A man named Oscar, who lives on the western edge of Jersey City, is offering a room for rent at $20 a night – just a mattress on top of a table, he warns, but there’s a New York City bus outside the door. For someone who is visiting the area or looking for a job, it may be quite a temptation.
“Of course the price of this place is awesome,” wrote a customer who stayed in the place. “The basement is not very tall, so sometimes I had to bend my head a little…The bed is placed on top of a table, there is a lamp on the ceiling. There is no air conditioning, so it might get a little hot, but it was doable for a Dutchman like I am.”
Cities like Jersey City have found it difficult to fight the popularity of new technology-based companies like Airbnb, where people rent out their own apartments or rooms via the internet, largely ungoverned by local hotel laws.
The City Council recently introduced legislation to legalize Airbnb. In exchange, Airbnb will pay the city 6 percent hotel tax on the 300 or more residential properties that rent out temporary living space to tourists. The matter may be up for a final vote next month.
This would make Jersey City the first city in the tri-state area to add Airbnb to an existing stock of hotels and motels that pay taxes. In the past, zoning laws tended to regulate how people ran their legitimate operations, but it seems that technology is outpacing the ability of government to do so.
“Technology is outpacing us.” – Mayor Steven Fulop
Like the Uber ride sharing service, which allows drivers — unregulated by local taxi laws — to pick up passengers who book rides online, Airbnb guests book their reservations through a website as well. The guests will pay Airbnb, which will then pay the homeowner after deducting the hotel tax.
The agreement with Jersey City will allow the company to continue to operate in Jersey City, and Airbnb will also provide insurance protection to the homeowners in case renters damage the homes.
The Fulop administration estimates Airbnb could bring in as much as $1 million to the city in hotel taxes that the city currently cannot collect.
Fulop and Ward E Councilwoman Candice Osborne announced the agreement earlier this month, and it was introduced at the Oct. 15 City Council meeting.
Critics of the program, including Councilman Richard Boggiano, have raised a number of concerns, including privacy issues. People purchasing condos with the expectation of living in a community of homeowners may suddenly find units in their buildings being rented out to strangers. The change would affect homeowners currently participating in Airbnb, he said, who will be required to pay the hotel taxes and insurance costs under the new regulations.
Osborne pointed out that condo associations have the ability to ban the practice in their buildings if their residents object. But the city would allow Airbnb to continue where there are no specific condo laws.
“If a condo association doesn’t want it to happen in their building, it can’t happen,” Osborne said. “What the city is doing doesn’t affect condo rules.”
If passed by the City Council, the regulations would permit city homeowners and certain lessees to rent their homes for less than 30 days. Airbnb has also agreed to charge and collect the standard hotel tax from their participants in the city. Although often called “a shared service,” Airbnb basically allows homeowners to make extra income from renting their homes, rooms, or even beds in rooms. Airbnb already oversees income tax reporting on these rentals.
“In Jersey City, we embrace the future, and that’s what companies like Airbnb are: the future,” said Mayor Fulop. “Airbnb is incredibly popular and growing rapidly, and while some people might have concerns about the sharing economy upending old ways of doing business, the best way to address those concerns is by engaging with these companies, not pretending they do not exist. In the words of Bill Clinton, ‘You have to make change your friend.’ And that’s what we’ve done here by working with Airbnb.”
Max Pomeranc, Regional Head of Public Policy at Airbnb, praised the city’s decision.
“We are grateful for the opportunity to work with the City Council and Mayor Fulop to develop thoughtful home sharing rules that will help middle class families in Jersey City,” he said. “This new law would generate more revenue for Jersey City and help countless families who share their homes and use the money they earn to pay the bills.”
Fulop also noted that Airbnb will expand tourist capacity to Jersey City by supplementing the city’s 13 existing hotels. A report issued by Airbnb claims 40 percent of tourist dollars are spent in the neighborhood where guests stay.
“Airbnb is going to let Jersey City expand its tourism industry and draw even more visitors from all over the world, all while allowing residents to take advantage of the popular platform,” said Osborne.
Some critics have pointed out that certain real estate groups have allegedly warehoused vacant condos and rental units and are basically operating illegal hotels.
The change of law that the City Council is considering will prohibit homeowners from changing the character of the neighborhood and will limit the number of properties one Airbnb user can rent on the platform to five.
As for the safety of the homes, Airbnb guarantees one-million-dollars’ worth of protection if the property is damaged by the renters.
Doing this is better than doing nothing
Although the Fulop administration is touting this agreement with Airbnb in glowing terms, Mayor Fulop admits that it results from the limitations of old government models to deal with changes being brought about by technology.
“The change is happening now,” Fulop said. “Whether it is Uber, new music platforms or Airbnb, technology is changing the world. We need to make this our friend because we do not have the ability to control it. On any give day, people rent 300 to 400 units through Airbnb, and we have no ability to regulate it.”
He said the agreement would provide income to the city and protection to residents that would not otherwise be available.
“This will allow our inspectors to laser in on the bad actors, rather than everybody,” Fulop said.
The city would respond to complaints and continue to provide oversight.
Fulop said it is unrealistic in modern times to prohibit the practice.
“If your neighbor rents to someone down the block, it’s impossible for you to know, or for us to enforce,” he said. “Technology is outpacing us. We need to work with it to come up with a reasonable outcome. And there is a big benefit.”
Al Sullivan may be reached at firstname.lastname@example.org.