By Joshua Bass
Americans have drastically changed the way they obtain their goods and services.
Sites like Amazon allow citizens to access a myriad of goods at cheaper costs as well as a platform to sell unwanted or unused products. Over the last few years, talented and eager entrepreneurs have found a way to utilize this new “shared economy” in the service industry, including the high-profile AirBNB, that allows travelers to rent lodging with local residents.
The legality and lack of regulation of AirBNB and similar companies, however, has come under scrutiny. Many cities have already begun to take action in dealing with homesharing. A major problem that many municipalities have with AirBNB is that it acts as a hotel, but does not pay the necessary transient occupancy tax that a traditional hotel would.
These taxes can be substantial, with most cities charging between 5% and 15%. AirBNB has already reached agreements with Portland, San Francisco and San Jose to charge users the additional fee, and the tax will soon be implemented in Washington, D.C and Chicago. AirBNB will pay the money collected from the tax in a monthly lump-sum to the respective cities.
The agreement between AirBNB and Portland is an ambitious project called “Shared City.” AirBNB hosts will have the option of donating some of their earnings to local charities and any donations will be matched by AirBNB.
Another part of the deal will allow Portland hosts to receive free smoke and carbon monoxide detectors upon request. AirBNB will partner with Portland's tourism board to promote the city and its attractions.
But while some cities have embraced the concept of AirBNB and a shared economy, others are fighting it.
San Francisco landlords fought Board of Supervisors former President David Chiu on the legality of AirBNB. The landlords had safety concerns due to the lack of a thorough screening process for travelers and complained that hosts were charging more than the market rate, essentially cheating the landlords out of money.
After a long fight, Chiu’s legislation passed, legalizing AirBNB and establishing a tax agreement between the company and the city of San Francisco.
Meanwhile, New York Attorney General Eric Schneiderman has deemed 72 percent of AirBNB listings to be illegal, claiming that “A slick advertising campaign doesn’t change the fact that this is illegal activity,” and criticizing the fact that 6 percent of the hosts generate 37 percent of the revenue.
Schneiderman recently announced a joint enforcement initiative with city regulators to shut down illegal hotels, with a focus on eliminating AirBNB from New York.
Expect both state and city legislators to propose policy that either inhibit or promote the growth of AirBNB and similar companies in the coming months.
Some state legislators have already begun the steps to take action and more will continue to do so as sharing-based businesses increase in popularity.
Click here for NCSL's research on ride-hailing.
Joshua Bass is an intern for the State-Federal Relations Division in NCSL's Washington, D.C. office. Email Joshua.