Anyone who has been paying attention to the escalating showdown between Airbnb and New York City’s hotel industry will not be surprised that the $31 billion startup just lost, handily. This afternoon, the New York City Council passed a bill that will force Airbnb to provide the Mayor’s Office of Special Enforcement with the names and addresses of its hosts. Other cities have passed similar laws, resulting in precipitous declines in listings. Because New York has strict laws about the homes that are allowed to be listed, and many hosts choose to skirt them, this could have more detrimental effects as the city identifies and fines these hosts more easily.
It’s the latest in a long history of battles between the startup and the city. “In 2010, I said, ‘This is gonna be a one-year challenge.’” Airbnb CEO Brian Chesky said, while addressing New York regulatory challenges at the Code Conference in May, adding that now “it doesn’t seem like the end is in sight with that challenge.”
But regardless of how many rules officials impose, Airbnb can’t afford to abandon New York City. That’s not because it’s one of the company’s largest markets — Airbnb’s listings are so diffuse that its top five markets, which include the Big Apple, account for just 4.3 percent of its listings. The New York political fight is resource-intensive enough that if the market were purely about revenue, there’d be a good argument for Airbnb to pull out of New York altogether.
Simply put, you can’t be a travel company in the 21st century and not operate in New York City. Airbnb has to maintain and grow its New York listings because it’s one of the top spots for travelers.
Even more, what happens in New York will influence how the world perceives the company, and it’ll set a precedent for other markets. As Airbnb looks for new ways to grow in the run-up to its initial public offering, the company is encountering regulatory crackdowns across the globe. The New York situation mirrors legislative efforts underway in Los Angeles, and comes months after San Francisco passed a measure mandating that hosts register with the city. Should Airbnb pull out of New York, caving to the special interests of the hotel industry, it sends a message that it might be willing to do the same in other places over time, eventually losing ground in markets where it has brokered a fragile peace.
Should Airbnb pull out of New York, it sends a message that it might be willing to do the same in markets where it has brokered a fragile peace.
Though Airbnb has attempted to collaborate with New York City regulators, it has hit a dead end in navigating the city’s quagmire of politicians. “New York is way behind other cities, and we’re moving farther away from a compromise position,” says Julie Samuels, executive director of the advocacy group Tech NYC, adding, “the only thing standing in the way of an agreement is pure politics.” The company’s New York troubles date back to a key decision Airbnb made in its earliest years: to ask forgiveness rather than permission as it rolled out its service in cities.
At the time, this idea was a central tenet in the on-demand economy’s playbook for launch. In most cities it worked. In New York, however, it backfired. In 2010, before most people had even heard of home-sharing or Airbnb, the New York state legislature passed the Multiple Dwelling Law, an amendment to fight illegal hotels. Tenants of apartments in shared buildings couldn’t rent their entire homes for fewer than 30 days. Early on, Airbnb chose to ignore it.
As Airbnb grew large enough to threaten hotels and their unions, an organized group of opponents latched onto the Multiple Dwelling Law to argue the service was illegal. After a protracted fight with the attorney general that ended with a scathing report published in 2014, Airbnb began devoting resources to New York City policy. But by then, its opponents had organized in their efforts to shut the service down. In 2016, New York state passed a bill that made it illegal even to advertise a listing in which a home is rented for fewer than 30 days. The day the bill was signed into law, 20,000 Airbnb listings were deemed illegal, and the hosts were threatened with up to $7,500 in fines for just posting.
Meanwhile, the hotel industry and unionized hotel workers have been supporting city politicians and have invested heavily in advertising and lobbying campaigns criticizing Airbnb for reducing the amount of affordable housing in cities. They’ve run ads promoting a recent report from city comptroller Scott Stringer that claimed Airbnb was driving rents up and taking affordable housing off the market.
While it got a lot of press attention, the report’s results were called into question by the company that provided the information. To analyze Airbnb’s impact on rents in the city, it relied on data scraped by AirDNA, an independent company that collects and analyzes data from Airbnb listings. An AirDNA spokesperson told The New York Times that Stringers’ team had come to “flawed conclusions” because it misinterpreted the data, and that Airbnb had no material impact on city rents.
Regardless, the latest city council legislation was introduced shortly after the report’s publication. It requires hosts of the city’s close to 50,000 listings to provide both the listing address and their home addresses, and answer some basic questions. Under the bill, violators will be fined up to $25,000 per listing not shared.
In the weeks running up to the new legislation, Airbnb countered in every possible way. It released a report showing that city council members who had backed the legislation had accepted tens of thousands of dollars in contributions from the hotel lobby. It sent an actor dressed as “Mr. Big Hotel Tycoon” to join protests outside city council offices.
The day before the bill passed, Airbnb’s policy and public affairs head Chris Lehane, a former Clinton administration political consultant, hosted a conference call for press in which he criticized regulators for putting politics before policy, saying: “The Office of Special Enforcement is using its power to target political opponents.” Lehane fell back on a familiar saw, claiming that Airbnb’s hosts, most of whom, he suggested, were just trying to cover their own housing costs by pulling in a little extra from the service, would be the ones to suffer. And he complained the legislation violated hosts’ privacy, a concern so great, he suggested, that Airbnb would consider taking legal action.
Lehane fell back on a familiar saw, asserting that Airbnb hosts were just trying to cover their own housing costs, and that they would be the ones to suffer.
Just hours before the bill was expected to be signed, Airbnb revealed that it planned to finance a host’s lawsuit against the city.
Though Airbnb is voicing concerns about privacy, ultimately the new legislation is problematic for the company because it enforces a state law—and it’s at the state level that Airbnb may one day succeed in improving Airbnb’s standing. A bill introduced in Albany last year would modify the state occupancy law in a way that would legalize most Airbnb rentals. So far, the proposal has remained ensnared in the capital’s divisions, subject to a different set of politics, and it failed to advance before the legislative session that ended last month. Unfortunately for Airbnb, the state legislature won’t reconvene until January.