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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