Airbnb Judge Blocks N.Y. State Inquiry Into Home Sharers

New York’s probe into whether Airbnb Inc. helps its hosts run illegal hotels hit a snag when a judge ruled a request for information about the lodging providers was too broad.

Acting Supreme Court Justice Gerald W. Connolly in Albany yesterday threw out a subpoena to the company from New York Attorney General Eric Schneiderman, saying the demand for information identifying all people in New York known by the company as hosts, including their names and addresses, “seeks materials that are irrelevant to the inquiry.”

The San Francisco-based firm lets customers rent a couch, bedroom or house from a host 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.

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. (AMZN), EBay Inc. (EBAY) and Twitter Inc., claim the service boosts local economies.

Connolly, agreeing with the attorney general, said evidence in the case suggests there are hosts “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.”

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.

Residents, Tourists

“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.” The subpoena lacked a reasonable basis, was too broad and burdensome and it sought private information on hosts.

“This decision is good news for New Yorkers who simply want to share their home and the city they love,” Nick Papas, a spokesman for Airbnb, said yesterday in a statement. “We look forward to continuing to work with the Attorney General’s Office to make New York stronger for everyone.”

15,000 Hosts

Schneiderman’s office asked for information on about 15,000 hosts who 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 Schneiderman’s office found. Airbnb has said it is open to accepting state law reforms 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.

Beginning Stages

“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 May 12 letter 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.

De-Facto Hotels

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 yesterday 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 found the subpoena request overreached by seeking information for all hosts in the state while 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.

Pyrrhic Victory

“I’m no lawyer, but this looks like the definition of a Pyrrhic victory for Airbnb,” said state Senator Liz Krueger, of Manhattan, who sponsored a 2010 bill targeting illegal hotels. She said yesterday’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.

Proponents of Airbnb argue that existing laws and regulations in some cities and countries weren’t meant to apply to people who rent their homes occasionally.

On the company’s blog, Airbnb’s David Hantman, head of global public policy, applauded housing regulatory changes over the past year in France, Amsterdam and Hamburg, Germany, that allow residents to more easily rent out their homes.

“Because Airbnb and other sharing economy companies are still so new, we often face a lot of misconceptions and misinformation as we begin dialogues with governments around the world,” Hantman said in a June 10, 2013 blog entry.

The New York judge’s decision yesterday “is an important win for the innovation economy and individual liberty,” Michael Beckerman, president of the Internet Association, said in a statement.

The case is Airbnb v. Schneiderman, 5593-2013, New York Supreme Court, County of Albany (Albany).

To contact the reporters on this story: Christie Smythe in Brooklyn at csmythe1@bloomberg.net; Chris Dolmetsch in New York State Supreme Court in Manhattan at

cdolmetsch@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg, Fred Strasser

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