Blowing up markets

July 6, 2010 | 11 comments

The Red VicBanning sublets

Last week, the State of New York passed a bill that bans short-term rentals: specifically, no homeowner or renter may sublet their home for less than a month. The target is sites like AirBNB, an up and coming website that allows travelers to eschew pricey hotels – and their accompanying hotel room occupancy tax – in favor of private homes.

If the governor chooses to pass the legislation (as opposed to veto it), AirBNB will effectively be outlawed, and with it, a grassroots marketplace economy for short-term accommodation. New York State will have cemented hotels and bed & breakfasts as gatekeepers to the city for travelers who can’t stay with friends or relatives.

To me, this is an interesting reaction: it shows, once again, that established gatekeepers are terrified of the Internet. We’re used to that by now in the context of media content – we already know that newspapers, publishers, record companies and movie distributors aren’t as important as they were – but this is a scarcity-driven marketplace. It used to be that finding a safe, clean room in a strange city was a hard problem, so we turned to hotels as a trusted source. Running a hotel is in itself an expensive, tough business, and as a result there were a limited number in any given city, and the price went up according to demand. Although the hotel business is a ruthless game, it’s always been hotels competing with other hotels.

Now, though, we can visit websites like AirBNB and Couchsurfing, where private citizens can offer their homes to travelers, and the site will let us know who we can trust based on other peoples’ experiences. The marketplace has been blown wide open, and it turns out that a lot of us would rather go for a cheaper, friendlier option. I wouldn’t put money on New York blotting out short sublets for long.

Power to the people

We’re going to be seeing a lot more of this, in all kinds of market sectors. We’re already seeing ridesharing sites become popular, for example, blowing up the market previously owned by taxicabs and making it available to anyone who happens to be driving somewhere. Effectively this formalizes hitchhiking, making it both safer and more efficient.

It all comes down to one simple rule: People want to be free.

The Internet is opinionated: as a medium, it inherently works to empower people and eliminate hierarchies in society. It shouldn’t be a surprise that the most popular Internet companies hail from California; their philosophies are direct descendents of the civil rights activism that took place there in the sixties and seventies. In many cases, it’s even the same people. (Or – and here I put up my hand as the son of Berkeley “radicals” – their children.)

Gatekeepers – companies, structures or processes that act as exclusive barriers or filters – are not long for this world. Where gatekeepers exist, they do so because the alternative was inconvenient at the time when the gatekeeper became established – not because they’re inherently better than an empowered population. Those organizations, companies, and even governments, need to look at themselves very carefully and figure out what needs to be changed, before those things are changed for them.

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11 Comments

  1. I have no problem with them being allowed to operate short term sublets – so long as they have to follow exactly the same laws and regulations as other hotels do.

    Otherwise they’re not operating on a level playing field.

    Andrew Ducker July 6, 2010 (11:03 pm)
  2. Andrew, they are not hotels. Did you even read the post? “private citizens can offer their homes to travelers.” H-o-m-e-s not hotels.

    Why not respond: If people can offer their homes, maybe the hotel tax should be eliminated?

    They’ve got you Andrew, and you don’t even know it.

    Do you remember Colonel Nicholson from The Bridge over the River Kwai? Look in the mirror. And weep.

    Michael July 7, 2010 (12:48 am)
  3. Wow. That was a fantastically patronising response. You’ve completely turned off any inclination I had to actually engage there.

    I generally feel like you are willing to talk about things in an intelligent manner, but that response was worthy of the Register forums, or an AC comment on /.

    Andrew Ducker July 7, 2010 (10:00 am)
  4. I feel like I should wade in here.

    Andrew isn’t the only one who’s brought up hotel regulations with me – it’s something that genuinely makes people feel safer. There’s a question to be asked here: are the trust metrics inherent in these sites enough to replace that? For a lot of people, clearly, the answer is no. Whether that’s come from the hotel industry (in this case), or is consumer-driven, I’m not sure.

    For me, I have one wrinkle that I’m not sure about. In the US in particular, there’s a bit of a litigation culture – how do homeowners avoid liability if something goes wrong? Is there a waiver built into the site (I’ve never used Airbnb, although I’m definitely thinking about it for my next trip), or is it kept informal?

    Ben Werdmuller July 7, 2010 (10:06 am)
  5. Gah – apologies for my earlier comment, which stupidly mistook as being from you, Ben.

    I totally agree that trust is involved. But also fire safety laws, zoning, etc. It’s all very well to say that people can decide to take their own risks, but most people are simply ignorant of what the risks are. Hotels have to comply with a lot of legislation – much of which is there for a good reason. Simply wiping it away isn’t going to work, and most casual providers of the new services aren’t going to get themselves up to code for the occasional visitor.

    I’m all in favour of couch-surfing sites, where people ahve an ad-hoc arrangement for free, but as soon as money is changing hands there’s responsiility involved.

    Andrew Ducker July 7, 2010 (10:12 am)
  6. Andrew, first off let me apologize to you and to Ben as well. Aiming my remarks at you by name was a mistake.

    Michael July 7, 2010 (5:12 pm)
  7. Apology entirely accepted. Everyone has off days – I’ve exploded at far more people than I care to think about.

    Andrew Ducker July 7, 2010 (5:45 pm)
  8. Ben, that is a great point, People want to be free. And I say, People will be free.

    The bill makes it “illegal for any homeowner or renter to sublet for less than a month.”

    The “safety” argument that some people commenting about this issue have made(on other websites) is ridiculous, since the bill lets you rent for 32 days without requiring you to conform to any additional safety regulations. It is not about making couch surfing safe, it is about protecting a special business interest and collecting taxes. Class A multiple dwellings (the type of building affected) already have reams of rules and regulations about safe capacity, fire safety, building codes, etc. And individual lease contracts already also restrict certain uses by a tenant for a given property.

    So now if your old college roommate visits you and crashes on your couch, if he offers you beer money, you’re a criminal. In Soviet Russia the strategy was to make everything illegal, then the government could arrest anyone for anything if they spoke out, because something they were doing just to live was illegal. “You want democracy? Oh, I see you bought toilet paper on the black market, off to Gulag for you comrade.”

    Michael July 7, 2010 (5:55 pm)
  9. Michael: Not just in soviet russia, but elsewhere. In the UK for example, Labour made practically everything illegal. It remains to be seen whether the new government will reverse this damage.

    It need not occur through malice of course, it could just be that the State needs to be seen to be doing something. Add to that a general unease of authorities to trust people or to allow innovation to occur unmolested.

    Marcus Povey July 8, 2010 (1:01 pm)
  10. Ben, you say:

    “It shouldn’t be a surprise that the most popular Internet companies hail from California; their philosophies are direct descendents of the civil rights activism that took place there in the sixties and seventies. In many cases, it’s even the same people. (Or – and here I put up my hand as the son of Berkeley “radicals” – their children.)”

    Do know of any published research that supports this assertion? While this has never occurred to me before, it seems obvious after just a little thought. I am very interested to learn more. The reason is that I’ve been very active just in the last month on a civil rights cause here in Canada and I’m working with a few friends on a web 2.0 startup. So was glad to read you point which makes allies my politics with my business. I am quite sure I have alienated a few venture capital friends with my views.

    Cheers,

    David de Weerdt
    Kitchener, Ontario, Canada

    David de Weerdt July 25, 2010 (7:00 pm)
  11. Apparently the westward movement of capital is not a new concept.
    http://en.wikipedia.org/wiki/Brooks_Adams

    Andrew Ducker July 27, 2010 (2:35 pm)

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