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Is Airbnb 'Great for New York City?' New York's AG Definitely Doesn't Think So. He released a scathing report, which challenges the company's presentation of itself as a benevolent force for the average New Yorker.

By Laura Entis

Opinions expressed by Entrepreneur contributors are their own.

Innovation versus regulation. It's a classic trope in start-up lore, one that home rentals company Airbnb evokes often to characterize its fight against regulators in cities across the country.

This summer in New York City, where Airbnb has continuously faced off with the state's Attorney General Eric T. Schneiderman, the company launched an extensive subway-ad campaign that featured smiling residents accompanied by the slogan: 'New Yorkers agree. Airbnb is great for New York City.'

Today, Schneiderman released a scathing report that attacks this image of Airbnb as a benevolent force for good that helps otherwise-struggling residents make extra income to make ends meet.

According to the report, nearly 72 percent of all Airbnb rentals in the city are illegal, violating zoning or other state law. The report was compiled using anonymized data on more than 497,300 short-term private stays from January 2010 to June 2014.

Related: Airbnb Will Soon Operate Legally in San Francisco

In response, Airbnb spokesperson Nick Papas told The New York Times: "Every single home, apartment, co-op and living space in New York is subject to a myriad of rules, so it's impossible to make this kind of blanket statement. That kind of uncertainty and lack of clarity is exactly why we're advocating for clear, fair rules for home sharing."

Perhaps more damning to Airbnb's image is that, while the vast majority of its hosts were found to be everyday people renting out one or two units, commercial users controlled a significant portion of revenue. The 6 percent of hosts who listed more than three unique units on Airbnb accounted for 36 percent of all reservations and 37 percent of all revenue. The highest-earning commercial user – who rented out 272 units -- netted $6.8 million in revenue over the last four years.

Related: Coming Soon: Hotel Tax on Airbnb Rentals in San Francisco

The hyper-critical report indicates that New York City, unlike San Francisco, which is taking steps to legalize Airbnb in the city, is gearing up for a continued fight.

Schneiderman took direct aim at Airbnb's position that the city is protecting cumbersome, inefficient monopolies by attempting to strangle innovative new startups with unnecessary regulation. "We must ensure that, as online marketplaces revolutionize the way we live, laws designed to promote safety and quality-of-life are not forsaken under the pretext of innovation," he said in a statement. "The joint city and state enforcement initiative is aimed at aggressively tackling this growing problem, protecting the safety of tourists and safeguarding the quality-of-life of neighborhood residents."

In response, Airbnb said the report is not a current reflection of rentals in the city. "The report's conclusions rely on incomplete and outdated information. For example, the findings do not account for the more than 2,000 listings we have already removed from our community in New York," Papas told Mashable in a statement.

Related: Innovation vs. Regulation Fight Continues as Airbnb Reveals Host Names to NY?s AG

Laura Entis is a reporter for Fortune.com's Venture section.

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