Companies Built on Sharing Balk When It Comes to Regulators
In the newfangled sharing economy, questions about safety, taxes and regulation have tended to be an afterthought. That has propelled companies like Uber, Airbnb and Lyft into the stratosphere.
But regulators as well as some elected officials across the country are increasingly questioning the presumptions and tactics of these start-ups, especially the notion that laws do not apply to them.
The companies are fighting back by rallying their impassioned and growing customer base. And they are stocking up on lawyers and lobbyists.
The latest confrontation comes Tuesday as Airbnb, the largest housing rental company, goes to court in Albany. It is fighting an effort by New York regulators to collect the names of Airbnb hosts who are breaking the law by renting out multiple properties for short periods.
Airbnb, which is now estimated to be worth $10 billion, is framing the dispute as a case of government scooping up more data than it needs for purposes that are vague.
'He claims to be targeting a small number of bad actors,' said David Hantman, Airbnb's head of global public policy, referring to the New York attorney general, Eric T. Schneiderman. 'But he is asking for data on thousands of regular New Yorkers.'
Document: Analysis of Airbnb ListingsIn a blog post, Airbnb said the regulators' plan was to accuse Airbnb hosts in court 'of being bad neighbors and bad citizens.' It added: 'They'll call us slumlords and tax cheats. They might even say we all faked the moon landing.'
It is illegal in New York City to rent out an apartment for less than a month, a 2010 measure meant to curb illegal hotels. But existing laws, Airbnb executives say, do not fit the sharing economy.
'There are laws for people and there are laws for business, but you are a new category, a third category, people as businesses,' Brian Chesky, Airbnb's chief executive, told an audience last fall. 'As hosts, you are microentrepreneurs and there are no laws written for microentrepreneurs.'
Micah Lasher, Mr. Schneiderman's chief of staff, fired back that 'being innovative is not a defense to breaking the law.'
Calling consumers to arms is a defense that has worked well for the businesses of the sharing economy. Last week, ride-sharing companies collected enough signatures in Seattle to overturn a new City Council measure that limited their growth. This week, they are trying to fight an effort by Arizona legislators to introduce some modest controls on their business.
Attempts at old-fashioned regulation are being cheered on by the taxi and hotel industries, who feel their livelihood is being threatened. Affordable-housing advocates are now joining the fray, saying companies like Airbnb are worsening the crisis in affordable housing.
'You are throwing gasoline on a fire that the rest of us are trying to put out,' a coalition of housing groups, Real Affordability for All, asserted Monday in an open letter to Airbnb.
Until recently, start-ups generally avoided areas that were heavily regulated, like transporting people and renting rooms. Even a well-funded start-up did not have the money, time or patience to wrestle approval from bureaucrats.
Then, a few years ago, Silicon Valley had a collective insight: Better to ask forgiveness than permission.
At a recent valley conference on the sharing economy, Kevin Laws of AngelList, which advises and finances entrepreneurs, explained that 'the approach almost all start-ups take is to see if they can be successful fast enough so they can have enough money to work with the regulators.'
Many start-ups define 'working with' regulators as simply accusing them of holding back innovation. But Mr. Laws said regulators were trying to balance many competing interests. 'This assumption that they're always bad in my experience has been almost 100 percent wrong,' he said.
The New York regulators are seeking through a subpoena the names of landlords they think are breaking the law.
On Jan. 31, there were 19,522 listings for New York City properties on Airbnb from 15,677 hosts, according to data the attorney general submitted to the court. But nearly a third of the listings were from only 12 percent of the hosts.
One Airbnb landlord had 127 listings in Manhattan on a single weekend last fall. Sixteen other landlords had at least 15 listings each.
Even as Airbnb was increasing the volume of its attack on regulators on Monday, it was deleting numerous New York landlords from its site.
'When we examined our community in New York, we found that some property managers weren't providing a quality, local experience to guests,' the company said in a blog post. The removed landlords controlled a total of 2,000 rooms.
The regulators took Airbnb's action as proof that there are indeed people abusing the site, and that Airbnb knows it.
'The publicly available data suggests that a disproportionate share of Airbnb's business comes not from struggling artists and grandmothers but rather large commercial enterprises,' said Mr. Lasher, the chief of staff. He added that the 'string of attacks' on the attorney general was 'a transparent effort to distract from our investigation.'
On Tuesday morning, Airbnb intends to put forth a fresh attack on Mr. Schneiderman, releasing a memo that plays up those struggling small stakeholders.
'Kimberly is an Airbnb host on the Lower East Side,' the memo says. 'She has a chronic illness that prevents her from working.' Kimberly is quoted directly: 'My husband and I spent countless nights wondering if and when we would lose our home, or if we would have to stop treatment to keep a roof over our heads.' She concludes, 'Airbnb saved us.'
What both sides seem to agree on is that being a New York landlord on Airbnb can be lucrative.
Two years ago, Airbnb hosts in New York were making an average of $21,000 a year, the company said at the time, and some as much as $100,000.
Of the top 40 highest-grossing Airbnb hosts in New York, each took in at least $400,000 over the last three years, Mr. Schneiderman said. Collectively, they have grossed more than $35 million over the last three years.
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