Why we can’t figure out how to regulate Airbnb


(Andrew Harrer/Bloomberg)

Whether you think Airbnb is a model of the economy's new sharing ethos or a tech company flouting local hospitality laws, most people following the short-term rental site's legal sagas can probably agree on one thing: The "host" recently caught listing 80 separate furnished units in New York City is a louse.

OK, not an individual louse, per se, but that's precisely the point. The host identified as "NY furnished rentals" turned up in public user data analyzed by the New York State Attorney General's Investor Protection Bureau, compiled as part of an ongoing dispute between the AG and Airbnb now before New York's Supreme Court. Andrea Peterson over at The Switch has your full explainer on the case, in which New York's AG is trying to subpoena Airbnb user data to identify residents who've been illegally letting their homes (or homes that they've bought for just that purpose).

Large-scale scofflaws like "NY furnished rentals" threaten the most harm to traditional hotels and the rental market. But they also defy a unifying idea at the core of the "sharing economy." Namely: Airbnb hosts, Lyft drivers and even Etsy entrepreneurs all by definition blend the personal and the commercial. They've created a gray area in the economy in between hotels and homes, between cabs and private cars, between businesses and hobbies, between professional spaces and personal ones.

Yes, "sharing" is an ill-fitting word for what most Airbnb hosts or Sidecar drivers are doing (are you really "sharing" something if you charge money for it?). But what they have in common is that they occupy the same awkwardly overlapping space between professional activities and personal ones, and that is precisely what makes them so difficult to regulate.

"We've lived in a world where there was this clear line between picking your friend up at the airport — you clearly don't need a permit for that — or lending your apartment to a cousin when he or she or visits, and running a hotel," says Arun Sundararajan, a professor at the NYU Stern School of Business who has studied this new kind of economic activity. "It’s important to recognize that these lines are blurring."

Airbnb says that it has booted serial hosts like "NY furnished rentals" from its platform in New York City (the AG's office counted nine "hosts" pushing more than 20 units each there in January). And on that much, Airbnb and New York's attorney general can agree. But that's not the tough call. The real question lies in what to do about everyone else.

"I think we are very much focused," Sundararajan says, "on trying to come up with a solution to the people who are in between."

"NY furnished rentals," on the other hand, bears none of this ambiguity. It's actually a vacation-rental service disguised as a host with an empty pad (its profile has since been taken down). In a community of people who don't believe they're running businesses — who do believe in some higher idea of "collaborative consumption" — "NY furnished rentals" is too clearly commercial. If nothing else, interlopers like it help make clear the boundaries of this new economic space.

Whatever the people in it are doing — and however we regulate them — they are not operating strictly commercial enterprises in the traditional sense of a hotel or a taxi or a company. They're quasi-professionals leveraging the excess capacity in their own assets. The Airbnb host invites you to use the same hand soap that she does. The Lyft driver takes you around town in the same car he uses to chauffeur his kids.

Airbnb contends that most of its hosts use the site to make a little extra cash and cover their bills. They rent their homes when they're out of town. They let out a spare bedroom when it happens to be free. They appear on the platform as Robyn in Park Slope, or Ettice in Harlem, as micro-entrepreneurs and fellow travelers, with pets and hobbies and baking skills, who intimately know the neighborhood dive bars. The whole angle is that they're not faceless commercial enterprises.

So how do we create regulation that acknowledges these people who are not quite innkeepers? How do we write rules that recognize a spectrum between private cars used for personal reasons and professional taxis driven by full-time cabdrivers? If it's societally beneficial to enable these activities, won't we discourage people from doing them if they have to comply with 10 pounds of paperwork to legally provide rides for five hours a week?

We could potentially regulate these activities by setting limits on them that explicitly acknowledge their quasi-professional status. Maybe you can only legally offer peer-to-peer ride services for 20 hours a week, or you can only rent out parts of your home for up to 30 nights a year. Caps like that would institutionalize the idea that the people doing these activities are not professional taxi drivers or hoteliers. Their cars are not primarily cabs. Their homes are not primarily short-term rentals. From there, it would stand to reason that we'd regulate these activities differently.

"It doesn’t seem to be in the best interest of society to place the same regulatory burden on someone who does something occasionally and someone who does something frequently," Sundararajan says.

We already make such distinctions, and along a spectrum of risk. Everyone who drives needs a driver's license. But people who drive a lot — truckers, bus drivers, cabbies — face additional training, permits and safety precautions. You need a driver's license to drive yourself. But you don't need an additional permit to carry your family and friends in your car with you, even though that scenario creates more risk. Unless, that is, the people in the back seat are paying you money, and you're a cabdriver.

"You might say 'safety is safety, we should hold everybody to the same standard,' " Sundararajan says. "But that’s sort of missing the fact that we aren’t already. We are holding people who do this without getting paid to a different standard."

We're always making a tradeoff between the burden of regulation, and the safety — or public benefit — created by it. In the safest possible world, a city health inspector would test the food on your plate at every restaurant every time you dine out. But of course we don't do that. We have spot inspections. "We accept that this is enough," Sundararajan says. And "enough" is a relative concept. It might mean something different for a restaurant and a food-share, for a hotel and an Airbnb host, for a service you buy from an avowed professional and one you get from a "peer."

Emily Badger is a reporter for Wonkblog covering urban policy. She was previously a staff writer at The Atlantic Cities.

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