Airbnb's decision to hand over user data first step in more regulation

(airbnb data)

The hotel industry is closely monitoring Airbnb, and a decision by the home-swapping company to turn over anonymous user data in New York could be the first step to tripping up one of the biggest players in the "sharing economy."

Airbnb yesterday reached a deal with the New York attorney general that ultimately brings more regulatory scrutiny of the company, while at the same time raises concerns about how it handles the private data of its users.

The home-exchange startup will provide Attorney General Eric Schneiderman with anonymous data about all of its hosts in New York City over the next year, but only identify the actual names and contact information of individual users if Schneiderman's office decides to investigate those users more closely.

In addition, Airbnb will notify all New York users about the array of laws, including rent regulations, zoning codes, business licenses and hotel taxes, that apply to their hosting, SF Gate reports.

The attorney general issued the subpoenas last fall, estimating that the state and city lost out on tens of millions of dollars over the past three years in unpaid taxes.

New York City bans apartment residents from subletting their dwellings for less than 30 days unless they are present during the rental. Simply put, if you list your apartment on Airbnb for a week-long stay, say, you are in violation. Additionally, New York apartment renters need clearance from their landlord before they can even sublet their apartment for longer than 30 days.

But landlords are culpable, too. Schneiderman charges that some landlords have turned multiple apartments into full-time, illegal hotels.

You can read the full subpoena, here.

Change of heart
The agreement is about-face for Airbnb, which had fought to protect the data of its users. Airbnb will now cooperate with regulators in New York seeking to crack down on illegal apartment rentals.

It's a coup for the hotel industry and will likely make New York residents think twice before listing their apartment on the site. The hotel industry, while applauding Airbnb's pluck, has felt wronged that the company isn't regulated, doesn't pay taxes in the same manner as a normal hotel and is devoid of any of the safety measures normal hotels provide guests.

Airbnb is widely reported as valued at around $10 billion.

Turning over user data can only be detrimental to Airbnb. And it's a bad precedent for others operating in the sharing economy, Gerry Stegmaier, an attorney at Goodwin Procter, told The Wall Street Journal.

"For businesses in the sharing economy to be successful, users have to be confident that their secrets will be maintained," Stegmaier said. "If they don't have trust, they don't have a business model."

In the coming months, expect what happened in New York to spread to other U.S. states and cities. Particularly when lost dollars are involved.