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The New Economy
Will Paris Leave the Lights on for Airbnb?

Clashes between France’s old and new economy hit international front pages this week when cab drivers violently protested the rise of ride-sharing company Uber. Meanwhile, if less in the public eye, Paris officials are grappling with another growing pain of the new economy: the expansion of Uber’s home-sharing peer website Airbnb, which served twenty times more customers in the City of Lights last summer than in 2011, according to the company. Though investigators track down “unauthorized apartments” and threaten owners with hefty fines, the number of illegal operators is estimated to be very high, reports the WSJ

Paris has bragged about its status as the top Airbnb market. But the firm’s impact on housing remains a matter of discussion. Paris officials say there are some 30,000 tourist apartments available for rent in the city—about 2% of the total number of units—with as many as two-thirds operating illegally. Airbnb says that it is a fringe issue on its platform; just 17% of hosts in Paris say they rent out apartments other than their primary residences. It isn’t clear how many of those might be doing so without city authorizations.

Some hotel owners and other activists argue that full-time tourism apartments likely account for more than that in revenue terms, however. “You can’t call this a sharing economy anymore,” said Laurent Duc, president of the French Hotel Federation. “This is an underground shadow economy.”

While we wonder how materially Mr. Duc’s role at the Hotel Federation factors into his dramatic assessment, he does home in on an issue that more broadly afflicts policymakers as they look to legislate on the sharing economy: classification. How many days must one reside in an apartment for it to be considered residential; at what point should owners be forced to pay tourist taxes; to what standards of operation should Airbnb units be forced to adhere? Essentially, as the WSJ writes it, what is Airbnb?

Particularly with respect to housing in major cities, with their many and often confusing statutes and regulations, categorization is a necessary evil. The problem, as we’ve written before, is when legislators seek lazily to apply categorizations of the past to new innovations. As with California’s ruling on whether Uber drivers are independent contractors or employees, the proper solution may eventually be to create a new classification entirely—one better suited to the demands of the changing economy.

Though it may be easier for governments to rebuke rather than to adapt to such changes, it is clear—simply by usage—that these services have become an essential and popular function of our modern economy. It will behoove smart politicians to enable, not hinder such progress.

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  • Proud Skeptic

    Makes a person wonder what business this is of the French government. I own or rent an apartment. I want to let someone stay there while I’m gone. I charge them money. I pay taxes (supposedly) on the income.

    Or…I own and apartment and don’t live there. I do the same. So what?

    I guess France spent a lot of time regulating and balancing everything and now that the world has changed they feel that they have to do it all over again. Seems like an awful lot of trouble to me when things will pretty much take care of themselves if you strop interfering.

    • Andrew Allison

      Hotels pay occupancy (in addition to income) taxes which are, shall we say, optional for AirBnBs and may represent lost government revenue. Second, AirBnB rentals absolutely represent lost revenue for the traditional lodging industry, which will fight tooth-and-nail to prevent it, just as the taxi guild is doing. It’s no different from what’s going on in the USA. It seems to me that there’s a pretty clear line between renting out your spare bedroom and owning a property used only for rental. Much as I applaud the sharing economy, it seems reasonable that a unit used only for rental should be treated like a hotel room. The spare bedroom question is less clear-cut.

      • Proud Skeptic

        True about the difference between the two, though there is a difference also between renting out many rooms in a building you own strictly for that purpose and a one off apartment where you get paid to make it available.
        As I understand it, Airbnb is simply a way for people to find places like this and is not a hotel corporation like Hilton. Different model.
        Bottom line for me is that, although people might find reason to complain, it is IMHO, crossing a line into a tiny segment of the industry because of a desire to protect another segment. No threat here. Airbnb will never push Hilton out like Uber might push out archaic taxi regulations and methods.

  • FriendlyGoat

    I have a feeling that the enemies of Airbnb are a better-funded lot than the enemies of Uber. Private-sector lodging owners are likely more powerful than cabbies. But, the enemies of Uber really have better issue-tools to object on such as liability and the employment status of drivers.

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