AirBnb under attack in New York

HOST INTRO: AirBnb – the site that helps people rent a bedroom or apartment on a short-term basis – is fighting a subpoena that could force it to hand over details on it’s most active users. New York Attorney General Eric Schneiderman is alleging that many of these listings may violate state law. But as Chris Mossa reports, some AirBnb hosts are simply using the service to get by.

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Evelyn Badia loves the new faces that rotate through her 2-family townhouse in Brooklyn’s Park Slope neighborhood. She loves the couple from London who planned to get married in her yard until a hurricane changed those plans.

BADIA: It was raining during Irene and the minister needed to leave because they were shutting down the trains. So they ended up getting married in front of the refrigerator. And I have pictures. (0:10)

She loves the California couple that came to town to pick-up an important package.

BADIA: They had a three-day old baby that they were adopting in New York. (0:04) 

And she loves the German students who just came down to breakfast and can’t decide what kind of coffee they want.

SCENE: Ambi from breakfast scene (0:14)

That’s Lena and Karim – two travelers from Germany. They booked the extra bedroom room in Evelyn’s house on AirBnb. It made adding New York as a stop on their U.S. tour possible.

LEENA: Hotels are way too expensive for us and this is good compromise I think. (0:07)

They’re paying $99 a night. The average price for one night in a New York City hotel last year – just shy of $300 dollars. They rolled in at midnight last night, meeting Evelyn for the first time. But she’s used to that. She estimates that strangers parade through here more than 300 days a year. And it all started because she needed the money.

BADIA: The original reasons why I became a host were financial. In January 2010, I lost my freelance job of 4 years – I work as a freelance producer for TV commercials. (0:11)

Five months later, Evelyn was still unemployed with no real prospects and a mortgage on her town house. She turned to AirBnb to hold her over until something came through. But the job market – still decimated from the recession – didn’t cooperate.

BADIA: The work was not steady. In 2010, I ended up working 5 months. In 2011: 20 days – the entire year. I needed the income to pay my bills. I found AirBnb and it was a blessing. It saved me. (0:15)

AirBnb was founded in 2008 to solve a problem: how to connect folks like Evelyn with extra space to travelers looking for a place to stay. And they’ve been incredibly successful – so much so that some hosts have turned it into a business according to Jason Clampet, the founder of online travel magazine, Skift.

CLAMPET: The ideal AirBnb user is, as they promote it, is someone who rents out their place from time to time and helps them pay their rent, pay their mortgage. And there are a lot of people like that, but there also are a lot of people who are managing 20, 30 units. (0:14) 

And some of them may be breaking the law. In 2010, New York State passed a short-term occupancy law that says an apartment can’t be rented for less than 30 days if the primary resident doesn’t live there.

Attorney General Eric Schneiderman claims that up to two-thirds of AirBnb hosts may be operating illegally by listing more than one property. He issued a subpoena seeking details on that group of users, including how much money they’re making. At a forum hosted by Crain’s New York in late April, Schneiderman explained that he’s not after AirBnb’s business model – only those hosts using the service to break the law.

SCHNEIDERMAN: Much of their revenue comes from people who have 2, 5, 20, 80 apartments that are up for rent all the time, all year long. That’s an illegal hotel – and you’re not allowed to run an illegal hotel. (0:13)

AirBnb is arguing – in both the courtroom and in the press – that handing over the records the Attorney General wants would violate its user’s privacy. But Jason Clampet doesn’t buy it.

CLAMPET: Now, it’s being turned into a privacy issue because that makes good PR. What’s it really is about is exposing how they do their business – what an AirBnb host is really like. (0:12)

In April, AirBnb voluntarily removed 2,000 listings that they believed were violating the law. But that’s not all they did last month. They also raised almost $500 million dollars in a financing round that valued the company at $10 billion dollars. And there’s a lot of buzz about an upcoming IPO. If the Attorney General gets his subpoena, AirBnb will have to hand over data showing how much revenue the Company earns from users with multiple listings.

AirBnb is also taking heat from the powerful hotel industry. Tourism is big business in New York City. In 2013, citiy officials estimate that tourism added $60 billion dollars to the local economy. Vanessa Sinders is with the American Hotel and Lodging Association.

SINDERS: We are hearing from more and more of our members on this issue – especially from our small hotels and franchisees who have concerns about the short-term online rental companies not being held to the same standards as hotels. (0:16)

AirBnb tried to shelve those criticisms by offering to collect hotel occupancy taxes from its hosts. But Sinders says hotels have more burdens that just additional taxes.

SINDERS: Hotels must comply with all regulations – not just paying occupancy tax to local governments. (0:07)

These regulations, which include enhanced fire, safety and accessibility rules don’t apply to homeowners and renters. According to recent Boston University study AirBnb currently has a negligible effect on hotel revenue. But theCompany is growing quickly and the day when they do represent a competitive threat may not be far off.

Evelyn Badia believes she’s fully compliant with the law. And for now, she’s content to read the reviews her guests have left on the site.

BADIA: This is Sylvia from Australia. She stayed here with her son, Karam. ‘Staying with Evelyn is like staying with family, but better. The house was in a great location. It was warm and inviting. Great restaurants within walking distance. We’ll definitely recommend Evelyn’s place. Sylvia and Karam’. (0:17)

A judge is expected to rule shortly on whether AirBnb will have to comply with the subpoena.

For Columbia Radio News, I’m Chris Mossa

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