72 percent of Airbnb rentals illegal in New York City

NEW YORK, Oct. 17 (UPI) -- A report from New York Attorney General Eric Schneiderman found 72 percent of the Airbnb rentals in New York City are illegal, threatening the start-up.

The business has faced legal troubles in cities due to the lack of regulation that applies to taxes and restrictions on traditional hotels and other accommodation services.

Most people, 94 percent, rent one or two units, usually their personal residence, to make a little extra money on weekends. However, Airbnb takes the bulk of its business from commercial renters -- someone who rents out more than two apartments -- with $168 million in profits. Schneiderman's office searched and found clusters of 10 apartments or more owned by one person, which is a red flag for commercial renters. Airbnb says it is working to identify and terminate these renters.

One of these commercial hosts made $6.8 million in revenue off 272 units, with a cut of $800,000 that went to Airbnb.

Aside from not having the insurance and regulatory practices of hotels, Airbnb hosts have avoided paying $33.5 million in taxes. The company has said it is willing to collect taxes.

Some cities are embracing the taxable revenue source by sanctioning Airbnb rentals under strict guidelines. San Francisco, the birthplace of Airbnb, recently did just that and now projects $11 million per year in additional tax revenue.