An ordinance targeting peer-to-peer short-term housing arrangements has taken effect in New York City.
Short-term rental companies operating in the city, such as Airbnb and Homeaway, must provide the city govermment’s Office of Special Enforcement with the names and addresses of people offering lodging space, the duration and prices for which spaces are rented, and other personal information held by the company. Failure to turn over users’ information will result in a $1,500 per-item fine against the company.
Speaking about her bill at a June 26 City Council meeting, City Councilwoman Carlina Rivera (D–District 2) said the regulations are intended to reduce the cost of housing.
“This bill has one clear priority: protecting our affordable-housing stock for the millions of New Yorkers who could not live here without it,” Rivera said.
Legislators approved the ordinance on July 17, and Mayor Bill de Blasio signed it on August 6, with the law taking effect immediately.
Edward Hudgins, research director at The Heartland Institute, which publishes Budget & Tax News, says peer-to-peer economy services connect people with resources with those seeking to use them, saving consumers much money in the process.
“Peer-to-peer operations like Airbnb are part of the new economy created by entrepreneurs looking for every opportunity to offer profitable services to willing customers,” Hudgins said. “Consumers, especially in large urban areas where hotel prices are high, realize substantial savings from Airbnb.”
Expanding the Market
Nick Zaiac, the Commercial Freedom Fellow at the R Street Institute, says the sharing economy is a net benefit for everyone.
“Peer-to-peer platforms increase both the size and scope of the market,” Zaiac said. “They allow consumers to access a bigger pool of options for whatever is being sold, often with lower prices. This opens access to new customers, especially the lower middle class. Typically, rules that add licensing, inspection, and other barriers will make the market less accessible to those with modest incomes and a need for extra cash. These people stand to benefit most from online platforms like Airbnb.”
Cronyism vs. the People
Hudgins says politically connected people, such as hotel owners, often use government regulations to protect themselves from competitors, making things worse for the public at large.
“Entrenched interests have a strong incentive to shield themselves from competition so they can extract higher prices from consumers, so naturally they back regulations to cripple or drive out Airbnb,” Hudgins said. “In New York, established hotel owners and workers will support local politicians who want to restrict competition. The visitors who are denied access to Airbnb are the victims of higher prices, but they will leave the city after their visits and not have the opportunity to vote the scoundrels out in local elections.”
Government as Root Cause
Hudgins says decades of big-government policies, such as rent-control laws and business licensing, are responsible for the very problem lawmakers say they are trying to solve.
“High rents and housing costs in New York and other major cities are the result of government policies,” Hudgins said. “Rent control keeps renters in their low-priced dwellings, because the rents are kept low by governments. The cost of construction licenses and every imaginable regulation on new construction is passed along to renters and buyers. The overall tax burden in New York City—one of the nation’s highest—is also reflected in housing costs.”
Hudgins says local lawmakers should resist the urge to micromanage the peer-to-peer economy, because it operates just fine without their interference.
“Lawmakers should simply leave the sharing economy alone and let it regulate itself,” Hudgins said. “Customer ratings systems for Airbnb, Uber, Lyft, and other such sharing operations offer good consumer protection without armies of arrogant, officious, and arbitrary bureaucrats. Haven’t politicians done enough damage?”
Suggests Supply-Side Solutions
If New York City lawmakers are truly concerned about making housing more affordable, they should remove the countless regulations that limit the supply, Zaiac says.
“To really promote affordable housing at a time when platforms make renting rooms easy, lawmakers need to legislate with a regional perspective,” Zaiac said. “Affordable housing requires a legal environment that allows housing to be built where citizens demand it, often in wealthy towns that have little reason to allow needed housing to be built. One option would be state rules that allow small apartment buildings in all residential zones laid out by its municipalities.”