Airbnb and the Housing Segment of the Modern 'Sharing Economy': Are Short-Term Rental Restrictions an Unconstitutional Taking?

The last few years have seen a reinvention of the economy through the growth of the “sharing economy” or the “new economy. ” The modern sharing economy is diverse and is made up of various types of organizations and structures, including shared housing. What ties these various components together is that they “generally facilitate community ownership, localized production, sharing, cooperation, [and] small scale enterprise. ” The rise of the new sharing economy has been a consequence of the latest assault on the old American Dream -- the version in which one is “expected to grow up, get a good job, and make money to buy all of the things [one] might need. ” The realization of this dream, however, has been hampered by recent negative economic changes. One pair of commentators has opined that “[t]he sharing economy is not a top-down solution, meaning that it will not be imposed by a set of legislated policies . [Rather], it is being built from the ground up by every individual and group that chooses to begin consuming, transacting, or making a livelihood in a new way. ” The sharing economy has redefined consumption in the housing context in a manner that implicates the exclusivity of the use and enjoyment of real property. Consequently, just as with other aspects of use and access to goods, materials, and services in the sharing economy, housing sharing is predicated on two ideas working in tandem with one another: (1) that “we can have access to many things that we need without having to own them all by ourselves” and (2) that by sharing some of the benefits of property ownership -- namely use and enjoyment -- we can also shift some of the (economic) burdens of ownership. The number of online platforms designed to link property owners with potential short-term lessees has grown rapidly over the last few years. Airbnb, the most well known of these platforms, describes itself as “a trusted community marketplace for people to list, discover and book unique accommodations around the world. ” Airbnb boasts that it has connected over twenty-five million guests with hosted properties in 34,000 cities in 190 countries since its founding in 2008. Airbnb is not only the leading online platform for the exchange of short-term rentals, recently, it has been the most controversial as well. Recently, controversy erupted in New York City, Airbnb’s largest United States market. In October 2013, New York Attorney General Eric Schneiderman subpoenaed Airbnb’s records, requesting data on its hosts for the previous three years. Schneiderman contended that Airbnb hosts in New York City were violating the New York Multiple Dwelling Law. The New York Multiple Dwelling Law requires that certain multiple dwellings units only be occupied by “permanent occupants” -- those residing in the unit for thirty or more consecutive days. The Attorney General also asserted that Airbnb hosts in New York City were not complying with state and local tax registration and collection requirements. Many state and local governments rely on their inherent police powers to regulate short-term housing in residential areas. In particular, zoning laws -- like New York’s Multiple Dwelling Law -- may overtly prohibit occupation by short-term renters. Historically, governments have used their police powers to create and enforce zoning restrictions of this nature for the purpose of preserving or improving public safety, property values, and the “character” of residential neighborhoods. These policies are of a bygone era and are ill-suited to address the modern sharing economy. Moreover, local governments do themselves a disservice when they prohibit housing exchanges. Rather than frustrating the goals and purposes for which old economy regulations were designed (e.g., the preservation of property values and neighborhood character), such exchanges may aid in achieving these aims. Additionally, these restrictions may constitute a regulatory taking of private property without just compensation in violation of the Fifth and Fourteenth Amendments. The sharing economy has positively impacted many individuals and communities, but there is also a brewing conflict between this genesis and the realities of economic regulation -- a conflict of which the New York Airbnb subpoena controversy is emblematic. Thus, in the housing context, we see this conflict playing out in the tension between growing patterns of home sharing and existing regulations that prohibit such sharing. This Article focuses on the question of whether municipal restrictions on short-term leasing constitute unconstitutional takings of private property without just compensation. Part I gives an overview of home sharing in the new economy via short-term leasing. In doing so, it not only examines the controversy in New York, but also provides a historical perspective on home sharing in the United States, focusing particularly on the proliferation of boarding houses in the nineteenth century as a corollary to today’s home sharing market. The examination of this topic is couched in the historical context of minority, immigrant, and women homeowners’ “taking in boarders” in lean times in an effort to make ends meet and maintain ownership of their homes. Part II analyzes short-term leasing restrictions under the Takings Clause. In doing so, it examines the nature of short-term leasing restrictions and the reasons employed by municipalities to justify these regulations. Part III discusses the New York Airbnb controversy. Finally, Part IV argues that such facilitation is desirable because municipalities actually do themselves a disservice when they prohibit these new economy housing exchanges. Such exchanges can help to preserve property values by providing income to homeowners that can be used to offset mortgage and maintenance costs -- in other words, sharing the burden of ownership. If homeowners are able to do so, they are more likely to be able to maintain their homes in the short-term and, in the long-term to maintain ownership. Moreover, municipalities may also reap economic benefits from permitting such exchanges.