Airbnb and Uber are two high-profile companies that have flourished in what is known as the “sharing economy.” The sharing economy uses technology to overcome traditional barriers to entry in the free market for enterprising individuals.
One important element is the peer-to-peer relationship. For example, in the case of Uber, the Uber application allows individuals who are in need of a ride to connect with individuals who have their car available to provide a ride. Uber drivers keep a large majority of the fee charged for the ride, the Uber company has little overhead as their drivers are contractors and not employees, and the consumer has an inexpensive and easy way to get where he wants to go. Both driver and rider are rated, so good performances are rewarded and bad behavior is punished. I take Uber fairly regularly and my drivers have been of all different stripes: people making some quick money before their day job, people who just drive to earn money for something specific, or people who are driving until they find something more suitable to their talents.
Airbnb is a similar business model, where people with homes, apartments, and rooms can rent them out via the Airbnb application to people who are looking for housing either for vacation or an extended trip or for whatever reason they prefer to stay in a private residence rather than a hotel. Airbnb has been a very successful business; the company is valued at $25B.
But all of that could change. Today in San Francisco, voters will decide how much they want to regulate the company.
Proposition F would restrict people who want to rent out their homes for the short term. The reason for the restriction lies in San Francisco’s tight housing market.
Explains Wired: “The measure pits San Franciscans who say Airbnb is chasing long-term renters out of the city against residents who say AirBnb gives them a bump in income that allows them to stay.”
The issue among certain folks in SF is that the housing market is tight and property owners have more financial incentive to rent out short term AirBnB rentals than they do renting out their property long term. On the other side, what business is it of the city what you choose to do with your private property? Do property owners have more of an obligation to the city they live in than to their own financial interest? I’m a libertarian so I say no. The people on the other side of the campaign say yes.
The details of the proposition: “It would limit the number of nights a unit can be rented each out each year to 75; require short-term rental platforms and individual “hosts” to submit quarterly reports to be the San Francisco Planning Department; and allow neighbors report on each other when violations occur.” More paperwork and encouraging citizens to turn on one another. Sounds fantastic.
This isn’t the first time Airbnb has come under the jackboot of local government. “Last year, San Francisco officials created a law to regulate short-term rentals, capping the time hosts can rent a space out to 90 days if they are not present in their homes, but allowing them to rent out a room or a portion of a home for an unlimited amount of time if they’re around during a visitor’s stay. After questions on whether or not the regulation was effective, the law was revised several times. By July, San Francisco had created an office of short term rentals to help deal with handing out registration certificates.”
What do the experts say about Airbnb’s impact on the local housing situation? Enrico Moretti, a UC Berkeley labor economist, thinks it doesn’t have much. Unusually good sense coming from a Berkeley professor:
“Let’s say tomorrow, we completely outlaw Airbnb,” he says. “I don’t think rents in San Francisco would change all that much.” However, Moretti says, that move could limit a source of income that San Franciscans might want to take advantage of to help them meet rent costs.
“I think the reason why we’re in a housing crisis is because the city, the planning commission, and the Board of Supervisors (the equivalent of the City Council in San Francisco) have, historically, been extremely reluctant in allowing more housing units in the city,” Moretti says.
Besides, he adds, it’s not like there isn’t already room for the city’s regulations. “It’s not like a Wild West where homeowners and renters can do whatever they want,” Moretti says. “There is a desire on the part of the electorate to find a quick and easy solution. [In the end], it’s a misguided proposition that does little to slow down the increasing rents.”
In a city full of tech workers, let’s see if they choose to chip away at the liberty afforded by the internet and free market.
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