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Regulate Don't Kill
Is New York About to Kill Airbnb?

Airbnb may be unable to operate in New York State if Governor Cuomo signs a bill passed by the New York State legislature earlier this week. The FT reports:

The San Francisco start-up has waged an eleventh-hour campaign to thwart the legislation, offering to impose a mandatory host registration system to help the state keep track of renters and a “one host, one home” rule to curtail the challenge it poses to New York hoteliers.

Mr Cuomo must decide whether to sign the bill by the end of next week. If it becomes law, it would impose fines of up to $7,500 on any host who advertised short-term accommodation through Airbnb.

Linda Rosenthal, the state assemblywoman who co-sponsored the bill, told the Financial Times that Airbnb’s concessions were “absolutely not” enough to address her concerns.

“The lawbreaker does not get to make the law, the lawmakers do,” Ms Rosenthal said, adding that Airbnb was reducing affordable housing stock in Manhattan. “The most hypocritical part of this is that Airbnb says they are really looking out for the average New Yorker who needs to make ends meet.”

Airbnb isn’t an unalloyed good, to be sure. The service might contribute to rising rent costs even as it makes higher rents more affordable for Airbnb-using landlords. But overall, Airbnb makes travel easier and more affordable, and puts some extra cash into property-owning and property-renting people’s pockets.

In any case, services like Airbnb aren’t going away. The information revolution is going to upend industries like hotels one way or another. Rather than running around trying to preserve the old system, lawmakers would be smarter to think about how to modify regulations to allow new companies and business models to flourish while also protecting users.

This doesn’t mean that states should avoid regulations altogether. Just as at the beginning of the industrial revolution, there are surely sound ways for the government to get involved in shaping burgeoning industries. But trying to apply blue model thinking to post-blue problems doesn’t help. By threatening Airbnb, New York State would be giving in to the hotel lobby and misguided neighborhood activists. We hope Governor Cuomo seizes this clear opportunity to use his veto pen.

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  • JR

    He won’t. I bet good money he won’t.

    • Andrew Allison

      You omitted the fact that the NY legislature is manifestly corrupt.

      • LarryD

        >>… the NY legislature is manifestly corrupt.

        Kind of implied by “… just a collection of special interests”.

        But this is why governments tend to be anti-innovation, the established interests are always in a better position to lobby against competition.

  • Kevin

    The hotels are a pretty despicable interest group trying to gut Air BnB only to keep their margins up. Cities ally with them to squash their competitors due to the taxes they pay and employment.

    But there are legitimate reasons to question the externalities Air BnB imposes on neighbors – parking, traffic, and just generally introducing lots of transient people into apartments or quiet neighborhoods. Still these evils generally seem more theoretical than real in most cases, and reasonable zoning or commercial regulations should be able to address them.

    The problem is how to avoid allowing incumbents (such as hotels) to use the regulatory process to strangle upstart competitors.

    • JR

      Shrink the amount of government, and thus it’s power, regulatory capture becomes less of a problem. This will lead to more choices at more price points for consumers. Another problem of socialism is that it never counts the costs on the consumer of the socialist policies.

  • Jim__L

    New York is yesterday’s news.

  • seattleoutcast

    I was surprised to hear that AirBnB is partially responsible for the outrageous increase in home prices. Investors are buying homes to rent out through AirBnB. I have no data, but anecdotal evidence, unfortunately. Has anybody heard about this?

    • Jim__L

      If you want to vacation in Yosemite, one of your options is to rent rooms in a house in Groveland (just outside the park) through AirBnB.

      I did this with a bunch of friends in January this year. The trip proved more popular than we’d anticipated, so instead of simply staying with a retired couple who has their many grandchildren over for a few weeks a year, then AirBnBs* the rooms to tourists the rest of the year, we got another place run by a management company.

      Staying with the retired couple was great. However, in the house run by the management company, the hot water was out.

      In the Sierras. In January.

      So… I’d highly recommend staying in a place where the proprietors are on-site. Helping a retired couple with supporting a place they could have their grandchildren over was a big plus, but self-interested as well.

      * Yes, AirBnB is a verb now. It can refer to either putting your room on the market or taking such a room.

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