Monday, July 21, 2014

Regulating the sharing economy by hook or by crook (or by opinion)

Thomas Friedman had an op-ed in Sunday's NYT about the sharing economy.  Relevant to this blog was one of the closing paragraphs in the op-ed, which read:

How fast [the growth of the sharing economy] happens will depend, in part, on regulators and tax collectors in different cities — not all of whom like people turning their spare bedrooms into hotels or their kitchens into pop-up restaurants. The sharing economy can complement the existing one, and make the pie bigger. But the bigger the Ubers and Airbnbs get, the more incumbents will resist them. This will be a struggle between the 20th-century economy and the 21st’s.

Friedman is right; the future of the sharing economy is, in many ways, governed by how local governments respond to the changes.  It is not, however, entirely a division between the 20th and 21st centuries; rather, the kinds of issues cities are forced to balance in regulating the sharing economy go back to very pragmatic--some might even say 19th century--public health and safety concerns.  

For instance, in some fashionable neighborhoods, so many people are subletting on Airbnb that critics argue rents now incorporate the potential for illegal subletting into the cost of the rent.  Even if such critics are not accurate, the hyper-renting on Airbnb and similar platforms does have substantial effects on particular apartment buildings and on the character of certain neighborhoods.  

Similarly, taxi drivers have not only been subject to regulations to protect their industry; rather, regulations on taxis ensure safety and much more.  For instance, taxis often must maintain environmental standards for their vehicles that are specific for fleet vehicles.  Sharing economy upstarts, like Uber and Lyft, are not subject to those fleet standards.  

And so, I would argue it is not accurate to say that the regulatory hurdle the sharing economy faces is the 20th century against the 21st.  Instead, I would say that the issue the sharing economy faces is how to provide 21st century flexibility within the parameters of public health and safety we came to expect in our urban spaces in the late 19th century.  

This change will come, but it will come in fits and starts, and primarily through experimentation in governmental regulation.  Interestingly, that regulation may come to rely, as Friedman writes elsewhere in the piece, on the perception of "trust" that a sharing economy vendor maintains through rankings and ratings.  If it were to come to that, such a change would alter the very idea of regulation and radically decentralize it.  Would it be regulation any more?  Where would liability flow in a regulatory state of private opinion?  These are big questions, ones I am just beginning to grapple with in a new article, and ones where I think the local government and land use legal academy could offer real assistance to local governments in the coming years.

Stephen R. Miller

| Permalink


I'll, again, post this very good article from the Washington Post on the topic. If people in the "sharing economy" think that they should be exempt from taxes and regulation, even though they are running businesses (if it waddles like a duck...). Calling it "sharing" doesn't change the basic nature of what's going on.

What preschoolers can teach Silicon Valley about “sharing”
By Catherine Rampell, Published: May 15


“Organic.” “Artisanal.” “Community-based.” “Social.” “Local.” “Fresh.” “Natural.” And the godfather of them all: “Green.”

These words used to have specific definitions and usages before they were hijacked by businesses and brand managers wanting to connote vague warmth-and-fuzziness.

“Sharing” is now at risk of linguistic appropriation and buzzword-ification, too — in this case by the entrepreneurs of Silicon Valley.

This week I attended a conference here called “SHARE: Catalyzing the New Sharing Economy.” As I learned from my fellow attendees — and as you may already know from reading about taxi-drivers’ scuffles with Uber or the New York attorney general’s battles with Airbnb — the app-based “sharing economy” is vast and growing.

It includes “home-sharing” (hosting strangers in your house, for money); “ride-sharing” (driving people around, for money); “food-sharing” (cooking for other people, for money); “closet-sharing” (giving away your used clothing, for money); “boat-sharing” (letting other people use your boat, for money); “book-sharing” (shipping off your old textbooks to needy students, for money); “parking-space sharing” (letting a stranger park in your driveway, for money); and pretty much every other kind of rental or purchase transaction you think of, but conducted through a decentralized network of “peers” newly haloed with the altruistic mission of “sharing.”

One woman told me she had recently quit her job to manage Airbnb properties full-time and called herself a “home-sharer.” I asked if providing lodging to tourists counted as “sharing” when she was charging them for this service. Isn’t that just, umm, a hotel? Or maybe a short-term rental? Well, she said, it wasn’t like she was getting rich like real hotels do (and so why should she have to pay hotel taxes?).

As you can tell from all my scare-quotes, I left the day’s events thoroughly confused about what “sharing” really is in the modern age. So the day after attending SHARE, I decided to consult another group of experts on the topic: preschoolers.

After all, sharing is one of the main things they learn. And these were not just any preschoolers but preschoolers in Silicon Valley — at the Oshman Family JCC preschool in Palo Alto, to be exact — so they should have a particularly fine appreciation of the more contemporary, app-driven nuances of the word.

“Sharing is a really big part of their curriculum,” one of the teachers assured me.

Notebook in hand, I confronted the chubby-cheeked Silicon Valley scions, my somewhat unfocused focus group. (Disclosure: My nephew attends this preschool. Rest assured, though, I interrogated his classmates with the same merciless objectivity as I would any other group of 3- to 5-year-olds.)

“What is sharing?” I asked, watching their expressions carefully.

“It’s giving people a turn,” offered a pint-size brunette. “It’s giving stuff to people,” said a fidgety little boy.

Okay, easy enough. That, of course, was the softball question. I asked a tougher follow-up: “Let’s say you want to play with my toy, and I say, ‘Only if you give me a cookie.’ Is that sharing?”

“No!” the kids cried unanimously.

“What is it?” I asked.

“That’s being mean!” said one girl. “Don’t be mean.”

I told her I wasn’t sure she had it completely right; offering a toy in exchange for a cookie-based currency isn’t necessarily mean. She then agreed it was more like a trade but was still pretty insistent that it wasn’t sharing, nor was any other transaction where I got paid for giving something away.

At its most benign, calling things “sharing” that are actually no different from traditional commerce is just empty marketing. It might also crowd out other activities that used to be done for altruistic purposes (like donating your old clothes to Goodwill rather than selling them on the Internet, or offering a friend a ride to the airport instead of charging for the service).

But more perniciously, this semantic sleight of hand has been used to justify tax evasion and other kinds of law-skirting. Of course you shouldn’t have to pay hotel taxes if you’re just “sharing” your home! And of course you shouldn’t have to submit to health-department restaurant inspections if you’re just “sharing” your kitchen with paying customers every night! Or get a taxi medallion or commercial insurance if you’re just “sharing” your car!

There’s nothing inherently unethical about monetizing skills or capital that are otherwise lying fallow, and no doubt many of these new “sharing economy” platforms are helping some 99-percenters make money in flexible, rewarding, creative ways. But to call these activities “sharing” is an insult to the intelligence of existing businesses, regulators and 5-year-olds everywhere.

Posted by: Jesse Richardson | Jul 22, 2014 3:42:07 AM

I do agree that the term "sharing economy" is a misnomer, but I don't have a better term to indicate this emerging trend, so I'm sticking with it until we all come up with something better as a signifier..

Posted by: Stephen R. Miller | Jul 22, 2014 1:17:38 PM