Rooms Rentals & Shares

New York Attorney General Wants to Shut Down Airbnb’s ‘Illegal Hotels’

Apr 25, 2014 6:00 am

Skift Take

We’ve reached the very odd point where Airbnb’s bogus claim of “regular New Yorkers” is butting up against the AG’s dubious “illegal hotels.” But it is really so much more complex than this, on both sides of the equation.

— Jason Clampet

Free Report: The State of Student Travel


New York Attorney General Eric Schneiderman said he isn’t trying to shut down Airbnb Inc.’s business with his demand for information about whether the online service’s users violate housing and occupancy tax laws.

“We’re not saying that people can’t sublet rooms,” he said today at a forum hosted by Crain’s New York Business in Manhattan. “We’re not saying this model should be eliminated completely. But we are saying you can’t run illegal hotels.”

His office is seeking information about the company’s hosts as part of an investigation of large-scale users, Schneiderman said.

Airbnb this week urged a judge in Albany, New York’s state capital, to block the attorney general’s subpoena for information. The San Francisco-based company, which provides a marketplace for rentals of private homes in thousands of cities around the globe, is said to be valued at $10 billion under a financing deal with TPG Capital.

The company is “selling to investors the idea that this is a hotel network, and they are telling the public that it’s not,” Schneiderman told the audience at the New York Athletic Club.

Nick Papas, an Airbnb spokesman, said in an e-mailed statement that the “hotel lobby and the attorney general” are “targeting thousands of regular New Yorkers just trying to make ends meet.”

Working Together

“We should all be working together to help New Yorkers, not make things harder for them,” Papas said.

The attorney general also discussed investigations by his office into high-frequency trading and his work on a national mortgage-backed securities task force.

Schneiderman said last month that his office is looking into whether some trading platforms provide unfair advantages to high-frequency traders.

“We are not looking to eliminate speed,” he said. “We are looking at unfair or deceptive practices in which they can only get away with it because of the factor of speed.”

The attorney general’s office sent subpoenas to several high-frequency trading firms seeking information about their arrangements with exchanges and dark pools as part of the probe, according to a person familiar with the matter.

“I think we’re going to do substantial work in this area over the next year,” he said today.

The mortgage-securities task force reached a $13 billion settlement with JP Morgan Chase & Co. in November to resolve allegations that it knowingly packaged and sold bad securities that helped fuel the financial crisis.

Schneiderman has said the task force, which he co-chairs, has also been looking at other financial institutions, without specifying names.

“We’re beyond the stage of investigations right now,” Schneiderman said today. “We’ve moved ahead.”

With assistance from Keri Geiger in New York. To contact the reporter on this story: Christie Smythe in Brooklyn at csmythe1@bloomberg.net. To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net. 

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