The sharing economy is hotting up, and I don’t just mean that it’s becoming more popular to do car-sharing, peer-to-peer lending, and the rest. What’s hotting up is the legal environment of collaborative consumption. In particular, questions are being asked about taxing the money people are making from renting their stuff, and about what happens to your car insurance when someone borrowing your car crashes it.
All the action is in California right now, and mostly in San Francisco. Regarding car-sharing, California passed a law protecting peer-to-peer car renters in cases where someone else’s driving leads to a handout from the insurance company. This was an early sign that if these practices are going to spread, they are going to hit some institutional obstacles and challenges.
The latest issue concerns tax liabilities for people renting out rooms or their whole apartments through Airbnb. For people using Airbnb, the sense is that it is informal, and that even if someone pays you for using their place, it is not really a business transaction, and so you don’t need to declare it to the tax man. But that’s not necessarily how the tax man sees it. If people are using Airbnb instead of staying in hotels (which are taxed), then the tax man (and the hotel industry) loses out.
Steve Jones has written a lengthy and considered piece on this, which is well worth a read.
Where we start straying into the sphere of unintended consequences is when we start to notice that for-profit companies are taking advantage of consumer interest in Airbnb by letting out whole blocks of flats by the day or week. This way they can make more money, and because they are renting for under 30 days, they are exempt from San Francisco’s rent control regulations. In the case of San Francisco, this has the unintended consequence of squeezing an already tight rental market. Why should I rent out an apartment I own on a year long contract if I can rent it by the day and earn way more than double? This wasn’t what the collaborative consumption people had in mind. That’s why it’s called an unintended consequence.
What would seem to be happening here is that commercial entities are starting to muscle in on what are meant to be peer-to-peer networks, where each peer is an individual person. One of the stated aims of the collaborative consumption movement is to provide a counterbalance to today’s “hyperconsumerism” by restoring the human touch. As an extra bonus, consuming this way is also cheaper. Precisely because of this it is attractive to people – that is, there is demand – and eagle-eyed capitalists seem to be paying close attention.
Does this mean we’ll see another Airbnb, one that keeps companies out of the loop? Will the consumer care? What other unintended consequences await us in the sharing economy?