Government Should Leave Sharing Economy Alone


Governments tend to target innovative industries that are too new to be regulated and single them out for punitive taxes and nasty abuse. As Art Laffer once put it, governments aren’t happy when business pioneers enjoy “success without the benevolent, guiding wisdom of” of the regulatory state.

This was the operating plan against Internet commerce two decades ago. As sales increased sharply, lawmakers could neither restrain the industry nor touch the growing number of dollars flying by between buyers and sellers. So they made it a priority to meddle in private affairs and do whatever it took to get their hands on the money.

A similar effort is playing out today in California, where lawmakers are waging a war on the sharing economy.

The campaign against home-sharing cooled a bit on May 1 when Airbnb and HomeAway settled a lawsuit they had filed against San Francisco’s law requiring all vacation-rental hosts to register with the city.

Reasonable people should wonder why this is any of government’s business. Government always concocts reasons why it should interfere. San Francisco argued that it is protecting groups that short-term rentals hurt, including the hotel workers’ union, landlords, and tenant groups.

Protecting favored businesses from competition keeps economies mired in the past. Disruption and destruction are central to economic and societal growth. And they’re practically a California tradition.

“Silicon Valley breeds ‘disrupter’ companies, shaking up traditional industries,” Laffer wrote last year in Investor’s Business Daily, “by providing different, superior and lower-priced goods and services than the entrenched businesses provide.”

Santa Monica has also targeted home-sharing. It spent $500,000 in 2015 to staff the first year of an anti-home-sharing task force that netted exactly one “offender” and $3,500 in fines.

Entrepreneur Scott Shatford, apparently fed up with having his legitimate business criminalized, “left Santa Monica for the more Airbnb-friendly city of Denver, Colo.,” Zach Weismueller wrote in February in the Reason Foundation’s Hit & Run blog.

It’s puzzling why elected officials would oppose a business venture that has the economic potential of home-sharing. In the Coachella Valley, visitors “booked over a quarter-million nights at short-term rental homes, pouring more than $272 million into local businesses and creating 2,500 jobs,” in 2013, Christina Sandefur, executive vice president of the Goldwater Institute, wrote last year.

For homeowners in mortgage trouble, home-sharing might be all that stands between them and the streets. Sandefur said that Airbnb reported in 2016 “that in 10 of America’s largest cities, over half of its hosts would not be able to pay their bills without the extra money earned from home-sharing, and 13 percent would have faced foreclosure.”

Local officials, from San Diego to San Francisco — where voters rejected a 2015 attempt to outlaw the business — continue their home-sharing hostility despite the benefits. Yet Sacramento, which is typically dedicated to saddling successful businesses with high taxes and hyper-regulation, has remained surprisingly quiet. A recent Los Angeles Times headline announced that “California lawmakers can’t figure out what to do with Airbnb.”

If that’s the case, here’s a suggestion: Do nothing. Let the market work. Adopt policies that give the sharing economy the room it needs to grow. Follow the lead of the Coastal Commission. Sandefur says that this council, which customarily disregards property rights, “actually favors home-sharing in the coastal zone — and has told coastal cities not to ban the practice — because it advances the commission’s mission of affordable access to the coast.”

California is not only home to Airbnb, ride-sharing giants Uber and Lyft are also based here. Lawmakers need to understand that their war on the sharing economy is a war on California.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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