Living in the 21st Century has brought about several new changes. Smartphones are now household items capable of tremendous processing power and instant communication with virtually anyone in the world, artificial intelligence is now capable of driving a car and the world is enamoured with applications. From social networking apps such as Facebook and Twitter, to financial management apps like Acorns and Mint, mobile and computer applications have become a part of our daily lives.
One of the more recent markets growing in popularity for app developers is the “sharing economy.” Applications such as Uber or Lyft allow users to share their cars and drive other users to locations for a fee, essentially creating a taxi service. Uber has seen an immense rise in popularity, growing an astounding 40% each quarter and racking up an impressive $3.63 billion in bookings in the first half of 2015 alone. Other sharing economy apps, such as Airbnb, allow users to rent out their homes to users for several nights at a time. And while Airbnb, much like Uber, has become incredibly popular in recent years, it has been making headlines for its legal issues.
While Airbnb has been incredibly beneficial to many average citizens, allowing them to make legitimate money on the side, a few unscrupulous hosts have chosen to abuse the service. Airbnb hosts are using the service to force out their pre-existing tenants and replace them with Airbnb users looking for short-term housing.
For example, in Los Angeles, a family was evicted from their Fairfax four-unit Spanish-style home, only to see that same house appear on Airbnb weeks later. Situations such as this are occurring throughout the U.S. in places like Washington D.C., San Francisco and New York.
Not only are these Airbnb hosts unethically evicting paying tenants in favor of more money through services like Airbnb, they are also drastically changing the housing markets around the country. For example, San Francisco, Airbnb’s hometown, has seen 1,900 long-term housing units taken off the market due to sharing economy apps. Dave Campos, a San Francisco County supervisor proposed stronger regulations on the sharing economy industry stating, “We want short-term rentals to be part of San Francisco, But there's a commercial short-term rental industry that buys entire buildings and rents them all out. That's changing the character of the neighborhood and taking housing stock away from people who need it.”
And according to a recent study conducted by the Housing Conservation Coordinators and MFY Legal Services, over 55% of Airbnb listings in New York are illegal, and the presence of these listings has reduced the available city housing stock by 10%. Democratic State Senator Liz Krueger has also noted the app’s disruption stating, “It’s taking apartments off the market, it’s increasing rental costs for those people trying to rent apartments, it is shrinking supply, it’s creating situations where tenants are being harassed by landlords who conclude it’s cheaper or more profitable to rent out by the night as illegal hotel operations than to continue their legal responsibilities to keep the apartments for residents.”
So what exactly is the appropriate course of action?
Since the sharing economy industry is still new, there are very few laws against these companies, and many cities that host Airbnb locations are scrambling to come up with answers. Recently, New York City Governor, Andrew M. Cuomo, signed a bill that imposed a heavy fine on Airbnb hosts. The bill makes it illegal for many to list their apartments on sharing economy apps. Anyone caught violating the bill will face a hefty $7,500 fine. According to Airbnb, this would affect more than 40,000 Airbnb hosts in the city of New York alone.
Other cities, like San Francisco, have instead opted to enforce laws requiring hosts to register with the city, and fine the rental companies $1000 a day for each illegal listing. Could Chicago’s ordinance, which adds a 4% surcharge on short-term rentals and requires hosts to register their units, be the proper method of action?
Most of these laws and rules are still fairly new, so there will be some time until we can see the long lasting effects they have on both the cities and the companies. I will continue to post any updates on this story as it develops.
