Airbnb: Not Necessarily A Wolf, But It’s No Lamb Either [Update]

Since its inception, there’s been no shortage of controversy surrounding Airbnb. One of the great darlings of the Internet, Airbnb is a favorite among many consumers, much like Uber and other “sharing economy” upstarts, but it’s got the goads of hotel commissioners and the like in cities all over the country, not the least of which is New York City.

Given that, it’s not surprising that elected officials are coming down hard on Airbnb and doing its best to regulate the company it says is, in effect, operating illegal hotels throughout the city, creating a nuisance and safety hazard for its inhabitants, not to mention stripping the city of millions of dollars in tax revenue.

In just the last week, several events have brought this situation front and center.  Last Thursday, the New York Attorney General released a report stating that 70% the website’s listings are illegal.  The following day, the Mayor’s Office brought its first lawsuit targeting buildings allegedly used as illegal hotels.  And on Monday, Share Better, a coalition of elected officials and community activists, released a TV ad featuring reenactments of Airbnb stays gone bad.

Being very confused ourselves about what is really going on, we decided to examine our data and find out.

Are short-term rentals really a nuisance for building residents?

Most news stories we have come across seem to be of the opinion that the answer is “no.”  A New York World story from a year ago attempted to answer this question by plotting resident complaints about Airbnb (and similar companies) on a map, ultimately concluding that the number of complaints (213 in all) was relatively low.

Our data, coming from a larger number of sources, tells a different story.  In the map to the right, blue represents 1-5 complaints, orange 5-9 complaints, and yellow 10 or more complaints per dot. Clearly, the number cited by The New York World is more than a little off the mark and doesn’t come close to painting a true picture of the Airbnb situation in the city. Some of examples of the complaints received are:

• “Current residential building is being turned into a hotel.  Landlord is evicting regular tenants & sub leasing apts. to hotel guests.”

• “Caller states of the 28 apts in the building there are 23 apts being rented as hotel rooms.  Only 5 tenants in building have a lease.  Please investigate.”

• “Caller states that apartment is being renting as rooms, which has mult bed in apartment (at least 20 beds), and also advertise hostel on Google (in residential building).”

• “Caller states that that the landlord has created illegal hotel rooms in the building massive parties every night with over 100 tourist at a time, every floor causing excessive noise.”

• “Caller states residential building is being used as a hotel with a desk in the lobby.”

There are numerous safety concerns, as well.

Elected officials claim these buildings are unsafe.  Let’s see what the Revaluate scoring system says.  Revaluate’s “Safety Score” is a 0 to 100 number which measures resident safety in and around the home (including fire code compliance, building violations, presence of window guards, unsafe construction zones, and several other factors*).There appears to be a clear correlation between complaints and building safety, at least according to our scoring system.

How about a real-life statistic?  As shown below, the rate of injury-causing fires is more than twice as high in buildings with at least one complaint.There are far too many factors involved to draw specific conclusions from these numbers, but they do lend support to elected officials’ assertion: that this problem is very real and quite widespread. It also seems to stem almost entirely from “commercial” hosts, rather than from individuals renting out their homes. We should also point out that when a specific website is mentioned in these complaints, it is normally someone other than Airbnb.

But the problem goes deeper than just nuisance complaints and building safety.

What about Airbnb’s (and other companies’) effect on the city’s revenue?  What about the fact that these hotels are not paying hotel taxes? Based on the NY Attorney General’s Report, there were approximately 200,000 bookings made through Airbnb in New York City in 2013, resulting in an estimated $17.7M in unpaid hotel taxes.

To put that number in perspective, let’s look at some tourism stats from NYC and Co, New York City’s official tourism organization.  Based on their official numbers for 2012, visitors to NYC spent a total of $36.9B, generating $9.3B in taxes (city and state taxes).

Assuming the same rate of spending for Airbnb guests, and assuming that each Airbnb guest stays for two nights, we can use the Attorney General’s numbers to estimate how much Airbnb guests spent while in town.Airbnb guests spent an estimated $254M, generating $64M in taxes in 2013

These numbers are not precise by any means, but it’s clear that Airbnb guests had an overwhelmingly positive impact on the economy of New York City.  $17.3M of unpaid hotel taxes is a rather small piece of the $64M tax pie, and $254 in spending means a lot of new jobs.

What are the real issues?

We believe that claims about annoyed building residents have been misunderstood.  It’s not a question of a handful of fickle residents, complaining because they saw someone in their lobby with a suitcase.  There is a real, widespread problem.  Few of us apartment dwellers would feel comfortable if we saw our neighbors being replaced, one-by-one, by rooms full of bunk beds inhabited by strangers.  In that regard, we applaud New York City and the Attorney General for the measures they are taking.

However, to highlight $17.7 million in unpaid hotel taxes, without even mentioning the $100’s of millions that these visitors contribute to the economy is, at best, misleading.  Clearly some of these visitors would have come to NYC anyway.  How much of this is actually “new” tourism, for which we have Airbnb to thank?  That is what our elected officials should be telling us, allowing us to evaluate the cost / benefit tradeoff at the heart of this issue.  Their criticisms of Airbnb really do have some merit.  Unfortunately,  reenactments of people finding “mouse droppings” in the cupboard, are completely missing the point.