Pitfalls of the Sharing Economy


Uber_Protest_Portland_(15655460313)Advances in technology have enabled start-ups such as Uber, Lyft, and Airbnb to provide convenient alternatives to some established businesses. Being able to request and pay for a ride on one’s smartphone, for example, has made Uber a household name. Similarly, via Airbnb, homeowners looking to make a little extra cash can provide accommodations for travelers who want a more affordable option to a pricey hotel.

The innovations, however, do not come without problems. In the case of the ride-sharing services Uber and Lyft, the taxi industry has begun to put pressure on local governments to impose regulations on these services similar to the ones to which taxi companies are subject. They argue that the expense of criminal background checks, taxes, and licensing fees puts them at a disadvantage vis a vis these new ride-sharing companies.

I see their point. It does seem unfair to regulate taxi services to a much greater degree. And I certainly think increasing safety requirements on Uber and Lyft would benefit customers. But there is a crucial difference between the two kinds of companies. Taxi drivers work a specified number of hours in company-owned cars. Uber and Lyft drivers are primarily individuals who want to make some extra money in their free time by driving customers when it’s convenient for them. As such, it would be hard to find enough drivers willing to go through onerous procedures just to work part timeĀ for these ride-sharing companies.

Uber and Lyft have already left the market in cities that have imposed greater restrictions on them, to the disadvantage of customers looking for a more convenient and often more comfortable option to taxis. Maybe the answer is to unburden taxi companies from some of the fees they are required to pay rather than add them to Uber and Lyft.

The issues in home and apartment sharing are a bit different. It may seem like homeowners should have the right to rent out rooms, apartments, or even homes to anyone they want. Many Airbnb hosts say that renting out their space helps them make ends meet in a shaky economy.

Yet in certain neighborhoods, residents complain that there are far too many rentals and that renters are often noisy and inconsiderate, strewing the neighborhood with trash and giving the area the feel of a rowdy fraternity house. In the Streeterville area of Chicago, for instance, many buildings are owned by outsiders looking to make money by constantly renting out all the units.

I would not be happy if I lived in a neighborhood that was constantly filled with strangers coming and going. It would not feel like much of a neighborhood, and I would worry about my family’s safety. And once again, there is the fairness issue for hotels and inns, which are required by law to have certain safety features and to pay hospitality taxes. I think it’s fair to limit Airbnb rentals to hosts who actually reside in the home they are renting – and to limit the number of times a space can be rented out to visitors.

Innovations in goods and services are a great thing. We benefit by new companies thinking outside the box and offering different methods of delivering them. But we need to be careful about safety and fair competition as we incorporate them into our economy.