Airbnb and the choice between “Gig” and “Rig”

Posted by Marc Hodak on October 23, 2016 under Invisible trade-offs, Scandal, Stupid laws | Be the First to Comment

In the History of Scandal class that I taught in the mid-2000s, one of the lessons was that scandals have a life of their own, separate from the reality that they are nominally attached to, with the reality invariably being much less salacious than the stories that grew up around it. I have since seen the opposite phenomenon, as well–stories that could easily be made into huge scandals, but simply make the news one day to die the next.

In that context, I find myself asking, why isn’t New York’s attempt to outlaw Airbnb a scandal? The ban, and the now accompanying fines of thousands of dollars, is designed to restrict apartment owners from renting out their apartments to visitors. This has several obvious effects:

• Restricting the number of rooms available to visitors from out of town
• Making hotel rooms more expensive, so that the visitors that do come have less to spend on non-hotel items
• Preventing generally less affluent apartment owners from adding to their income (rich people don’t need to rent out their apartments to make ends meet)

But it should not be surprising that the bill was not called the “NYC Visitor Cap Bill,” or “Only Rich Visitors Allowed Bill,” or the “Ordinary Apartment Owners Don’t Really Need Extra Income Bill,” or the most honest title, “Government Supports Hotel Owners and Unions Bill.”

I have long since learned that laws restricting overall economic activity to favor one specific group rarely makes for scandals. But one of the lessons of the current election is the widespread feeling of a “rigged system.” Notwithstanding Gov. Cuomo’s pious announcement that “this is an issue that was given careful, deliberate consideration,” he will have a difficult time washing off the stank that this bill was so clearly bought and paid for by powerful real estate and union interests at the expense of tens of thousands of apartment owners looking to make some cash out of their slack capacity.

Since the hoteliers and their unions could not directly propose a bill, it had to be championed by New York City representatives in the legislature, and they had to provide at least a sheen of respectability behind it. So they argued that unscrupulous landlords were pushing out residents so they could rent their units out at a market rate, thus depressing the city’s housing stock. How often does that happen? What tiny percentage of Airbnb users fit that description? And if that were their true concern, why not limit the $7,500 fines to landlords of multi-family units? The questions practically answer themselves. No matter how the legislators try to polish it, the turd of this law remains visible for everyone to see. It prevents thousands of ordinary citizens from inviting thousands of ordinary visitors into the city in a raw expression of state power.

This is a special type of corruption that has seemed immune to scandal: Some special interest purchases state power at the expense of the masses. Charter schools providing hope to otherwise hopeless inner city kids are resisted by an entrenched education establishment afraid of giving up money and control. Ride-sharing apps that provide millions of people the ability to come and go, including to neighborhoods traditionally underserved by cabs, are resisted by an entrenched livery establishment afraid of giving up money and control. In all cases, these are open conspiracies of entrenched private interests combining with government to defending archaic regulations of long-failed business models that cannot stand up to free people making personal choices in an increasingly tech-enabled world. And because the government has police power to enforce those regulations, the rest of us can preserve our freedom to do what we want only under the threat of confiscation or violence.

The Baptist and Bootlegger combination that invariably supports these laws, as we are witnessing in the insane opposition to the “gig economy,” invariably dresses up its opposition to increased freedom in terms of speculative benefits to deserving groups if we only stop “bad” people from doing what they want. But those deserving groups invariably continue to suffer despite the accumulating restrictions, and the many others caught in the wide net of those arbitrary restrictions, enforced by a transparently bought-and-paid-for-state, get a growing feeling in response: “Rigged.”