It’s bad news all round if Airbnb bites the dust in New York

Cheap weekends in NYC could be a thing of the past. WanderingTheWorld

New York Attorney General Eric Schneiderman has sent a subpoena to the home-renting company Airbnb. The demand asks for personal data relating to 15,000 users of the service in the city that have rented out their home. A law passed in 2010 makes it illegal for residents to rent out their home for less than 30 days.

In response AirBnb is challenging the law. It wants to use New York as an example of how its business model can overcome regulatory obstacles to become legitimate and socially acceptable. It argues that “regular people renting out their own homes should be able to do so” and that occupancy tax is not an irresolvable problem. It points to a study conducted in Berlin which highlights the local economic impact of Airbnb: a contribution of more than $130 million in a single year. Even more importantly, it argues this money provides a greater contribution to the local economy than if the money was spent in large international hotel chains.

The outcome of this saga could prove to be globally influential, particularly in Europe where lawmakers are already examining how to govern these disruptive new forms of commerce.

Airbnb isn’t the only company of its kind suffering growing pains. Car sharing start-ups are also facing entrenched bureaucracy, resistant unions, and cease-and-desist letters because some feel the services they offer risks eroding the taxi transportation market.

These new businesses that are bracketed into the “sharing economy” or “collaborative consumption” face enormous legal hurdles. Technology brings the potential for new social arrangements which the law simply hasn’t had time to catch up with. The services encourage us to rent rather than buy, or go even further by persuading us to commercially exploit the spare resources that we each own individually. They turn the person with a spare room into an hotelier, the person with a spare car seat into a taxi driver, the old wardrobe into a thrift shop, the tool box into a money maker, and the home wi-fi network into an internet cafe. The value of the sharing economy has been estimated to be worth $26 Billion per year and is growing rapidly. It is big business and it’s little wonder regulators are beginning to pay attention.

This type of informal bartering is of course not new, but previously the transactions were almost invisible to authorities. It was a black market, or at best, a grey market. The web has changed that. The companies that have succeeded in this space so far have designed transparent transaction records to create openness and honesty because the peer-to-peer model relies on trust as its currency. But as a consequence they make it easier for regulators to sniff out informal exchanging and thus tax avoidance.

What is potentially worrying for people using these systems is that even more personal data will be collected under the guise of regulation - a particularly sensitive issues in the wake of the NSA scandal. The type of data held on sites such as Airbnb does not exist in a vacuum. It is behavioural and has the potential to reveal more about our consumption habits than most citizens would like to share.

The surveillance tension can only be addressed by creating greater legal clarity for organisations, otherwise social and technological innovation will be prevented from emerging in this fertile space. Airbnb argues “tax laws are confusing, contradictory, and impossible to articulate, especially as applied to the novel ways that users may share their accommodation”, but that isn’t the only problem for regulators. There are also spillover effects of renting out accommodation which need to be monitored. For instance, most people who rent out their apartments live in close proximity to neighbours, many of whom have objected to the constant flow of antisocial guests in their building.

There are lots of reasons to champion this emerging breed of business. They advocate experiential rather than materialistic consumption and they take significantly less resources from the environment than traditional alternatives. They are ideologically refreshing, but that involves inevitable conflict. We need to think more about how we evaluate the social implications of these models.

For the past few decades at least, politicians in the UK and US alike have cherished ownership as a means of creating a sense of pride and social responsibility. This may partially reveal why regulators have been slow to embrace this new wave of services, but their popularity demands that renewed attention be given to the laws of commerce and the rights of the individual to trade freely. The future success of these organisations may actually depend more on persuading government to collaborate than consumers.

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