Closing the Barn Door on Airbnb?

Back in our great great grandfather’s day it was no uncommon to hear people on the street yelling “get a horse,” whenever an automobile rattled down the street.

The pejorative saying was a reaction to a change of technology that many in society were unwilling to embrace, and that existing institutions did not yet know how to cope with. Traffic lights had not for the most part been invented, and cities knew gridlock that included horses, wagons, bicycles, trolleys as well as the horseless carriage.

The recent conflict over the emerging short-term rental industry in Jersey City may well become symbolic of the current inability of government to cope with new technology. Not only urban areas plagued with an assortment of new vehicles – such an electric scooter – competing for space on streets and sidewalks, many of the rules by which cities are governed may well be completely out of date.

While we do not have people shouting about horses in 2019, many of contemporary institutions are struggling to cope with an emerging technology, and government – which historically people have relied on to provide regulations are order – appears to be completely unprepared for the massive changes taking place – such Uber and Airbnb.

Essentially, with new technology almost anybody with a vehicle can become a taxi driver and nearly anyone anywhere with an apartment or house can start up a hotel.

Hudson County is already split on the issue with a number of towns banning the practice outright.

While Jersey City’s battled with short term rentals such as Airbnb is at the epicenter of this conflict, the significance goes well beyond its borders, and may well become a political nightmare for officials for whom regulations governing zoning or the taxi industry may no longer apply.

Hudson County towns like Jersey City, Secaucus and Union City are banning or severely limiting some shared residential services like Airbnb.

This is more than just an attempt to protect the hotel industry in some of these towns as some proponents of the short-term rental industry claim. The new shared services economy, fueled by new technology, is testing the limits of traditional government to regulate it.

This was part of the logic behind Jersey City legalizing short-term rentals in 2015, a first-in-the-nation deal that allowed the city to collect hotel taxes on these rentals.

Mayor Steven Fulop, a progressive, sought to embrace a number of initiatives that appeals to his growing

Fulop
Fulop

political base – such as establishing a bicycle-share program. But the short-term rental program vexed him. At the time said government regulations simply weren’t equipped to deal with the challenges imposed by the new technology. The agreement would provide the city with extra tax revenues and the tourists the short-term rentals would spend money in local restaurants and other shops, use local transportation and other services.

What Fulop and the city council didn’t understand at the time is that they threw open the doors to a modern-day gold rush. What started out as mom and pop operation became big business allowing corporate and others to cash in.

Hudson County became even more lucrative a destination for short-term rentals when Manhattan issued a ban to protect its hotel industry.

Opposition rose in Hudson County partly from a strong hotel lobby both in Jersey City and Secaucus, but some residents complained wild parties, unaccountable landlords and lack of cleanliness in short-term rentals as well.

Solomon

Leading the charge against short-term rentals is Jersey City Councilman James Solomon, who claimed warehousing of rental units for short-term use created a shortage in long-term rentals and drove up the cost of rents in Jersey City.

While Solomon’s statistics are suspect, he received no help from Airbnb which he claimed refused to give him information about the full extent of the short-term market in Jersey City. He and Fulop managed to impose strict regulations on short-term rentals, in a desperate attempt to return it to the mom and pop status originally intended. The new regulations are scheduled to go into effect in 2020.

Airbnb representatives claim they welcome reasonable regulations such as a registry of those operating short-term rentals, health and safety inspections, and the presence of a manager on site of any short-term rental buildings. But short-term rental operators claim the regulations imposed will largely destroy businesses that began operation when the city opened the doors in 2015. For the most part, the city’s new regulation would outlaw large short-term rental operations.

In fact, the regulations the city imposed earlier this year will only make things worse, driving the short-term rental industry to places like Craig’s List where there will be no way of tracking them, nor will these have the basic protections such as insurance and regular reviews that Airbnb and other online platforms provide.

But this is a lot like closing the barn door after the horse has escaped.

When the city legalized short-term rentals in 2015, people invested, some smaller entrepreneurs who saw this as an opportunity to build a new career. Larger corporate interests also saw this as a way to make many times the amount of money they would otherwise make in long-term rentals. Cleaning services dedicated solely to short-term rental operations sprang up, hiring local people. Food delivery services expanded to accommodate a largely transient population that wanted food, but not the fuss of having to cook it themselves.

Recently, Airbnb struck back and managed to galvanize a petition drive sidestep the city council and could possibly put the question on the ballot in November.

But this is not the first time Jersey City has been forced to abandon regulations to allegedly protect local residents. The city tried to limit chain stores from its downtown to protect mom-and-pop stores, a plan that backfired under threat of corporate lawsuits.

Even if the referendum to force a similar retreat on short-term rentals fails, the city will be faced with serious legal challenges as existing business sue to recovered lost potential revenue.

While less dramatic a confrontation, the city council also struggled to deal with the ride share program in Jersey City as well.

Early on, the Fulop Administration embraced Uber and Lyft while placing onerous restrictions on traditional taxicab companies. But last year, after a passenger was attacked after climbing into a vehicle believed to have been a ride share, Jersey City proposed new restrictions that would force these share programs to provide visible identification in other words to look more like a traditional taxi.

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  • 1Lionel

    A big load of codswallop is hard to come up with. Airbnb is no more a technology company than a drug cartel looking to off load contraband via the internet. Section 230 CDA (Federal law) protects – for now – this rogue company that knowingly violates local laws around the world making it the only unicorn that is massively profitable pre-IPO. Guess what? Were any drug cartel to go IPO the stock would rocket up faster than any mission to Mars

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