PhotoAirbnb has agreed to comply with New York Attorney General Eric Schneiderman's demand that it turn over user data. The peer-to-peer rental service will also warn future hosts that they may be violating New York laws.

Schneiderman's office agreed that Airbnb could "anonymize" the data by blanking out names, Social Security numbers and other personal data and replacing them with a numerical identifier, at least for now. 

However, Airbnb agreed that it will turn over identification data in any case the AG's office decides to investigate after examining the anonymized data.

The settlement basically leaves Airbnb in the clear while subjecting its hosts to what could be a grueling series of demands for payment of back taxes, fees, penalties and interest. 

“Airbnb and the Office of the Attorney General have worked tirelessly over the past six months to come to an agreement that appropriately balances Attorney General Schneiderman’s commitment to protecting New York’s residents and tourists from illegal hotels with Airbnb’s concerns about the privacy of thousands of other hosts," a statement issued by Schneiderman's office said. "The arrangement we have reached today ... strikes this balance.” 

Warning to be posted, finally

Besides agreeing to give up the information, Airbnb agreed to post a notice that will be displayed to any potential host seeking to rent a New York property through the service, warning that the practice may be illegal under city and state laws -- something critics say it should have done from Day One.

The city and Airbnb have been at loggerheads for months over allegations that Airbnb is in violation of multiple laws and regulations, including:

  • The New York State Multiple Dwelling Law. This law prohibits short-term rentals in multiple dwelling buildings unless the owner is present;
  • Hotel taxes. Both New York City and the state have multiple hotel occupancy taxes, sales taxes and use taxes that may apply to Airbnb users.
  • Rent regulation. Both the city and state have laws that regulate how much rent a property owner can charge. New York City also has a complex rent control law. Short-term rentals can't exceed the limits set by these regulations.
  • Zoning laws. City zoning laws regulate how property may be used in the city.
  • Business licenses. Whether it's a newstand or the New York Stock Exchange, every business must have a license.  

It adds up

PhotoWhile some of this may sound petty, ask any small business owner how much time and money goes into keeping up with the many taxes, fees and regulations imposed by local and state governments.

What the agreement seems to say is that the AG's office can rummage through Airbnb's records and pick out the individuals who have taken in the most money or rented out their property the most times and then go afrer those individuals for payment of back taxes and fees.

There's major money at stake. Airbnb has reportedly told the AG's office that its top 100 hosts in New York have taken in more than $54 million over the past three years. 

Rights of other tenants

Schneiderman and officials in other cities and states have been under pressure from tenants' groups, landlords and the hotel industry, all demanding that Airbnb be reined in.

Tenants have complained that their quiet residential buildings are potentially turned into hotels, with strangers coming and going at all hours, potentially creating a security hazard. Condominium and co-op managers have noted that their homeowners' and shareholders' agreements generally prohibit short-term rentals. 

Hotels are irate for obvious reasons. They argue that the Airbnb hosts are unfairly undercutting established hotels because they don't pay the applicable fees and taxes and don't have to meet the building, health and zoning regulations that apply to hotels.

In the clear

If this all sounds familiar, it's because it's similar to the complaints raised about Uber, Lyft and other so-called peer-to-peer services that put customer and service provider together via the Internet. 

In each such service, it's the independent contractor service providers -- the drivers, rental hosts and grocery deliverer -- who are at most risk. Customers are in the clear, since it's not generally illegal to patronize unlicensed businesses.

And while the middleman sites -- Airbnb, Uber, etc. -- may be threatened, subpoenaed and even sued by cities, states and other aggrieved parties, it's the service providers who will feel the harsh Iron Boot of the State on their necks, as they wade through demands that they document every transaction, and pay a mountain of overdue taxes, fees, penalties and interest.

Service providers also need to hope that Uber, Airbnb, et al, have properly submitted 1099s to the Internal Revenue Service, which is traditionally the last but most tenacious and feared agency to land on businesses that have run afoul of the law. 

The "victim" in these cases may technically be New York City but in reality, it is the individual who thought short-term rentals would be a cool and easy way to make a few bucks.

Rent out your apartment for two nights for $500 with practically no work or expenses -- wow, sounds too good to be true. Exactly.

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