Who Will Save the Airbnb Faithful?
by Brendan O’Connor
In October, New York State Attorney General Eric Schneiderman issued a subpoena to Airbnb, ordering it to turn data about its 15,000 registered hosts in New York over to the state. While neither Airbnb nor its hosts pay the 15 percent lodging tax that most New York City hotels are subject to — no small part of the reason why startups like Airbnb have been able to “disrupt” the established hospitality industry — the attorney general’s primary concern was not the stream of potential tax revenue trickling past the state’s coffers. (Airbnb kindly offered to induce its users to pay the tax, which would amount to some $21 million.)
Rather, it’s that Airbnb encourages potential violations of the 2010’s “Illegal Hotels Bill,” which made it unlawful to rent out units in Class A multiple dwellings — apartments, basically — for fewer than 30 consecutive days. (In 2012, for example, New York City won a $1 million suit against Smart Apartments, an illegal hotel company which is now banned from operating.) Last week, settlement negotiations between the Attorney General’s office and Airbnb broke down, and Airbnb, whose IPO is seemingly on the horizon following a recent $10 billion valuation, is now in federal court.
On Wednesday, Airbnb hosted a “community meetup” at the WeWork Lounge in Lower Manhattan. Nearly 250 people registered for the event; the line for snacks extended out of one room into another. Most of the attendees, a mix of hosts and users, simply wanted to know how scared they should be of the Big Bad Attorney General. There was much confusion about who was subject to which laws (a woman who lives in a one-bedroom apartment in Brooklyn was under the impression that the laws did not apply to her); which laws have been broken (a former tax accountant berated everyone for being too stupid to understand New York’s tax codes); and who might go to jail (probably not Airbnb executives!).
According to Airbnb’s head of public policy, David Hantman, all of these questions — any question that anyone could have about Airbnb, really — could ultimately be reduced to one: “Does the attorney general get to push our community around and attack regular New Yorkers?” He added, “Because if we don’t stand up and he wins the press narrative and every other narrative, and he’s running for whatever he’s running for, they’ll use that data to do whatever he wants with it.”
What does the attorney general want to do with the data? Hantman reported that, in the course of those negotiations, when Airbnb asked what the attorney general wanted with it, the attorney general got offended. “They got their backs up,” he told the crowd. “They said, ‘We don’t have to tell you anything. We looked at this and we think that people are breaking the law, so we want the data.’” A spokesperson for the attorney general told me via email, “We are investigating illegal activity on Airbnb’s website. Airbnb has resisted cooperation — unlike other companies, such as Yelp and Facebook, who worked with us to root out illegal activity. Hence, the need for a subpoena to Airbnb itself.” The subpoena — which Hartman has described as “overbroad” — was “narrowed to seek information only about Hosts that would be violating the law,” according to the attorney general’s memo in opposition to Airbnb’s motion to quash the subpoena.
At the meetup, Hantman avoided using phrases like “illegal” or “violating the law.” He preferred, instead, to talk instead about “bad actors” without precisely defining the term: “Honestly if you ask the attorney general who a ‘bad actor’ is, I think he would just apparently say, ‘All New Yorkers.’” Airbnb, he added, is “using the term, maybe we shouldn’t, because it’s his term.” (According to a spokesperson from the attorney general, however, Airbnb introduced it in a blog post last October.)
A man in a fitted, button-down shirt and tie — which may or may not be the sort of thing a bad actor might wear — asked, “What is Airbnb’s view of an entrepreneur who does an improvised hotel operation, has amazing quality, whoever comes to his apartment loves it 100%, what is the view?” Answering his own question, he said, “It’s illegal in New York.”
Someone shouted back, “This guy is a plant for the DA!” before Hantman could respond. “We are constantly looking at our community to make sure people are providing the kind of experience we want them to provide, and, if they’re not providing it, we’re removing them,” he said. That’s all we can answer today.”
But Airbnb’s view of bad users is not necessarily aligned with the state’s: Of course it behooves Airbnb to enforce a baseline standard of hospitality, which it already does to some degree with its rating system. If your apartment is gross, you will get bad ratings; if you have bad ratings, people will not want to stay at your apartment. The less this happens, the better for Airbnb’s business.
Unlike the so-called slumlords targeted by Airbnb’s internal enforcement mechanisms, however, hosts who frequently list multiple properties with grand amenities in gentrifying and gentrified neighborhoods and can charge exorbitant rates — which, again, are not subject to hospitality taxes and from which Airbnb derives its fee — are very good for business. But the more this happens, the fewer apartments enter an already crushed housing market, the higher the rent ceiling goes, and the more cities like New York become enormous Epcot versions of themselves. Hantman denied that such “improvised hotel operations” exist, claiming that 87 percent of Airbnb hosts have only one listing, and that the vast majority of the rest have only two.
But that percentage refers to the number of users, not the shape of Airbnb’s business; Airbnb has not disclosed how much of its revenue is accounted for by the 13 percent of users with multiple listings. “We had a small number who had many listings, and now they are gone,” Hantman said, referring to the fact that Airbnb removed some 2,000 listings earlier this year. “These hosts weren’t making their neighborhood stronger and they weren’t delivering the kind of hospitality our guests expect and deserve,” Airbnb spokesman Nick Papas later told me via email. “In some cases, they were making communities worse, not better.”
“We in this room know the truth,” Hantman said. “And the truth is that this is a group of good people doing good things for the city, bringing the city back and helping their own families survive in a tough world.” Again, Hantman invoked the language of unity and solidarity. “This is a case not even against us. It’s for your information,” he said. “And we are refusing to turn it over.” (Cue applause.) “To us, it’s about the hosts. It’s about the community,” he said. “He’s not prosecuting us. We are keeping him from you. We’re all in this together.”
“If we make ourselves known,” one woman then shouted from the crowd, “how are we protected?” (“Unfortunately, we can’t provide legal assistance or review lease agreements for our 500,000 hosts,” Papas told me later. “But we do try to help inform people about these issues.” Nitasha Tiku at Valleywag found some of Airbnb’s warnings lacking however.)
One man in the audience concluded a ringing monologue by saying, “You can’t stop a revolution, as proven by what’s going on in the Middle East. It’s gonna happen. Tax us or not, but it’s gonna happen.”
“I’m a closet revolutionary,” responded Douglas Atkin, Global Head of Community and Mobilization and author of a book titled The Culting of Brands: How To Turn Your Customers Into True Believers. “So I love what you’re saying.”
“Why is no one talking about what Airbnb did during Sandy?” a celebrity photographer, who claimed to have skipped taking pictures of the set of “Girls” to be at the meetup, asked at one point. “I thought that was great! Essentially Airbnb was being used as a public service. Why is no one mentioning the potential for public service in place?”
“What happens is when people pay attention, they’re on our side,” Hantman said. “People saw what happened with Sandy and thought, ‘Oh, why would we go against these people?’ And then it wore off. So maybe we should talk about it more.”
“This is like the Palestine-Israel thing,” said one woman, who looked as though she might have made the trip down from the Upper East Side. “Israel doesn’t get any good press. You deserve a lot better press than you’re getting.”
“If you look at the marketplace, we do the most,” Hantman said. “We have the most transparency, and we have the best guarantee, and we have the best hosting community. And we’ve somehow become the target.”
One audience member questioned this kind of rhetoric. “You say, ‘We’re doing it for you.’ But I’m sure you’re not just doing it for us. You’re doing it for yourselves as well, for your business,” she observed. “It’s not just for our community. If you don’t have us, you don’t make money.”
“It’s about money,” she said. “New York City is about money.”
Brendan O’Connor is a reporter in New York.