New York’s investigation into whether Airbnb Inc. allows users to run illegal hotels hit a setback when a judge ruled that a request for information about the service’s rental home providers was too broad.
Acting Supreme Court Justice Gerald W. Connolly in Albany Tuesday voided a subpoena from New York Attorney General Eric T. Schneiderman, saying the demand for information identifying all hosts in New York, including their names and addresses, “seeks materials that are irrelevant to the inquiry.”
The San Francisco-based firm lets users rent out a couch, bedroom or house and makes money by charging a fee for each transaction. With listings in about 34,000 cities around the world, the company is said to be valued at $10 billion under a financing deal with TPG Capital.
There’s evidence hosts are “regularly using their apartments to provide lodging to guests who may not be complying with the state and local tax registration and/or collection requirements,” Connolly said in his ruling.
State regulations generally prohibit short-term rentals of entire private homes. Critics including affordable housing advocates say Airbnb is driving up rents, while supporters such as the Washington-based Internet Association, which represents e-commerce companies Amazon.com Inc., EBay Inc. and Twitter Inc., claim the service boosts local economies.
Matt Mittenthal, a spokesman for Schneiderman, said the judge “rejected all of Airbnb’s arguments except for a narrow technical issue” and the attorney general will issue a new subpoena as early as this week.
“Our office is committed to enforcing a law that provides vital protections for building residents and tourists alike,” he said in an e-mailed statement.
Airbnb has said it wants to work with state officials to ease restrictive laws and find ways of collecting and remitting occupancy taxes. New York City hotel rooms are subject to a 14.75 percent occupancy tax, according to Connolly’s decision.
In its challenge of the probe, Airbnb called the attorney general’s demand a “government-sponsored fishing expedition,” and said that it lacked a reasonable basis, was too broad and burdensome and that it sought private information from users.
“This decision is good news for New Yorkers who simply want to share their home and the city they love,” Airbnb spokesman Nick Papas said Tuesday in a statement. “We look forward to continuing to work with the Attorney General’s Office to make New York stronger for everyone.”
Schneiderman’s office had asked for information for about 15,000 hosts that rent accommodations in New York state, including their names, addresses, contact information, addresses of the homes and rental charges and communications related to taxes, according to papers filed by Airbnb with the Albany court.
More than 60 percent of the service’s listings in New York City on Jan. 31 appeared to violate a 2010 law targeting illicit hotels, the state attorney general’s office found. Airbnb has said it is open to reforming state law to allow it to collect and pay occupancy taxes.
The company said in April that it removed 2,000 listings in New York after Schneiderman “raised concerns about bad actors” such as property managers with large numbers of listings.
“With all due respect to Airbnb, we want to be the ones to look at the data and make that determination,” Schneiderman said at a breakfast forum held by Crain’s New York Business on April 24 in Manhattan.
“Much of the revenue of Airbnb is not nice people seeking to make ends meet,” he said. “This is an issue that is only in the beginning stages of an investigation.”
When asked if he was considering regulations for Airbnb during a public appearance last month, New York City Mayor Bill de Blasio said that the city is still sorting through issues that need to be reviewed, including revenue, security and law enforcement, according to a transcript.
“It’s certainly something we’ll be doing on the city level, working with our partners in the state government as well, but it’s something that I think in general, government is grappling with as a new phenomenon,” the mayor said, according to the transcript.
New York City Public Advocate Letitia James told the city’s Metropolitan Transportation Authority in a letter Monday that it should stop allowing Airbnb to use its advertising space until the service “reforms its business practices.” James sought immediate disclosure of all of Airbnb’s advertising contracts for locations the MTA controls.
The company’s practices have led to the creation of de- facto hotels without oversight and have driven up apartment prices, James said in the letter to MTA Chairman Thomas F. Prendergast.
Lisa Linden, a spokesman for the Hotel Association of New York City, a trade group representing more than 250 hotels, said the judge provided a “a clear road map for further enforcement” of occupancy and tax laws by calling most of Airbnb’s arguments unpersuasive or unnecessary.
Connolly said in his decision that the attorney general’s request is too broad because it seeks information for all hosts in the state, even though some might be excluded from the occupancy and tax laws. New York’s multiple dwelling law, for instance, applies only to cities of at least 325,000, according to the decision.
“I’m no lawyer, but this looks like the definition of a Pyrrhic victory for Airbnb,” said New York state Senator Liz Krueger, of Manhattan, who sponsored a 2010 bill targeting illegal hotels. “Today’s decision gives Airbnb a little time, but it looks like that’s all it gives them.”
New York lawmakers including Krueger and U.S. Representative Charles Rangel, both Democrats, called for increased enforcement of state and local rental laws in response the dispute between the state attorney general and Airbnb.
The group said in a statement in April that Airbnb may be used to illegally rent out as many as 3,000 units in Harlem, where rents have increase by about 27 percent from 2006 to 2011.
The case is Airbnb v. Schneiderman, 5593-2013, New York Supreme Court, County of Albany (Albany).
With assistance from Henry Goldman in New York.
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