The Appraisal: The Airbnb Economy in New York: Lucrative but Often Illegal

By sharing her kitchen and her keys with strangers, she estimates that she brings in up to $10,000 a year.

Airbnb is a service that is adored by some, despised by others, and most commonly known as a place to rent out your apartment while you’re out of town for a few days. But doing so is often illegal in New York City, one reason the company has locked horns with the New York State attorney general, Eric T. Schneiderman.

A huge amount of money hangs in the balance of this dispute, including revenue for Airbnb, as well as untold millions in hotel tax dollars that the attorney general says Airbnb has been costing the state every year. Also at stake is a discrete little economy, populated by New Yorkers who make a substantial portion of their income by renting out apartments on a short-term basis through the website, sometimes legally and sometimes not.

“Last year we made about $90,000 from this business,” said Leslie, who rents out two rooms in her two-family house in Brooklyn through Airbnb.

Leslie, a stay-at-home mother who is married to a teacher, agreed to speak only if her address and last name were withheld. So did Joe, who said his “dedicated Airbnb room,” which brings in about $2,000 per month that he splits with his two roommates, allowed him to start a small technology company. And P., a musician who rents out two apartments in Manhattan and one in Brooklyn.

One man, however, declined to be identified by his extremely common first name, by his profession or even by the state in which he lives. Instead he described himself as “one of the people they really want to get.” He operates empty New York City apartments as short-term rentals, none of which he lives in, a practice he called “beyond lucrative.” It also happens to generally be illegal.

In most residential apartment buildings, renting out your space for less than 30 days is illegal, unless you are present when you have that visitor. The restriction does not apply to single- or two-family homes, like Leslie’s, but zoning laws may still limit the practice. Leases and building bylaws may also forbid it.

Still, even those whose rental side business might surmount legal hurdles were skittish about being identified. Sometimes they did not want their neighbors to know. But they were also worried that the state might choose to make an example of them. Mr. Schneiderman has subpoenaed Airbnb for transaction information on many of its New York users, and the company is fighting to keep the information private.

According to the attorney general’s office, based on information given to it by Airbnb, the top 40 Airbnb hosts in New York have each grossed at least $400,000 over the past three years, a collective total of over $35 million. The top 100 hosts in that time period have grossed $54 million.

“We began this process in the hopes of collaborating with Airbnb to recover millions of dollars in unpaid taxes and to stop the abuse of Airbnb’s site by operators of illegal hotels,” Matt Mittenthal, a spokesman for Mr. Schneiderman, said in an email. “Airbnb isn’t standing up for average New Yorkers who rent out their apartments from time to time — Airbnb is standing up for highly profitable, illegal businesses that make up a huge chunk of its corporate revenue.”

Some building management companies have begun clampdowns of their own. One of them, TF Cornerstone, recently sent a letter to all of its rental tenants saying that subletting their apartments short-term on websites “creates an overall security risk” and also violates their lease. Another company, Dermer Management, reminded residents in some of its condo buildings that though Super Bowl weekend might seem like a great time to rent out their apartments for extra cash, the buildings’ sublet policy forbids it.

But Airbnb and its hosts say that they serve an important economic function in the city, helping travelers on a budget visit a place so expensive it might otherwise be out of reach, and that they bring those tourists to areas where they might not otherwise go.

“It’s important to remember that almost 90 percent of our hosts have only one listing and it’s the home they live in,” said David Hantman, head of global public policy for Airbnb. “They have asked for a lot of data on regular New Yorkers, and we don’t want to turn it over.”

Ms. Robertson, who began renting out space in her apartment when an illness resulted in high medical bills in a difficult economy, said she had guests only when she was at home. And both she and Leslie, the stay-at-home mother in Brooklyn, said they had declared all of the money they had earned on Airbnb as income.

“Show me the law, and I’ll follow it,” said Leslie, who is in the process of hiring an expediter to help her navigate zoning restrictions against the practice. “When I ask five different lawyers what the law actually means, I get five different answers.”

But as several hosts pointed out, letting a stranger use your shower is not for everybody, and there are those who will always prefer to stay in a hotel.

“This spring, my own family was in town looking at colleges and they refused to stay here — they stayed in a hotel,” said Susan, who owns a small consulting business and rents out a room in her co-op apartment. “There are people who want complete privacy and room service, and they’re willing to pay for that. It doesn’t matter how many good reviews I have, my family’s not staying here.”

She still finds plenty of takers, though. She said the rental income from that one room made up about half of her income.

Article source: http://www.nytimes.com/2013/11/05/nyregion/the-airbnb-economy-in-new-york-lucrative-but-often-unlawful.html?partner=rss&emc=rss