Airbnb is the latest sector of the sharing economy being forced to overcome legal hurdles. The home-sharing service now faces major financial implications if it continues to operate in New York — one of the most visited places in the country.
New York Governor Andrew Cuomo recently signed legislation that charges a $7,500 fine for those who advertise their residence on a home-sharing service. Airbnb’s future within the five boroughs is on the rocks, to say the least.
Governor Cuomo’s new law follows a group of Democratic U.S. senators who requested that the Federal Trade Commission regulate the home-sharing market. Both actions come in response to claims that entrepreneurs are buying up properties and renting them out in the same way hotels rent rooms. Real-world figures tell a different story.
Over 95 percent of all Airbnb hosts in New York list just a single property. Meanwhile, Airbnb cut around 3,000 illegal listings of the over 44,000 total listings in New York. The real challengers behind the war on home-sharing services are Airbnb’s competitors, namely hotels, despite Airbnb’s flexibility with the state’s requirements.
Airbnb has agreed to comply with every stipulation the state of New York demanded. New York hosts cannot list more than a single property and must register online. Users who break those rules three times are permanently banned from using Airbnb’s services.
Here’s the real kicker: Airbnb agreed to collect state taxes so hosts couldn’t cut corners when it came time to pay up. The company wanted to help generate more revenue for the state of New York by making sure the state itself got its fair share.
Airbnb has already filed suit to overturn the legislation and their challenge is likely to prove successful. The First Amendment protects free speech, including commercial, which means that Airbnb is free to advertise as it pleases, provided it does so responsibly.
Unfortunately, the war on sharing services doesn’t begin and end with Governor Cuomo and a group of senators. Democratic presidential candidate Hillary Clinton is ready to enter the fray as well. Clinton promised to crack down on the sharing economy by imposing regulations that could change how services like Uber, Lyft, and Airbnb operate altogether.
Home-sharing services like Airbnb have been used by 11 percent of adults according to the Pew Research Center. That may not seem like much, but it certainly makes an impact, especially in states with a high cost of living, like New York.
A hotel room at the Holiday Inn Express will run visitors up to $300 a night while using a home-sharing service can result in major savings. The average New York host brings in more than $5,000 per year. More than 75 percent of New York hosts also claim that listing their homes helps pay their rent. Clearly the problem doesn’t lie with those using home-sharing services.
The real problem with home-sharing services lies with hotel chains who have never had any real competition. Alternatives to renting a hotel room have been scarce in the past and now a cheaper, more convenient alternative is on the rise, threatening the hotel industry’s monopoly.
Airbnb helps owners and renters supplement their income while providing visitors with an affordable place to stay, thus stimulating the economy. Judging by recent legal motions to block sharing services’ operations, the business-inclined politicians don’t seem to share the same mindset.