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Airbnb: To Tax or Not Tax a Rented Bed

Cities are cracking down on Airbnb’s booming rental business
Airbnb: To Tax or Not Tax a Rented Bed
Illustration by Jon Burgerman

New York may be the city that never sleeps, but overnight visitors are still advised to check in somewhere. Staying in hotels is not for the frugal, however, especially when you add taxes, which come to more than 15 percent of the bill. No wonder so many now shop on the website Airbnb.com, where $20 a night secures a bed in a shared Queens apartment, and $285 an entire loft in SoHo. The four-year-old site, an aggregator of private vacation rentals, has increased its listings in New York City from 900 three years ago to close to 15,000 today. That’s made it not only a sizable player in the lodging industry—the city has 90,000 traditional hotel rooms—but a high-tech and potentially expensive headache for city officials.

Under a 2011 state law, residents can rent out rooms in apartments they occupy, but not the entire space. Yet Airbnb features legions of apartments available on a short-term basis. The San Francisco-based company, which operates in 30,000 cities worldwide, insists it can’t police its users and instead relies on them to follow local rules. Overall the city issued 2,587 violations of the state law from May 2011 through June of this year, and in September officials doubled the fines, which can now reach $25,000. City Council Speaker Christine Quinn says unregulated hotel rooms can endanger tourists, irk residents who have to put up with transients arriving at all hours, and put the squeeze on affordable housing.