Remove the roadblocks

IT IS not hard to find evidence of the success of the “sharing economy”, in which people rent beds, cars and other underused assets directly from each other, co-ordinated via the internet. One pointer is the burgeoning of demand and supply. Airbnb, founded in San Francisco in 2008, claims that 11m people have used its website to find a place to stay. Lyft, a company that matches people needing rides and drivers wanting a few dollars, has spread from San Francisco to 30-odd American cities. Another sign is the frothy values bestowed on sharing-economy companies: Airbnb is reckoned to be worth $10 billion, more than hotel chains such as Hyatt and Wyndham, and Lyft recently raised $250m from venture capitalists. But perhaps the most flattering—and least welcome—indicator of the sharing economy’s rise is the energy being devoted by governments, courts and competitors to thwarting it (see article).

The main battlegrounds are the taxi and room-rental businesses. A court in Brussels has told Uber, another San Francisco ride-sharing and taxi-services startup, to stop operating in the city. In March Seattle’s council capped the number of ride-share drivers on the road at 150 per company at a time—though this is now on hold, thanks to a petition backed by the companies. Other cities have banned their services outright, or tried other ways of putting spokes in their wheels. Meanwhile the Hotel Association of New York has been lobbying for stricter enforcement of a rule that bans absent owners from letting their apartments for less than 30 days, which makes most of Airbnb’s listings there illegal.

But share nicely

The newcomers’ opponents, whether competitors, officials or worried citizens, complain that the likes of Airbnb and Lyft dodge the rules and taxes that apply to conventional businesses. Regulations exist to keep hotel rooms and kitchens clean and fire alarms in working order, to stop residential areas being pocked with unlicensed hotels, and to see that cabbies are insured, checked for criminality and tested on their knowledge of the streets. Cowboys such as Airbnb, Lyft and Uber, their critics claim, are a danger to an unsuspecting public. Look no further than the reports of orgies in Airbnb lets or of accidents—in one of which a six-year-old girl was killed—involving ride-sharing drivers.

The objectors have half a point. Taxes must be paid: a property-owner who rents a room should declare the income, just as a hotel should. Safety is also a concern: people want some assurance that once they bed down for the night or get into a stranger’s car they will not be attacked or ripped off. Zoning and planning are also an issue: peace-loving citizens may well object if the house next door becomes a hotel.

Sharing-economy firms are trying to mitigate these problems. They have tightened insurance cover for their drivers and have offered to collect hotel taxes. They have an interest in their participants’ good behaviour: as hosts, guests, drivers and passengers all rate each other online, their need to protect their reputation helps to maintain standards and keep people honest. But if consumers want to go for the cheaper, less-regulated service, they should be allowed to do so.

The truth is that most of the rules that the sharing economy is breaking have little to do with protecting the public. The opposition to Lyft and Uber is coming not from customers but from taxi companies, which understand that GPS makes detailed knowledge of the streets redundant and fear cheaper competition.

This all argues for adaptation, not prohibition. An unlikely pioneer is San Francisco, not usually regarded as a municipal model. Uber and Lyft got going in the city partly because taxis were hard to find, but the authorities have tolerated them. San Francisco bans rentals of less than 30 days, but is considering allowing people to let their residence, provided they live there most of the time, register with the city and pay its 14% hotel tax. Amsterdam and Hamburg have similar rules.

The sharing economy is one of the great unforeseen benefits of the digital age. Cities should not ban it but welcome it.