The State of New York just approved new legislation that is intended to create new rules to regulate online rental companies like Airbnb.
The international home rental service allows private citizens to lease out their homes, rooms, apartments or other dwellings to travelers for a given length of time. But, much like Uber does for ride sharing, Airbnb operators can offer essentially the same services as a hotel chain without all the overhead, rules and regulations a full-time commercial enterprise faces.
States and countries across the globe are wrestling with what to do about this issue. They don’t necessarily want to stifle new tech innovation, but they also can’t afford to allow these innovations to create an unlevel playing field for established business.
There are already some restrictions on rentals. NY does not allow most apartment dwellers to sublet their rentals for less than a month through services like Airbnb. But this tougher regulation criminalizes the act of advertising a rental that violates existing law. This law is aimed at hitting Airbnb rather than the actual people renting the locations.
While Airbnb said it would sue if the bill was passed, no suit has been filed … yet. The company is certainly not above taking the fight to government officials intent on stopping or limiting its growth. Officials ostensibly say they want to reduce the impact of short-term leasing on property values, but Airbnb doesn’t buy that argument.
But the case isn’t clear cut for politicians. Sure, they don’t want to upset well-heeled business owners, but they also can’t afford to alienate a voting public that – clearly – loves services like Airbnb and its vehicle cohort, Uber.
Airbnb immediately grabbed that PR lever, telling anyone who would listen that the NY bill would “seriously damage” its business, especially in NYC, which is far and away the company’s biggest market area in the U.S.
But NYC has some precedent, albeit internationally. Major metropolises like Berlin, Amsterdam, and Barcelona, have placed heavy restrictions on short-term renting if they haven’t just banned them altogether.
This argument is just getting started, but the script has already been written in fights with other cities and states. The state will argue that Airbnb engages in business practices that hurt the market and may even be illegal. Meanwhile, Airbnb will say they’re providing a necessary service that’s being unfairly marginalized. Should be interesting to watch this play out.
David Milberg is a financial analyst from New York City.