Most of the Sharing Economy is a Rental Economy and should be regulated as such

Renting is not sharing: it should be regulated and taxed!!

“Under a rhetoric guise of “sharing”, websites like AirBnb or Uber are creating a new informal economy of uninsured workers whose entire life is up for rent, from cars and homes, to their own hands available to perform chores for a fee in sites like “taskrabbit ”. Entire professions – cab drivers, cleaners etc- are passing in this way into a new black economy- unregulated, tax free and uninsured. And instead of (or alongside) the much-touted socialization and community, the result is the commodification of the final shreds of social life that had remained outside the economy.”

Excerpted from Giorgos Kallis:

“AirBnb, and other sites such as Uber , where drivers car-share with passengers for short routes in town or, Greek-origin Cookisto , where amateur cooks deliver home-cooked meals, are part of a phenomenon that has been dubbed “the sharing economy”. As the title of Rachel Botsman´s book tellingly puts it, in this new economy “what´s mine is yours ”. I offer my house, and you offer yours. You cook for me, or I can cook for someone else. Use takes the place of ownership.

Instead of buying new consumer goods, in this “sharing economy” we collaborate to share goods that we already have, when we do not need them: from rooms, houses, cars and bikes, to appliances, drills, or even dogs (in BorrowMyDoggy ). Of course, borrowing, lending and doing small favours are not new phenomena. What is new is the scale in which these can now take place. The new online social networking platforms allow exchanges not only between friends and neighbours, but between complete strangers, from different parts of the world.

As with everything new under capitalism, creation brings destruction. The new economy is disrupting existing industries. Last June, London grinded to a halt by a strike held by 10 thousand taxi drivers who demonstrated with their vehicles on the city centre against Uber, whose low prices are threatening to put them out of business. In theory, Uber drivers were supposed to be everyday people who decide to make an extra buck by taking a passenger with them in their rides. In reality, most drivers are former taxi drivers who are exploiting the legal gap and drive without having to pay for insurance or for a license.

For similar reasons, in New York or San Francisco, hoteliers accuse AirBnb of unfair competition. Its hosts do not pay municipal taxes, do not have to meet expensive safety regulations, and can operate wherever they want, and outside the zones set out by planning authorities for tourism activities.

It is hard to sympathize with taxi drivers or hoteliers, or lament that the prices of these, often overpriced, services are going down as a result of the “sharing economy”. However, there is a deeper issue at stake here. Laws and regulations exist for a reason. Municipal taxes finance the public infrastructure that is then used by tourists. Planning authorities limit the number of “room to let” or the taxis in a city, because otherwise life can become unbearable for the inhabitants of the city.

I have many friends in Barcelona who have experienced a total transformation of their apartment blocks, suddenly finding themselves alone within AirBnb rentals, unable to sleep from the parties of weekend travelers. Rental prices in the centre of Barcelona are sky-rocketing, as owners find it more profitable to rent on AirBnb than hold long-term leases. New “entrepreneurs” bid prices up, renting apartments that they then sublet at AirBnb.
Zoning restrictions for new hotels was a key site of struggle for Barcelona´s neighbourhoods’ movements. But all this has become now irrelevant by the unregulated avalanche of AirBnb houses popping up literally everywhere and changing the form and composition of the city.

Regulatory authorities are slowly catching up. In Barcelona, municipal authorities fined AirBnb with the symbolic sum of €30 thousand for advertising apartments that did not have rental permits. After a public backlash against unregulated rentals in the neighbourhood of Barceloneta this August, with spontaneous citizens´ protests, the municipality has started a door-to-door check, closing down rented apartments that lack a permit. In New York, authorities have begun evicting people who sublet apartments that do not belong to them, whereas in San Francisco authorities file lawsuits against short-term rentals that violate the law.

AirBnb, and other companies such as Uber, which have come under the attention of regulators respond that over-legislation is threatening to kill innovation at its birth. If, in order to rent out a room or give a ride, one has to get a license like a hotel or a taxi, then this becomes an economically impossible proposition.

AirBnb is running a huge advertising campaign in New York , reminding New Yorkers the benefits it offers to them, not least income. Mobilizing their so-called “communities”, companies like AirBnb or Uber are organizing counter-protests, involving their users. This discourse of “community” and “sharing” is instrumental not only for mobilizing people in regulatory battles, under the guise of a romantic battle for a different economy, but is also essential in building up a case, that these ventures are not like any other capitalist venture, and therefore merit a different treatment from the regulators.

The case for a special treatment by regulators seems weak, if one considers other factors. First, AirBnb itself is a capitalistic corporation like any other, valued at $10 billion. Its profits – dozens of millions today- are forecast to reach an estimated $1 billion per year in the coming years. AirBnb is a company with only 600 employees, with relatively low costs (related to software development and operation), but with a potentially huge market under its reach.

This is a company that can potentially control the global market for short-term rentals, charging a 10-15% commission in each and every exchange. Online social networks are not only bringing people from faraway together, but also are creating global markets, where only local segmented markets existed before. The profits from these markets are astronomical unlike anything a real estate agent would ever dream of and concentrate in the pockets of a few entrepreneurs and venture capitalists, a concentration with probably precedent in history. Tellingly, but somewhat exaggeratingly, this has led some to call companies like AirBnb, a “mafia of intermediaries”.

Second, most of the transactions taking place under AirBnb are pure rentals, involving money. It is a euphemism to call them “sharing” and hence argue that they should not be regulated or taxed. They are normal economic transactions. Where is the sharing in renting at AirBnb, and why is it “peer-to-peer” when you rent at AirBnb but not when you rent in the rental market?

In the rental economy of AirBnb a whole suit of small scale intermediaries are popping up, from those who rent houses and then sublet them through AirBnb, to companies who take care of everything that needs to be done for renting your house at AirBnb (from furnishing it, to managing the listing), for a cut on the deal. It’s one thing to host someone in your home with the prospect of someday being hosted in theirs too, as is the case with Couchsurfing , or to exchange your home, as in HomeExchange (in both cases without the mediation of money), and another one to rent or pay to rent.

Third, and worse of all, under a rhetoric guise of “sharing”, websites like AirBnb or Uber are creating a new informal economy of uninsured workers whose entire life is up for rent, from cars and homes, to their own hands available to perform chores for a fee in sites like “taskrabbit ”. Entire professions – cab drivers, cleaners etc- are passing in this way into a new black economy- unregulated, tax free and uninsured. And instead of (or alongside) the much-touted socialization and community, the result is the commodification of the final shreds of social life that had remained outside the economy.

Everything now is available to rent, at the right price; from empty rooms to an unused frying pan. Nothing any more is available for free. Hosting a friend at your house has an “opportunity cost”, eroding the value of hospitality.

The rental economy of AirBnb is not the same as the real sharing economy of urban gardens, time banks or couchsurfing, where users truly share their work, their resources and their assets, without the intermediation of money, and crucially without profit. The rental economy is the inevitable, within capitalism, commodified version of the sharing economy. As the crisis opened opportunities for new forms of mutual aid and sharing, enterprises such as AirBnb saw the opportunity to monetise them and profit.

As for the environment, I am not sure that leaving nothing idle is good for the environment. The “sharing economy” mobilizes and puts everything into circulation, retaining at all costs an unsustainable consumption model. Not my view of a sustainable future.

In conclusion: AirBnb is a rental intermediary. It is a capitalistic enterprise like any other and a very innovative and successful one in that. It should be treated, regulated, zoned and taxed as such. The same applies for those who profit from it. Exemptions could be made for those who do not use it professionally or do not make money from it (this can easily be ascertained by the frequency, duration and value of the services offered as the websites document everything).

Renting is not sharing: it should be regulated and taxed.”

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