June 29, 2016
SAN FRANCISCO — Airbnb has charmed and strong-armed lawmakers around the world to allow it to operate in their communities. But two cities, Airbnb’s hometown, San Francisco, and New York, the service’s largest United States market, have not been so compliant.
On Monday, Airbnb sued San Francisco over a unanimous decision on June 7 by the city’s Board of Supervisors to fine the company $1,000 a day for every unregistered host on its service. If Airbnb does not comply, it could face misdemeanor charges.
The suit follows a bipartisan move by New York lawmakers who voted this month to heavily fine anyone who uses Airbnb to rent a whole apartment for fewer than 30 days, a practice that has been illegal in the state since 2010.
The actions show how Airbnb, despite aggressive lobbying efforts, has not been able to persuade some local legislators to play ball. And in the case of New York, the company has demonstrated a surprisingly tin ear for local politics.
“We’re not afraid of money in New York,” said Micah Lasher, a state Senate candidate and Airbnb critic, who worked for Eric T. Schneiderman, New York’s attorney general. “There are more competing interests in New York City and it’s harder to push people around. It’s harder to disrupt.”
A showdown in the two cities could push thousands of illegal listings off Airbnb — a rare speed bump for a company that has shown little signs of slowing down. Airbnb is in talks for a new round of investment that would peg the company’s worth at about $30 billion, tripling its value in two years.
“Airbnb is in a real bind,” said Bradley Tusk, the campaign manager for Michael R. Bloomberg’s 2009 mayoral campaign who has helped start-ups like Uber navigate New York’s political landscape. “It must choose between making their markets dramatically less valuable and getting rid of a cloud of regulatory uncertainty.”
Airbnb executives once promoted San Francisco as a city it could work with. After affordable housing advocates expressed fear that the service worsened the city’s housing crunch, Airbnb agreed to cap short-term rentals for entire homes and required hosts of such listings to register with the city. That law, which became known as the “Airbnb law” for its friendliness to the company, took effect in February 2015.
But only 20 percent of the 7,000 or so hosts required to register have done so, and Airbnb has not removed lawbreakers, according to David Campos, a member of the Board of Supervisors and a longtime opponent of Airbnb. The board hopes that fines will push Airbnb to help enforce the law it helped create.
“Airbnb is proving that it wants to play by its own rules, that it believes that it is entitled to something no business has, absolute freedom to operate free of responsibility and oversight,” Mr. Campos said. “It’s their way or the highway.”
In its lawsuit, Airbnb claims that the board has violated the Communications Decency Act, a federal law that prohibits the government from holding websites accountable for the content that is published by their users. Just as a website may not be held liable for comments posted in its chat rooms, the argument goes, Airbnb may not be held accountable for illegal rental listings.
In New York, which has an unusually broad anti-Airbnb coalition of Democrats and Republicans, landlords and tenants, affordable housing advocates, real estate developers and unions, the fight has been a long time coming.
And it has escalated as other tech start-ups reconciled with local power brokers. The state Senate has voted to legalize fantasy sports, paving the way for the companies DraftKings and FanDuel to operate.
New York City is now Uber’s largest — and most tightly regulated — United States market. Hosts in New York generated about $1 billion in revenue last year (Airbnb takes a cut of that), but 55 percent of the New York City listings were illegal, according to a study commissioned by affordable housing advocates.
In 2013, the company received a subpoena from Mr. Schneiderman for statistics about who used the platform and what they used it for. Airbnb initially resisted, but agreed to provide an anonymized version of the data a year later.
During the public fight with Mr. Schneiderman, Airbnb also tried unsuccessfully to negotiate a behind-the-scenes deal with the attorney general and the city’s power brokers, and it made influential enemies along the way.
The company alienated the powerful Hotel Trades Council, an influential hotel union, by offering a deal to a service workers union that held out the possibility that Airbnb hosts would use unionized apartment cleaners, according to two people with knowledge of the offer who spoke on condition of anonymity.
The Silicon Valley venture capitalist and Airbnb investor Ron Conway made matters worse when, after donating to Bill de Blasio’s mayoral campaign, he flew to New York and told Mr. deBlasio and business leaders to follow San Francisco’s example or fall behind in innovation and growth, according to people who attended one of the meetings. That message was not well received.
In response, Mr. Conway said in an email that New York City “won’t even entertain a real conversation” about innovation and the city in the process has become “its own worse enemy.”
Airbnb has since tried to appease the city with millions of dollars in hotel taxes. But the tax payments, which are paid by hosts, not Airbnb, would essentially legitimize the hosts’ illegal rentals, argued Liz Krueger, a New York state senator who has pushed to remove illegal Airbnb listings.
Airbnb released more data in December in a bridge-building effort, but it required lawmakers to make appointments to read a physical copy of the information at a location in New York chosen by Airbnb. It was a bit like making a library appointment to inspect a rare book.
“People could stay for as long as they wanted,” said Chris Lehane, Airbnb’s head of public policy. Lawmakers said they thought it was an insult. Mr. Lehane said it was a privacy measure, though the data was anonymous.
Political leaders, unions, landlords and housing activists devised a way to deter illegal rentals on Airbnb. Cognizant of the Communications Decency Act that Airbnb is citing in its San Francisco lawsuit, lawmakers drafted the recently approved bill to fine the hosts up to $7,500 if they are caught listing an illegal rental.
“We had to become the enforcers because Airbnb would not do it,” said state Assemblywoman Linda B. Rosenthal, an architect of the legislation. Mr. Lehane counters that the bill is an attack on “the heart of Airbnb’s core business.”
The bill has not yet been sent to Gov. Andrew M. Cuomo and a time frame for that is not clear. Once he receives it, he has 10 days to veto it or let it become law.
Now New York and Airbnb are at an impasse. Airbnb rejects New York’s housing laws and will not compromise unless it can help rewrite them. Politicians say they will come to the table after Airbnb removes all illegal listings.
In Airbnb’s defense, Mr. Lehane said that New York is the only major American city that has not worked with Airbnb to create friendlier laws. And Airbnb could someday strike a working relationship with New York lawmakers and power brokers.
“We haven’t been perfect and we’ve learned a lot,” Mr. Lehane said.