Airbnb has made enormous strides in the Vacation Rental segment of the travel industry in the past year, but a roller coaster week in the media may be threatening the image of this successful startup.

On Monday, New York State Attorney General Eric Schneiderman filed an affidavit with the state Supreme Court in Albany claiming that the majority of Airbnb listings in New York are illegal.  Schneiderman originally filed the subpoena, seeking user data from Airbnb, in October.  Speculation is swirling that since the company has been in negotiations with the Attorney General’s office for months, a settlement fell apart.

The issue at hand is that subletting for less than 30 days is in general illegal for renters in New York who are not continually residing in their apartment.  For Airbnb, plenty of the nearly 20,000 offerings – 64% on January 31 – listed on the website in New York were for an “entire apartment”, not a shared space, as the law would seem to mandate.

Airbnb Legal Issues in New York
This is not the first time Airbnb has drawn criticism in the state of New York.  The company has been under much scrutiny for not abiding by the same hospitality tax structures to which traditional hotels are subject.

The company announced last week that it would begin a pilot program in San Francisco, Portland, and New York, to start “self-tax collecting.”  The company estimates the tax could collect up to $20 million a year for the government.   It also claims that it will pump $768 million specifically into New York’s economy this year.

Other Issues at Stake
Last week, Airbnb announced it closed a deal for $450 million in funding, allowing the company to attain a valuation it had been seeking for some time now: $10 billion.  It’s now, after this funding round led by private-equity firm TPG, one of the most valuable startups on the planet.   As the company moves closer to a potential IPO, the Airbnb legal team will have to ensure that their business practices in other states, and in countries around the world, are within the legal framework.  Otherwise, the company will end up spending all of its revenues on litigation and lawyer fees.

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