As former members of America’s middle class sink slowly into genteel poverty, our ever resilient entrepreneurial class is always ready to meet a new marketing challenge. Welcome to the sharing economy.
“Sharing economy” is a polite way of describing people who are forced by their diminished prospects to take the low-rent approach to certain aspects of living, like travel accommodations.
Instead of staying in that three- or four-star hotel, the traveler hooks up with a firm like Airbnb, a San Francisco outfit that connects the traveler with a person renting out an extra bedroom or condo for a short period of time, and takes a 12 percent fee for its trouble.
On the surface, this has the appearance of a win-win situation. But like many things in life, there are unintended consequences. Take the case of Chris Butler.
Butler is suing the landlord of his formerly rent controlled apartment in San Francisco, alleging he was illegally evicted so the owner could rent two apartments in the building for $125 and $145 a day through Airbnb, a much larger potential profit than the $1,840 a month in rent Butler was paying.
Aside from being highly lucrative and laxly regulated, this form of commerce violates San Francisco laws on rentals of less than 30 days, and Airbnb and its hosts fail to collect the city’s 14 percent hotel occupancy tax. This doesn’t even begin to address the issues of inviting a total stranger into the your house, or renting a room from the landlord from Hell.
Airbnb, founded in 2008 and now generating an estimated $100 million a year in revenue, calls Butler’s case “incredibly rare” and says a study it commissioned shows that short-term rentals involve such a small share of the housing stock that they “cannot have a measurable impact on housing costs or rental demand.”
Another San Francisco innovator, Uber, has created a controversy of its own through a mobile app that connects people in need of a ride with vehicles for hire and ride-sharing services.
As you can image, the taxi cab industry is not happy with this new unregulated and untaxed competition, and has tried to block the service in Washington, D.C., New York City, Chicago, and other cities.
While limo and town car operators have used Uber to generate income during dead times, there are also plenty of non-professionals in the game who may be poor drivers, have unsafe cars, and don’t have the catastrophic insurance licensed taxies are required to carry. Then again, they could just be thieves looking to rob a bargain hunter.
Legitimate Uber drivers can still have nasty surprises awaiting the customer through what the company calls “surge pricing,” a polite way of saying prices can go sky high when rides are tough to get during periods of bad weather or other heavy demand. For example, Uber’s prices were seven times the normal rate on New Year’s Eve in 2011.
But, hey, that’s the brave new world.