No Room for the Middle Class

The New York State Legislature recently passed a bill subjecting residents to fines upwards of $7,500 for listing whole-apartment rentals on Airbnb. Though laws forbidding short-term rentals have been on the books since 2011, these additions—celebrated by powerful hotel groups—will dish out expensive punishments and restrict financial opportunity, all for renting out private property. To put these fees into perspective, in the state of New York a class A misdemeanor is punishable by fines of not more than $1,000. Some examples of class A misdemeanors in NY include crimes such as assault in the third degree, endangering the welfare of a child, and inciting to riot. Committing a misdemeanor may also result in up to a year of jail time, depending on the infraction and sentencing, but it’s bizarre to think you could commit a crime that harms people and receive a lesser penalty than you would for simply renting out your property.

Though I’m not a New Yorker, I can sympathize with the way many must feel at the prospect of this bill’s passage. I fall into the same class of person who would be stifled by these regulations: an average citizen with some unused space, who will no longer be able to freely rent out my home. I joined Airbnb as a host in 2012 and the arrangement worked perfectly. Without Airbnb, I had an unused room in my apartment that would just sit empty when I occasionally travelled for weeks at a time. Renting out the room was especially helpful during the holidays. Guests wished to visit nearby family but wanted their own space, while I wanted cash for gifts and planned to spend time out of town with my own family. Airbnb’s review system let me see feedback about the person I was allowing into my home and insured potential property damage up to $1 million. In the end, it was a low-effort, consistent source of alternative income. The property was insured, the taxes were paid and documented, and I felt secure—it was a modest middle class victory.

By the next year, I started renting out a West Virginia farm I own with some friends. This has become our most reliable source of income, helping us pay down our mortgage and giving us some financial leeway to expand our operations. All this was made possible by better utilizing property we already owned. A couple of years later, as the director of operations for Consumers’ Research, I have established a small business account with Airbnb. This has been a convenient and economic way to book frequent conference and meeting trips – on average, we save $200-$300 per person, per trip. If we book ten trips for just two employees through Airbnb, we are already cutting expenses by the thousands. That makes a big difference for a small non-profit with a limited budget.

With New York’s new regulations, consumers, businesses, and homeowners alike no longer have the liberty to take full advantage of their underutilized assets as I did. For example, residents will now have to be present in order to rent out what is categorized as “Class A” housing (permanent residences). This includes “tenements, flat houses, maisonette apartments, apartment houses, apartment hotels, bachelor apartments, studio apartments, duplex apartments, kitchenette apartments, garden-type maisonette dwelling projects, and all other multiple dwellings except Class B multiple dwellings.” In Brooklyn and Manhattan alone, roughly half the commercial properties are Class A. Therefore, if someone wanted to rent out their apartment while they left town for a few weeks, they’re out of luck—and so are their would-be guests.

Contrary to criticism that Airbnb rental markets are dominated by a few power brokers, Airbnb’s Head of Global Public Policy has stated that “almost 90 percent of [Airbnb] hosts have only one listing and it’s the home they live in.” Instead of painting the Airbnb market as a thorn in the hotel industry’s side, and a loss of hotel
tax revenue, city councils and state legislatures should see it as a potentially greater source of tax revenue. With a clear-cut tax code, the fifty largest cities in the U.S. could net revenues in the ballpark of $200 million. With a growing market cap and the advantage of affordability, Airbnb is bound to grow, rake in even more tax revenue, and attract tourism that cities would not have been able to accommodate otherwise.

Wealthier homeowners have been able to profit from their properties for years. Summer homes in the Hamptons or the south of France, rented for nightly, weekly, or monthly rates, are easily rented out by those property owners who can afford the sizable fees of property management. Airbnb has made it simple and economical
for those traditionally precluded from the short-term rental economy to participate in transactions. Over 16,000 Airbnb hosts have stated that their supplemental rental income has helped them stave off eviction or foreclosure. Laws like the one passed by New York’s Assembly and Senate deny this opportunity to the middle class, and permit only the select few to profit from their unused property.

Signing this bill into law is signing away economic opportunity for the middle class.

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Kyle Burgess is the co-founder of two social enterprises and has worked in strategy, communications, and program management for a decade. Kyle received her Master’s degree in International Relations & Economics from the Johns Hopkins School of Advanced International Studies (SAIS) and her Bachelor's degree in Political Science from American University.

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