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Why Airbnb Doesn't Worry When its Users Break the Law

Posted: 01/09/2013 7:00 am

Since May of 2011, the vacation rental website Airbnb has been openly flouting a New York City law stating that it is illegal to rent full apartments for less than 30 days. It's a pretty basic law that the city worked closely with state legislators to make as simple as possible so that enforcement would be easy.

In a frank interview with me, David Hantman, Airbnb's Global Head of Public Policy said, "We can't possibly keep up with the law in all the cities."

That's insane.

Businesses big or small -- and I started a small business with big ambitions this summer -- have a responsibility to be good neighbors or, failing that, at least understand the law of the land. And you'd think Airbnb would understand how important it is to be a good neighbor.

Anything else is plain arrogance, even if you consider yourself "disruptive" and have a ".com" at the end of your name.

Airbnb says the law in New York is complicated, but it's not. It just doesn't fit with their business model. Before New York State passed the current law, residents and community leaders (and not hotel chains, as some uninformed Airbnb backers claim) had been complaining about a glut of illegal hotels and apartments for years, but a patchwork of contradicting laws meant that it was nearly impossible to stop them, especially since fines were so small. But the profits were nice: A studio apartment on a vacation rental site can go for $175 or so a night, bringing in much more than the monthly income from someone with a standard year-long lease. The hosts could basically operate like a hotel, but without all the pesky safety regulations, insurance requirements, permits or zoning that real businesses have to deal with. Screw the neighbors.

Airbnb likes to argue that its hosts are just folks; musicians renting out their place while they are on tour, snowbirds getting a bit extra cash while they go to Florida. But that's not really the case. It's big operators like New York's Smart Apartments that allegedly run 200+ units in 50 buildings illegally, infuriating neighbors and turning residential apartment buildings into transient dorms. Visitors may be well-meaning, but they make life difficult for people who want to go to work or take their kids to school without seeing a new stranger in the building every day.

Airbnb has known about bad apples like Smart Apartments (which was the offspring of Hotel Toshi) for some time. Every major newspaper in the city wrote about Toshi's brazen antics and angry neighbors. Following a meeting CEO Brian Chesky had with me and a few colleagues at my old company about a possible partnership, I emailed him about the dubious listings I found on the site and asked why they let them remain. I got silence. Those listings stayed live until this October when the Bloomberg administration sued Smart Apartments and demanded over $1 million in damages. Toshi, Smart Apartments and their unsavory peers were just too popular and profitable to ditch.

I like Airbnb. I think its website is inspiring for travelers, house hunters and armchair dreamers. They've pulled vacation rentals kicking and screaming into the present century and they've made it look sexy. The listings that are legal fulfill the site's promise of connecting travelers with interesting locals in just as interesting neighborhoods.

Although this is the vision Airbnb likes to promote, it's not the reality.

Airbnb pretends that any impediments to its success -- or an eventual IPO -- are messy, old-school regulations that stifle creativity. If you don't like it, you just don't get the new economy, Airbnb and its defenders say. But the new economy, like the old, has rules they need to obey, even if they are a slight speed bump along the road to success.

Over the last 24 hours our story has sparked lots of responses across the web, most of them around the "I didn't know it was illegal" theme. Ideally we'd see Airbnb respond by saying, "Hey, we're going to operate according to the law in our leading markets and stop enabling and profiting from illegal activity." But I don't see that happening. I think that their leaders' reality is so distant from everyone else's that they honestly believe the nonsense that comes out of their mouths, rather than the great prospects possible in the (legal) connections they make possible.


-- By Jason Clampet

 

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