October 20, 2014

WHY NEW YORK HATES AIRBNB:

New York is the obvious business case for a service such as Airbnb: a dense city where a lot of people want to visit, and hotel rooms are limited in number. You’ve got a population of educated professionals who travel a lot, leaving their apartments empty. You’ve got insane housing costs in desirable areas, leaving renters open to making a few extra bucks on their abode. Unsurprisingly, almost 30,000 NYC units are available on the site.

It turns out, however, that New York is also one of the most challenging environments for Airbnb. You’ve got a powerful hotel lobby that likes the shortage of affordable rooms for rent. You’ve got an extremely high percentage of renters rather than owners, most of whom probably have leases that forbid subletting without permission. You’ve got a lot of apartments, whose fellow tenants may object to your giving strangers the keys to the front door. And don’t forget the well-organized affordable housing groups who object to landlords converting rental units to short-term stays. All of which has culminated in a law that effectively outlaws the majority of Airnb rentals in the city by making it illegal to sublet a New York apartment for less than 30 days.

Entrenched interests. Plus:

Whenever a new market opens, there’s a sort of wild west period when gaps in the law allow people to make a bunch of money. Over time, however, legislators and regulators wake up, and start laying down the law. Entrenched competitors are protected, numerous interest groups are given concessions, fees are tacked on. The end result is greater certainty, but lower profits and innovation.

I’m afraid that’s going to be the story of the entire Internet soon. Interesting, isn’t it, that most of our growth comes from the parts of the economy that politicians haven’t gotten their sticky fingers on yet.

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