Yan, a 24-year-old consultant, has rented out an apartment through Airbnb the past few years in fear. He hides his business from his landlord so that he doesn’t get evicted from his Midtown East luxury apartment. He also worries about whether he is violating local illegal hotel laws.
The demand is so high, however, that he keeps doing it; He has a 90 percent monthly occupancy rates for nearly half the year in an apartment he rents out to travelers looking to save money and live like the locals do. While he wouldn’t disclose exactly how much he earns from his Airbnb business, he said it would be the equivalent of a livable salary in New York.
Yan (who wished not to be identified by his last name) is like many New Yorkers who are waiting out a period of uncertainty about how peer-to-peer companies stand with local regulations. The interest in these services remains constant, in spite of that.
The high demand for peer-to-peer services in New York City is a clear indication that the sharing economy is here to stay. Now that the excitement and idealism surrounding the idea of sharing is fizzling, however, peer-to-peer companies have reached a point where following the rules, like everyone else, will be necessary.
Unlike in other cities and states throughout the country, sharing economy companies have had a hard time settling in to New York. The battle over Airbnb is emblematic of this; Housing advocates, legislators and hoteliers successfully cast doubt on whether homesharing makes sense in such a dense and costly city.
Last month, State Attorney General Eric Schneiderman ruled that a majority of Airbnb’s listings were illegal. The ruling came after a several-month battle between the home sharing startup and housing advocates who claimed that Airbnb is bad for affordable housing and public safety. Airbnb’s lobbying efforts and 25 million ad campaign proved fruitless compared to the city’s relationship with the unionized hotel industry and affordable housing advocates.
Nonetheless, there has been no sign of decreased interest in Airbnb’s services after the ruling.
“Demand continues to grow,” said Nick Papas, an Airbnb spokesman.
New York City isn’t always an old curmudgeon when it comes to new kinds of business, even if it appears that way when compared to San Francisco’s vibrant tech scene. Technology companies have made headway in New York, particularly in high-tech, according to a State Comptroller report released earlier this year. Former mayor Michael Bloomberg open the door to future generations of technology when he opened his doors to Cornell to build the Cornell Tech campus on Roosevelt Island.
Technology and digital media companies such as Gilt Groupe and Tumblr have flourished here, too, thanks to New York’s perpetual allure to a young creative demographic and to the wealth and investment opportunities that come from proximity to Wall Street.
Sharing economy companies that arrived in the city in the past few years have taken an approach of not asking for permission and dealing with the consequences later. In the process, have run up against age-old regulations and powerful institutions.
Experts have differing ideas about whether the regulators or the sharing economy companies should be the ones to compromise.
“I would say that smarter innovators will design companies to abide by the rules,” said Dean Baker the co-founder of the Center for Economic and Policy Research. Baker thinks that sharing companies will have a place in the New York economy if they learn to adapt to the regulatory structure already in place.
For Airbnb, that would mean working within New York City’s illegal hotel laws which stipulate that renters can’t host guests for 30 days or less while the tenant isn’t present. Illegal hotels have been a sore point in a city that struggles with affordable rents and apartment shortage.
Regulation critics claim, however, that the burdensome nature of New York City’s regulations will stifle innovation and push sharing startups out altogether.
“To me that suggests that something needs to be changed about the law,” said Arun Sundararajan, Professor of Information, Operation and Management Sciences at NYU’s Stern School of Business (speaking from the backseat of an Uber car in San Francisco, where he was visiting with several sharing companies.)
Sundararajan says that regulations weren’t written with sharing economy businesses in mind and they function much differently than their traditional industry counterparts. It’s the regulators–not the companies–that need to compromise, he said.
The lines have been blurred, for example, between the personal and professional with home and ride sharing startups. Apartment and car owners, therefore, should not be beholden to the same laws and regulations as hotels and taxi companies, he argues.
“You can’t fit a square peg in a round hole,” said Sundararajan.
Sharing economy companies, particularly ride sharing companies, are experiencing changing costs and wages for employees.
“That’s the kind of pricing experimentation that happens a lot with new markets,” said Andrew Moylan, the Executive Director of the non-profit policy research organization, R Street Insiitute. “It’s hard to know with any precision what the right price is. They’re growing and they’re able to rely on pricing to a certain extent.”
Car-sharing companies such as Uber and Lyft have been met by a hostile regulatory environment as well. Casualities of Uber and Lyft’s growing pains in the city include drivers who, as independent contractors, don’t have the right to unionize as cab drivers do, and who have been protesting across the country over low prices for consumers at the expense of low wages for them.
The R Street Institute will release a report this week that will give grades to cities across the country in terms how open they’ve been to ride-sharing. New York City scored a “D” according to the report because independent and even casual drivers have to buy into costly commercial insurance policies and the city bans price experimentation such as surge pricing.
The car service regulatory infrastructure is in place to allow the powerful Taxi and Limousine Commission to remain competitive in the face of this technology disruptions, say some experts.
“Regulation structure was designed to limit,” said Baker, “It doesn’t make sense to have that apply to the cab company and not to Uber. You will drive out the cab companies if that happens.”
No matter the harshness of the regulations and uncertainty over pricing, the peer-to-peer economy will stick around because people want it to.
“I think there’s clearly going to be some sort of future for these kinds of companies,” said Andrew Moylan. “The reason is simple, there’s significant consumer demand for them.”
by: Laura Bult