The shared economy – a force of disruption for good?

The last couple of years have seen the rise of what I can only call the “sharing economy”. You have Airbnb for apartments, Lyft for car sharing to name just a few. The premise is pretty much the same – take a highly regulated industry and inject some “community based disruption”. From their stratospheric growth this approach seems to be working – and has the legacy industry up in arms. Of course, they are the headline grabbing articles which tend to have a “David versus Goliath” spin; that the big hotel chains are stomping down on the small homeowner who occasionally rents out a room. I too am a welcome user of such options – why would I stay in a small hotel room in NYC when I could afford to perhaps get a bigger room at a cheaper price on Airbnb?

But there are a few elements that still prick my conscience, which I would like to extol here..

First, if you ask many of these temporary landlords you will realize that this business is more than just an occasional thing. Most of them, I daresay a majority of them use it as a means to significantly supplement their income. Nothing wrong about the latter, but perhaps it would be difficult to categorize them as just a one-off type of deal – something that these arrangements often claim to be.

Second, although it may be overdone, the traditional industries are subject to multiple regulations which they need to abide or risk closure. This does not come free, and many a time ends up being paid by the end consumer. In the “sharing economy” none of these burdens are forced upon the landlord. Imagine, if each registered leaser had to pay for regular inspections in his private residence – not sure how many would be interested in going through the paperwork and cost each time.

Finally, there is the issue of taxes. Although most of us (and I am no exception) shudder at the “T” word, we recognize that taxation is important, allowing for the general development of society and infrastructure. Hotels and other registered establishments have to pay this (in some cases there is an additional tourism fee and other odd levies) – and recoup it from their customers. When this question was directed towards Airbnb it squarely put the onus of collecting and reporting these taxes to the landlords…. Good luck on making sure that they would report this in their tax returns!

There can be many more reasons, but what it amounts to is the creation of a non-level playing field, where the established lot are subject to several boundary conditions which for some reason do not exist for these new-comers. Question is – is this fair? Rather than needless arbitration in courts can we reach common consensus where these players can coexist, but under some boundary conditions which are applicable to all? In that way, the occasional landlord can also rent out (say without any restrictions if you limit it to under 10 – 20 nights a year), while for other purposes conditions similar to hotels may apply. Maybe we need to reduce these overall regulations to make it easier for the rest to comply without harming the safety and security of the end consumer.

Only thing I am not sure is – how many would still remain in business…… your feedback, as always is welcome!