Airbnb proves its worth to New York: $632 million, to be exact

Kimberly Kaye rents out her one-bedroom apartment in New York City’s East Village through popular lodging platform Airbnb. Kaye and her husband listed their apartment on the site after Kaye’s chronic, degenerative illness forced her to quit her job and go on disability. The couple couldn’t make rent and didn’t want to lose their home.

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Airbnb wants New York Attorney General Eric Schneiderman to see Kaye and other hosts like her: average New Yorkers, some of whom have fallen on hard times, who are able to cover the cost of their extraordinarily high rents by listing their homes on Airbnb. But if appealing to state regulators’ emotional sides isn’t enough, the company has commissioned an economic impact study to back up its claims with hard facts.

Airbnb released the study Tuesday in the midst of a legal fight with Schneiderman, who has demanded Airbnb hand over data on all of its New York City hosts. The company is challenging the subpoena in New York State Supreme Court.

Airbnb would take a big hit if it were kicked out of New York City, but the 21st century lodging platform is trying to convince state regulators that New York would miss Airbnb if it weren’t around. The company said its 17,500 New York City hosts and their 416,000 guests generated $632 million—directly and indirectly—for the city over the last year.

Unconventional effects

The effect Airbnb has on New York’s tourism industry is small potatoes compared to hotels—more than 50 million people visited the city last year, and only 1 percent found a play to stay through Airbnb. But economic development and real estate consulting firm HR&A Advisors found that the company has nontraditional effects on New York’s economy.

“Airbnb is activating neighborhoods that haven’t been activated by tourism conventionally,” HR&A Advisors partner Jamie Springer said during a Tuesday press conference.

More than 80 percent of New York City listings on Airbnb are outside the city’s concentration of hotels in midtown Manhattan. Neighborhoods like Bedford-Stuyvesant and Harlem, where 20,000 and 28,000 guests, respectively, stayed through Airbnb last year, are not typical tourist hot spots. Bed-Stuy got a $14.5 million cash infusion from Airbnb guests, and Harlem saw $18.1 million extra. Even Staten Island got some love—1,400 people rented rooms or homes there last year.

The study was based on surveys of 1,300 Airbnb hosts and guests in New York, focus groups, booking data between August 2012 and July 2013, and conventional economic impact modeling to determine the effects the company has on the city.

You can rent an entire 1-bedroom apartment in Brooklyn on Airbnb for less than a midtown Manhattan hotel room.

Death and taxes

The key number that Attorney General Schneiderman will be looking at is Airbnb’s tax contribution, which is lower than he’d like to see.

The Attorney General’s office says Airbnb hosts aren’t paying enough, if any, state, local, and occupancy taxes on their rental income. Airbnb says its hosts are issued a 1099 tax form at the end of the year and last year paid $12 million in personal income tax on their earnings. Airbnb guests in New York contributed $31 million in sales tax during the same time frame—combined, that $43 million would support 370 schoolteachers in the city, the company said.

The real issue, Airbnb says, is the state law that determines how taxes are paid on rentals. The company wants New York State to offer an exemption for people renting their primary residences from occupancy taxes.

“We’ve asked for clarification,” Airbnb public policy head David Hantman said during Tuesday’s press conference. “Our guests and hosts pay a lot of tax, and we’re eager to help them pay more if that’s what’s appropriate.”

East Village host Kimberly Kaye has never turned a profit on her Airbnb guests, who cover her rent, she said, and that’s it.

“Our guests are quiet donors to a charity they don’t even know exists,” she said.

She plans to pay income taxes at the end of the year.

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