by Misha Lepetic
“People say New Yorkers can't get along. Not true.
I saw two New Yorkers, complete strangers, sharing a cab.
One guy took the tires and the radio; the other guy took the engine.”
~ David Letterman
A few months ago, friends of mine moved to the Bedford-Stuyvesant neighborhood of Brooklyn. The three of them signed a lease on a five-bedroom duplex, with the express purpose of leasing out the remaining two rooms on Airbnb, the service that allows people to rent out extra rooms or apartments on a short-term, informal basis. Since then, they have had a colorful assortment of travelers, tourists, students and businessmen tramp through their place. In return, the additional income has allowed them to live in a much larger and better appointed place than would have been otherwise possible.
The expense of renting an apartment in New York has been the stuff of legend for a long time now, but as this expense continues its inexorable climb, brokering sites such as Airbnb have inspired people, perhaps for the first time, to intentionally re-conceptualize their living space as a business model. In other words, what is generously known as the “sharing economy” is really the monetization of all those bits and pieces – your apartment, your car, your power tools – that used to sit around and just, well, be yours.
And then last week, New York Administrative Law Judge Clive Morrick ruled Airbnb illegal. Is this really a setback to all the annoying shouting about the “sharing economy”? Or is it more of a setback to Silicon Valley’s dogma that there is always another patch of contemporary life that, whether it knows it or not, is in need of disruption?
Actually, let’s first be clear about the ruling, since there has been much breathlessness in the media around this. The so-called “hotel law” violated by the respondent had been passed in 2010. Specifically, the law prohibits the right to charge for a stay of less than 29 days if the person renting out the space is not present. So the law still has plenty of loopholes; Airbnb is by no means “illegal.” But it is also worth mentioning that most leases explicitly prohibit any rentals – most New Yorkers don’t need such a “hotel law” to find themselves in violation of their lease (or even condo or coop rules). This of course has not stopped Airbnb from encouraging people to sign up; after all, the company gets roughly 10% per transaction and is currently estimated to be worth around $2.5bn.
However, the ruling does raise an important point about the informality. When one talks of the informal economy, one imagines vast and chaotic open-air markets in Argentina, or hardworking street vendors in Bangkok. The informal also takes the form of vast trading networks, such as the flow of computer equipment into and out of Paraguay, as richly described by Robert Neuwirth in The Stealth of Nations. But informality has always been here in the United States, too, and it is getting bigger and more important.
As James Surowiecki noted in a recent New Yorker piece, approximately $2 trillion dollars of income went unreported to the IRS last year. But what is really impressive is the rate at which off-the-books income is increasing: “in 1992, the I.R.S. estimated that the government was losing $80 billion a year in income-tax revenue. Its estimate for 2006 was $385 billion, almost five times as much” – and that is still probably an underestimate. It is also worth considering that, as the job market has stagnated since the 2008 crash, these numbers can only have continued to increase.
Hence the great attraction in monetizing assets such as the extra room in your apartment. As an exceptionally carefully executed brokering service, Airbnb found its sweet spot by taking the classifieds from Craigslist and bolting on a rating and feedback system pioneered by eBay, the grand-daddy of retail-based brokering sites. Trust and transparency are literally what make this market function. Airbnb will even send over a photographer to make your place’s listing look great – after all, unlike Craigslist, they have real skin in the game. (Of course, this same transparency makes easy pickings for anyone wanting to enforce laws like New York’s). More subtly, it’s worth examining the ideological role the individual is expected to play, as shown in the way Airbnb organizes consumption.
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