Airbnb’s opaque city tax schemes are facing fresh scrutiny
The Huffington Post
Alexander C. Kaufman Senior Business Editor
Ben Walsh Business Reporter
29 September 2016
NEW YORK ― As Airbnb enters into a flurry of voluntary tax agreements
with cities across the country, one progressive advocacy group is
trying to find out more about how these deals are struck and how they
Facing accusations that it’s upending neighborhoods and violating
regulations, the home rental service has recently been lobbying local
governments to allow it to collect lodging and tourist taxes from its
sprawling network of renters as a way to compensate cities. But
American Family Voices, a Washington D.C.-based nonprofit, says these
agreements effectively allow Airbnb to be taxed on the honor system ―
and make it harder for local governments to shut down hosts who are
running illegal hotels out of rental properties.
On Monday, the group told The Huffington Post that it’s filing freedom
of information requests with 11 cities, states and counties to learn
more about the tax deals they’re cutting with Airbnb.
Competing hotels are closely regulated and strictly taxed by
municipalities, but renters and owners who sell nights in their homes
on Airbnb’s platform are not necessarily covered by those same
regulations, nor do they pay the same taxes, American Family Voices
“Airbnb should play by the same rules as every other business is
required to play by law,” the nonprofit stated in a press release
"Airbnb should play by the same rules as every other business."
—American Family Voices
Airbnb pitches voluntary tax agreements as a way for the company to help bolster cities’ revenues.
“Our community wants to pay their fair share and we want to help,” Nick
Papas, an Airbnb spokesman, told HuffPost by email. “These taxes were
designed for big hotels with teams of lawyers and accountants, not
regular people who occasionally share their space. As a result, they
often go uncollected. Airbnb makes it easy for cities to collect this
new revenue at virtually no cost.”
So far, the company has collected $110 million in more than 200 cities
and towns around the world, including Chicago, Paris and its hometown
of San Francisco, through such agreements. Now valued at $30 billion,
Airbnb began collecting a tourist tax in Los Angeles, the
second-largest city in the United States, last month.
But it’s been much harder to strike a tax deal with the country’s
largest metropolis. Last November, New York City officials vowed to
spend $10 million over a three-year period to target illegal hotels,
which Mayor Bill de Blasio’s administration blamed for exacerbating the
city’s affordable housing crisis.
In June, New York state lawmakers passed a bill that heavily fines
people who list on Airbnb or similar sites apartments for fewer than 30
days without the presence of the owner. The legislation, introduced
last December, targets landlords with multiple listings who list
apartments on Airbnb instead of leasing to city residents. Violators
could face fines of up to $7,500. Earlier this month, Airbnb threatened
to sue the state if Gov. Andrew Cuomo signs the bill into law.
The bill basically reinforces existing state law, last updated in 2010,
that prohibits buildings with three or more units from renting out an
apartment for 29 days or less.
A June report commissioned by two housing advocate groups, MFY Legal
Services and Housing Conservation Coordinators, found that 28,765 of
the site’s 51,397 New York City listings last year ― about 55 percent ―
violated that law.
The report also found that neighborhoods already struggling with the
social upheaval of gentrification ― such as the Bedford-Stuyvesant, a
historically African-American enclave of Brooklyn ― were among the
biggest hotbeds for illegal short-term rentals.
After months of pressure from city officials, Airbnb released a year’s
worth of borough-level data that showed 95 percent of users who rented
their entire apartment had only one listing. The company billed this
one-year “snapshot” as evidence of its transparency, and used it to
burnish its image as a revenue source for low- to middle-income
families trying to make rent.
But the move backfired two months later, when independent researchers
accused Airbnb of tampering with the data and purging more than 1,000
“The intervention was so specific, and the timing so close to the date
of the New York City snapshot, that the conclusion is inescapable:
Airbnb removed listings from its site so that its data set would paint
a more attractive picture of its business, to better influence media
and public opinion,” Airbnb critics Murray Cox and Tom Slee wrote in a
report they released in February. “It was a cover-up, not a move to
"Airbnb removed listings from its
site so that its data set would paint a more attractive picture of its
business, to better influence media and public opinion."
—Airbnb critics Murray Cox and Tom Slee
Collecting taxes from renters could be a way to further obscure the
effect Airbnb has on residential neighborhoods, said Cox, a
Bedford-Stuyvesant resident whose website Inside Airbnb tracks housing
data on the company.
“You have a platform that incentivizes illegal commercial activity that
Airbnb has no interest in curtailing, and their investors have no
interest in curtailing,” Cox told HuffPost. “They’re trying to maximize
their revenue and grow as fast as they can for a potential IPO. Any
kind of limitations would be bad for their business and bad for their
It may be tempting for some cash-strapped cities to cut deals with
Airbnb. But residential property taxes are usually lower than levies on
commercial spaces, meaning that, unless Airbnb starts effectively
policing its platform, cities lose money on properties that now
essentially function as hotels.
“If these residential properties are being converted into hotels,
there’s nothing that really compensates the city for that conversion,”
Cox said. “For example, there should be higher property taxes on that
property because it’s no longer residential.”