Airbnb follows Uber playbook
Lawmakers seem inclined to regulate apps with a light touch
FIRST UBER, NOW AIRBNB. The so-called sharing economy that went from zero to billions of dollars in the blink of an eye caught the State House off-guard, but it now appears the Legislature is inclined to regulate these new services with a much lighter touch than the legacy industries with which they compete.
After months of fits and starts, the House and Senate each passed their own bills to regulate the transportation network industries and a conference committee is now working to resolve differences between the measures. The final product will bring some regulation to the industry, but it won’t address the concerns of the taxi industry, which wanted fingerprinting and heavier background checks for drivers as well as limits on fares.
The Legislature is not as far along in dealing with the home-sharing apps, which include the likes of Airbnb, HomeAway, VRBO, and Flipkey. But it appears lawmakers will follow the same regulatory script they did with Uber and Lyft, passing some new measures to regulate the apps but by and large allowing the services room to grow without a leash.
The Senate has tentatively approved a measure that would extend the room occupancy tax to the booming home-sharing market, where “hosts” rent out anything from rooms in their homes to their entire house through internet hosting platforms. The measure, part of the economic development bill, is expected to bring in as much as $20 million a year for the state and a similar amount to cities and towns that have local excise taxes.
“Regulations are a separate issue from the tax piece,” says state Rep. Aaron Michlewitz of the North End, who wrote the measure to regulate home-sharing and who also penned the House bill to place some limited restraints on transportation network companies. “This is a fast-growing industry and while I appreciate the revenue portion of it, regulations are definitely a major part of the legislation.”
Officials at Airbnb and HomeAway, the two leading sites for rentals of private residences, are fine with the Legislature’s approach so far. They say they support the imposition of a room occupancy tax on their rentals but don’t want to see room occupancy regulations applied to someone’s home. Their approach is similar to the argument Uber and Lyft made in opposing regulations on their drivers who use their own cars.
“Airbnb is grateful to all who recognize the growing ‘sharing economy’ in Massachusetts and appreciates the thoughtful dialogue that has occurred to ensure that middle class families are able to continue sharing their homes with others to ‘help ends meet’ financially,” William Burns, a senior advisor with Airbnb, wrote to the Senate in support of the tax measure. “Airbnb sees the value in ensuring that our community pays its fair share of these room occupancy taxes.”
A spokesman for HomeAway says his company supports extending the room occupancy tax to home-sharing, but he says any effort to further regulate those who rent their homes would stifle economic growth and hinder a homeowner’s ability to augment his income.
Like Uber and Lyft, the home-sharing apps are becoming major factors in the marketplace, accounting for an estimated 15 percent of the short-term rental market. Airbnb said it facilitated more than 400,000 rentals last year in Massachusetts through 9,500 hosts.
The rapid growth is starting to command the attention of lawmakers everywhere. US Sen. Elizabeth Warren was one of three senators to sign on to a letter to the Federal Trade Commission this week asking the agency to look into the emerging home-sharing industry and raising concerns that the sharers are not just people trying to make ends meet.
The letter cited data from the New York Attorney General that found that commercial entities account for a disproportionate share of short-term rentals. The attorney general found that those who own three or more units comprise 6 percent of Airbnb “hosts” in New York City yet generate more than 37 percent of the revenue. In addition, the attorney general found that 72 percent of rental units violated state and local laws on health and safety.
“We are also troubled by efforts of platform companies to negotiate agreements with state and local governments to collect and provide aggregate tax payments on rentals processed through their systems without providing more detailed information that would help officials to determine the legality of those rentals,” the senators wrote. “In other cases, online platforms appear to be complying with state and local tax laws inconsistently, collecting taxes in some jurisdictions and not others.”
Paul Sacco, president and CEO of the Massachusetts Lodging Association, says applying the same regulations to the home-sharing market that hotels and motels “willingly comply with” is not only fair for the lodging industry but also ensures health and safety for those who rent a home that may not have smoke detectors, proper exits, or sanitary conditions.
Sacco says apps such as Airbnb and HomeAway allow an underground rental industry to thrive at the expense of established businesses that must comply with occupancy laws. Sacco said he is aware of individuals in Boston and Cambridge who have about 60 to 70 units each that they rent on the internet platforms, though he declined to provide the names or supporting data for his claim.
Sacco, who lives in Sandwich, says many people who used to rent their homes on the Cape by the week have begun to list them on the apps as nightly rentals. He said others are beginning to buy up multi-family homes in the Boston area to turn them into short-term rentals.“We’re not trying to put them out of business,” says Sacco. “We just want to regulate them.”
At least for now, it does not appear that argument will carry much weight with lawmakers.