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Monday, October 24, 2016

Homesharing Falls to Cronyism in Manhattan

Instead of using the rise of the homesharing economy as motivation to innovate, the hotel industry instead resorted to cronyism by pressuring Governor Cuomo to increase regulations on their competition.

Late last week, Governor Cuomo signed legislation which made his position on the sharing economy painfully clear to New York City residents. Capitulating to the whims of the traditional hotel industry, Cuomo made history by adopting the nation’s strictest home sharing regulations, essentially banning the homesharing industry from operating within city limits.

Instead of innovating, the hotel industry resorted to cronyism and pressured the Governor to increase regulations on competition.The New York City hotel industry has experienced record declines over the last few years, which directly correlates to the rise in popularity of sites like Airbnb.

When it came to booking accommodations for one of the most popular tourist destinations in the world, consumers were more than happy to spend less to stay in bigger spaces with more amenities, such as kitchens and laundry facilities. For tourists on a tight budget, this allowed them the freedom to save money by cooking their meals instead of eating out, which can add up quickly in Manhattan.

While the hotel industry had every right to be concerned over the increasing popularity of sites like Airbnb, using the state to squash the competition is concerning, to say the least. In the unbridled market, entrepreneurs are rewarded for taking risks and innovating, which is exactly what the homesharing economy has been doing while the hotel industry has refused to update their business model.

Just as the taxi industry, whose business model has remained stagnant for the last eighty years, has enjoyed an almost century-long monopoly, the traditional hotel model has had no reason to think seriously about innovation since they were the only game in town.

However, instead of using the rise of the homesharing economy as motivation to innovate, the hotel industry instead resorted to cronyism by pressuring Governor Cuomo to increase regulations on their competition.

Fining Creativity

In New York City, it is already illegal for apartment dwelling residents to rent out space in their homes for less than 30 days. However, the new law takes these regulations even further by punishing residents for merely listing their apartments on homesharing websites. Under the new regulations, those caught advertising short-term rental spaces on sites like Airbnb are subject to fines ranging from $1,000-$7,500.

President of the New York Hotel and Motel Trades Council, Peter Ward, stated, “For too long, companies like Airbnb have encouraged illegal activity that takes housing off the market and makes our affordability crisis worse.”

Those caught advertising short-term rental spaces are subject to fines ranging from $1,000 to $7,500.While the hotel industry may see Cuomo’s actions as a victory against their competitors, it is the residents of New York City who are really being punished by these new regulations.

The sharing economy is unique specifically because its model isn’t about big business or central control over a given market; it is about individuals connecting with other individuals to conduct business free from all the crippling government regulations found in almost all other sectors.

Additionally, for many residents living in one of the most expensive cities in the United States, losing the ability to supplement their income through homesharing comes as a huge blow.

According to the New York Post, Chris Lehane, head of global policy for Airbnb said, “It’s baffling to us in this time of economic inequality that folks would be looking to impose fines of as much as $7,500 on a middle-class person looking to use the home that they live in to help make ends meet.”

The new regulations are set to go into effect on November 1st, but Airbnb has sought help from the federal court in Manhattan in order to stop the new law in its tracks. In papers filed with the court, Airbnb claims that federal law has been violated by New York City officials who are punishing Airbnb for content created and posted by third parties. The company also claims that the new regulations are a violation of the company’s first amendment rights.

While New York City is infamously known as an overbearing nanny state, the collusion occurring between government officials and hotel moguls is shocking, even for Manhattan.

Summing up the situation perfectly Brendon Muir, of the Reclaim New York good-government group said, “In a desperate attempt to hammer Airbnb to please the hotel unions, state officials just risked nixing $2 billion worth of economic activity that benefits people struggling to afford to live here.”

This first appeared at Generation Opportunity.

  • Brittany is a writer for the Pacific Legal Foundation. She is a co-host of “The Way The World Works,” a Tuttle Twins podcast for families.