, you could blame the recession...except it was 2008 when it was at its worst.

That's just cherry picking the one down year. 2009 was the worst of the recession and AirBnB was tiny in 2009 relative to today. As AirBnB grew so did visitors.

Visitors (int'l & domestics)

2013: 54.3 million

2012: 52.7 million

2011: 50.9 million

2010: 48.8 million

2009: 45.8 million

2008: 47.1 million

More interesting is that visitor spending and hotel prices and occupancy also did well. I agree that while none of this is definitive proof on anything. However it is not consistent with AirBnB seriously harming either hotels or visitors. Appears to be a win-win.

Over 6 years = 54.3-47.1=7.2 2002-2007 = 46-35.3=10.7

Hmm. Now you can blame the great recession but growth did slow.

So lets take 2011 to 2013 [after the Great Recession]: 54.3-50.9 = 3.4 And 2003 to 2005: 42.7-37.8 = 4.9

Notice the difference?

You can't claim this supports your position without cherry picking the data. Its completely worthless.

"If you torture the data long enough, it will confess to anything." - Ronald Coase

My point is the data is worthless to support your claim. Comparing time periods isn't "torturing the data".

The linked document shows that the lion's share of revenue is being made on rentals located in some of the most expensive parts of Manhattan. They are no doubt cheaper than similarly located legal hotels, but there are four other boros and the whole rest of Manhattan that contain legal hotels, hotels that in many cases are cheaper than illegal hotels listed on AirBnB in the most expensive areas of Manhattan.

I'd like to see the evidence that people would not visit NYC if they couldn't stay in Chelsea.

> NYC government also seems to think they'll be able to put the genie back in the bottle -- they're wrong. Airbnb has proven this is a huge market -- if they go under, they'll be replaced by a solution that is harder to regulate.

They didn't prove anything. We already knew flophouses were a viable businesses in the absence of effective regulation going back to the early 19th century. Businesses that privatize the profits and socialize the costs tend to be profitable.

> Businesses that privatize the profits and socialize the costs tend to be profitable.

What costs are being socialized by Airbnb?

Evading taxes that pay for city services? Raising the cost of housing stock [and thereby the welfare programs for housing in NYC]?

> Evading taxes that pay for city services?

Well that does not actually answer my question. What services? Water, electricity and basic services like that are paid for and not more expensive for temporary residents. Police maybe? Do temporary residents require more police involvement? You are implying you have an answer to my question and maybe you do. I would like to hear it.

> Raising the cost of housing stock

No, this is not a cost imposed on others, because that is not what imposed means. If you want to buy housing you are free to do that and so are others. If you want to prevent other from competing with you, that is asking them to subsidize you.

> Well that does not actually answer my question. What services? Water, electricity and basic services like that are paid for and not more expensive for temporary residents. Police maybe? Do temporary residents require more police involvement? You are implying you have an answer to my question and maybe you do. I would like to hear it.

...seriously?

1) Shifting tax burden onto residents and legally operating hotels. By evading things like the hotel tax, the per-tourist revenue goes down. 2) Who do you think owns the airports and all the other infrastructure transportation? Hell, La Guardia had a 50 year old control tower before they started on the new one. 3) What do you think pays for all the additional safety regulations and inspections for transient residents? [e.g. Fire codes for housing them are different than a residence.]

> No, this is not a cost imposed on others, because that is not what imposed means. If you want to buy housing you are free to do that and so are others. If you want to prevent other from competing with you, that is asking them to subsidize you.

Effectively breaking the zoning rules [hotels are zoned differently than residential] is an imposition.

I think the underlying issue here is you don't care if it has negative economic effects on other people or the city government because "free market".

Yes seriously.

1) Tax burned is a cost imposed by the government, presumable to cover the cost of externalities. I am not trying to be a jerk when I say I would like to hear what externalities you are thinking about here. 2) This might actually be a real answer. Assuming of course that airports operate at a loss and recoup that loss with things like hotel tax. 3) Safety regulations are not a cost imposed by Airbnb and illegal hotels tend not to have extra inspections.

Zoning rules are again, not imposed by Airbnb. They are imposed by the government presumably to cover some externalities. I can't figure out what those unnamed externalities are, so I asked.

> I think the underlying issue here is you don't care if it has negative economic effects on other people or the city government because "free market".

Again, no. When someone complains about negative effects, but fails to mention what they actually are I think it is perfectly reasonable to ask what those negative effects are.

I think that way, and I think your math is super hand wavy. I can't think of a trip I've taken in the last few years where incidental expenses exceeded the cost of airfare + hotel.

If you spend $50 a day on food in NYC with a sales tax of ~9% we are talking about $4.50 a day. And $50 a day is high, if we are talking about people that are so price sensitive that they won't come to NYC at all without AirBnB.

Of the top 10 rooms listed in the AirBnB report, $100 a night seems to be the median price. With a hotel tax of ~6%, that should be $6 a day.

You can nab a real hotel room in NYC for $200 a night (with some work, even less). That yields ~$10 to the city a night in hotel fees.

It's hard to say without knowing a lot about price sensitivity whether or not your argument is true, but on the surface of it, I don't see it. Are there that many people that can buy a plane ticket, pay $50 a day in food, and $100 a night for AirBnB, but CAN'T pay $200 a night for a hotel?

I would imagine that more likely it changes the length of peoples stay. Maybe with AirBnB you can come for 6 days instead of 4 or something like that. But if AirBnB currently doesn't pay any taxes, I'm don't see how 6 days of sale tax instead of 4 makes up for the lost hotel tax.

I think his point is not about an individual's spending habits but the increased spending of the population as a whole. A breakeven analysis is needed. Income elasticity of demand... that sort of thing.

You have to compare the cannibalization of lost hotel sales to the revenue from AirBnB sales and increased airline sales and increased incidental revenue etc and say "ok now we think X many more people will make the trip because the bar has been lowered". Then you drink a nice cool refreshing Dr. Pepper, and maybe book a trip to Denver to buy some edibles.

> "If you spend $50 a day on food in NYC with a sales tax of ~9% we are talking about $4.50 a day. And $50 a day is high, if we are talking about people that are so price sensitive that they won't come to NYC at all without AirBnB."

I agree with the general notion that the wider economic benefits of AirBnb are a bit suspect.

But the benefit to the city isn't just direct income via taxes. That $50 on food results in $4.50 in tax revenue, but also pays the cook, the waiter, the restaurant owner, the guy who owns the building it's in, and the supplier (who probably operates from NJ, but whatever).

Considering how slim restaurant margins are, it's pretty safe to say ~90% of that $50 goes straight back into the economy. The city after all isn't just there to collect tax money, it's also responsible for creating jobs.

If AirBnb was dramatically cheaper than NYC hotels it'd still be a benefit to incur even low levels of tourist spending from tourists who were otherwise unable to afford to travel here. That said, having looked at a lot of AirBnbs in NYC before, they are largely not much cheaper than hotels.

Only the extreme end of sketchy AirBnbs are notably cheaper, and that has negative externalities to the extreme.

The lost revenue from hotel taxes not paid is next to nothing in NYC. This really isn't about taxes, it is about the impact that illegal hotels (as opposed to people renting out a spare room) have on quality of life and housing availability for regular New Yorkers.

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