The Story Behind The Airbnb Hype

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The Story Behind The AirBNB Hype


The Story Behind The AirBNB Hype


Apparently the service chain Airbnb is no longer feeling so welcome by community groups and the public officials who represent its most fertile market. Their fight to go public and receive its IPO in New York City will be considerably more of an uphill climb than the company may think. For those who have spent the past 10 years fighting the problem of illegal hotels, the chain represents a decades old problem. For building owners, this business model – turning residential buildings into commercial youth hostels or budget “boutique” hotels - was used to clear out rent regulated buildings, including SROs in order to convert them to market rate housing or coops/condos. The hostels were a way for the landlords to make a lot of money quickly, and make life miserable for anyone living in the building.

The estimated loss of affordable housing rests at or around 300,000 units. http://www.nytimes.com/roomfordebate/2013/10/16/housing-thats-not-a-luxury/strengthen-rent-regulations. According to an opinion piece by Jaron Benjamin of the New York Times, this loss of affordable housing takes on an extra meaning when you consider the fact that there is an estimated 53,000 homeless in New York City.

A coalition from the upper West Side of Manhattan and Hell’s Kitchen brought about the 2010 updating of the multiple dwelling laws which defines the state’s policy for rent regulation and clearly defines residential housing as opposed to commercial hotel properties.

What was over looked by various housing groups and representatives OSE (Office of Special Enforcement) who are in charge of cracking down on illegal hotels is that once the law went into effect on May 2011 the key interest groups involved in the real estate industry would challenge the law. In fact two groups of landlords did challenge the law in the courts claiming the law was unconstitutional and a potential harm to their business but the judge upheld the law stating that there was no evidence that the landlord’s businesses were being damaged in anyway.

Building owners and the landlords who have engaged in this illegal practice continued status quo, seeing that any fines received was only the price of keeping the operations of their business going. The price for violating the law was at the time $500 dollars no matter if they were illegally renting out one room or 40.

In response to this situation, the New York City Council passed 2012 legislation called fines bill also known as bill No. 404-A.The new removed the flat rate of $500. Those fines would be per room and per-night. After that the fines would go up to $1000 dollars per room per night and so on.

The arrival of AirBnB has complicated the fight in many ways for tenant’s rights groups. The fight went from being between tenant and the landlord where the rules are clear cut to tenant to a situation where it is now tenant versus neighbor and in many cases landlord versus the tenants who illegally rent their rooms for less than 30 days. Another big change from the classically known “bad old days” where the problem was by enlarge being perpetrated by local landlords many of whom may have owned one building, with the larger operators owning what amounts to whole communities but still are open to the same governing laws , Airbnb’s operations run out of San Francisco and they leave the legal risks to individuals who use their service. So if any client is caught, it is up to him or her to deal with legal matters. The company is also reportedly operating out of hundreds of thousands of units worldwide and is worth $10 billion dollars which would if legitimized make them eligible to going public on the stock market. Airbnb however has no plans to change their business practices to accommodate local housing laws but instead uses their resources to lobby Albany lawmakers to change New York state’s housing law to suit them. In order to do this they have united the who’s who of illegal hotel chains in order to form the so called nonprofit group known as Peers. http://valleywag.gawker.com/airbnbs-industry-mouthpiece-astroturfs-for-donations-1481305550/@maxread . Peers main function it seems is to bring together students, coop/condo owners and many others who use their service.

According to one email Airbnb visited 168 law maker’s offices within a 48 hour And the author of the email stated, “From Lewiston to Syracuse to Manhattan, they told personal stories about what Airbnb had made possible for them”. Peers also reportedly raised an average of $12 from over 700 of its members.

Airbnb posses yet another problem far beyond giving campaign contributions and having its members talk about how the service allows them to keep their homes, the company is a hotbed for the sex trade. Dana Sauchelli and Bruce Golding of the New York Post released an article titled “Hookers turning Airbnb Apartments Into brothels” which laid out how escort services use the room so as a place for the girls to perform for their johns on an hourly rate and are usually rented out in so called bundles http://nypost.com/2014/04/14/hookers-using-airbnb-to-use-apartments-for-sex-sessions/ . According to the authors of the article the service agency has the girls set up their own profiles on the Airbnb website using a prepaid debit card, all as a way of not getting caught by the authorities. One sex worker was quoted in the article as sayingIt’s more discreet and much cheaper than The Waldorf”. These operations largely run out of the financial district and Mid-Town West to service local business men.

In another case of the sex trade sector using Airbnb in order to find space to operate out of, a female client in Washington DC was appalled to find that the two men who rented her apartment on a short term basis turned the place into a message parlor.

Since Airbnb and other companies who use similar business models have continued to expanded to such a great degree, New York State Attorney General Eric Schniederman has issued a subpoena to Airbnb in an effort to obtain the company’s client list. The subpoena has yet to be honored with the head of Airbnb claiming that it was an overreach by Schniederman’s office. http://pix11.com/2014/04/22/officials-say-nyc-airbnb-rentals-making-housing-crisis-worse/#axzz2zjNqFN59 . Challenging these claims by company heads are lawmakers such as Liz Kruger and Charlie Rangel, both of whom see the chain as another example of business greed.

Rangel recently stated that New York residence are not the ones who are benefiting from the presents of Airbnb, it’s the operators of these illegal hotel chains which exacerbate the issues of the warehousing of apartments and the loss of rent regulated housing. These services also allows building owerns/landlords, along with “super clients”, those who operate more than 30 rooms for the company, an incentive to use normally rent regulated housing for transient purposes . Finally, when one thinks of these operations in the scope of the massive affordable housing crunch which is plaguing New York City it is easy to see why Airbnb might not be such a welcome guest.

Until next time…

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