This is one of the things about AirBnB that bothers me. They know it's not legal for him to rent it because of NYC's Illegal Hotels Act. I can't shake the persistent feeling that they know their business model relies on people breaking the law and they just don't care. That bugs me.

I poured myself a glass of wine and sat back to read these comments. This is exactly what I wanted to say myself. Facilitating breaking the law and the social compact of residential neighborhoods, that is their business model. It is because of this argument that I will be happy the day I see AirBnB go down in flames, though to be honest, I doubt I'll have that pleasure.

Edited to add: I would change "don't care" to "have consciously decided that limiting their business to places where it is legal, while feasible, would limit their profits and their relevancy in ways they do not want to do."

The buzz from the wine is wearing off, and I remembered that I do think the AirBnB model (but not modus operandi) has 2 legitimate purposes: 1) occasional subletting during occupant absence and 2) satisfying temporary demand.

Case 1) is essentially making vacation home exchange totally fungible. By definition (at least for most people), a vacation is infrequent and has significant cost, in part due to paying for 2 dwellings concurrently (the vacant home, and the vacation accommodation). AirBnB solves this by having a large market of people who may want to pay you for your empty home.

Examples of case 2) would be huge conventions and university graduations. These are cases where it would be inefficient to build hotels to satisfy peak demand, and sometimes it becomes impossible to find (conventional) lodging at any price. AirBnB solves this by providing elasticity in the form of non-conventional lodging only available during the peak.

In both cases, the difference with the current situation is that these cases are limited in time. I think AirBnB would be a good thing if it limited the rental of any property to a maximum of 1 month per year, with a limit of 4 guests per year. That would eliminate people running residential businesses, which is my main objection (and probably the company's whole profit and growth strategy). In other words, AirBnB would be a great but small niche player.

Since I'm just talking to myself here, I'll continue with another thought.

If I were in or interested in city government, here's what I would do: pass a city ordinance that A) limits residential short-term leasing (<30 days) to a maximum of 4 events with a maximum of 28 cumulative days (allows for vacations and special events, as detailed in my post above); and B) requires any company offering or brokering or representing such properties (such as AirBnB, VRBO, etc.) to enforce A) and report actual usage to the city for tax purposes.

To me, this is a sensible compromise to regulate the residential homestays enabled by the AirBnB model, to get the benefits of this model and limit the impacts on neighbors and the rental/real estate market. It will also eliminate the unfair "first-mover" advantage that AirBnB encourages (if you are the first in your neighborhood to buy or develop a one- multi-unit mini-hotal, you can fly under the radar and make a small fortune, essentially get a free property). Depending on the local conditions, the city could consider a vacation rental license that allows year-round short term rental--in which case the property can be listed on websites as long as it is described as such and the license must be listed in the ad. Occupancy and taxes must be reported to the city/local government as in the first case.

You might be talking to yourself, but I am reading. =) And I largely agree with everything you're saying. It's utterly incompatible with the growth-obsessive sort of business plan that AirBNB must follow, but it'd be a better thing for human beings.