Aided by advances in technology and online payment platforms, a fundamental
change in our economy is underway.
This emerging economic model is commonly referred to as the sharing
economy, collaborative consumption and the peer-to-peer economy. These platforms
allow people with goods, services and skills to directly connect with
individuals desiring access to these items without the need to go to a
traditional business to facilitate the transaction. An advantage of this system
is allowing owners of infrequently used assets to share with others and generate
income to recoup a portion of the cost of their investment.
Examples of sharing economy
businesses include Ebay, an
online marketplace; Zipcar, a car-sharing service; VRBO, a vacation property rental
service; Airbnb, a lodging
marketplace; Uber and LYFT, ride-booking services.
Announcements of new applications occur on a daily basis, including Scootaway, an
app-based scooter rental startup in Columbia.
So why should cities care about the growth of the sharing economy and its
impacts. The answer is simple. Current regulatory systems are not designed to
accommodate technology-based, peer-to-peer exchanges of goods, services and
skills. This business model leads to a number of regulatory challenges and
Ride-booking services also pose a unique set of challenges for local
governments including safety and insurance issues.
- Is renting a residential unit or portion of the
property on a daily basis using a platform such as Airbnb a violation of zoning
regulations when the property is located in a single-family residential
- If it is a zoning violation, how do cities police
this illegal practice when the transactions take place online and exact
locations of the rental unit may not be disclosed in online advertising?
- Is the income produced from peer-to-peer
transactions, using a platform such as Airbnb and Uber, subject to income, sales
and accommodation taxes?
- Are accommodations
furnished online in peer-to-peer exchanges subject to residential health and
safety standards or commercial standards applied to traditional
Cities play a central role in deciding which sharing economy practices are
adopted and which are rejected. City officials need to review their regulations
and determine if they still make sense and whether they should be applied or
modified to accommodate sharing economy applications.
The National League of Cities recently
conducted a survey in 30 of the largest cities in America to measure the
sentiment and direction of the sharing economy.
According to Brooks Rainwater, director of the City Solutions and Applied Research Center at NLC, "Overall,
cities are finding that there is a way to strike a balance between promoting
innovation, ensuring consumer safety and addressing existing industries’
[concerns]." Cities must evaluate issues such as the impact ride-booking
services have on existing taxi and limousine services or the impact of Airbnb
and VRBO have on traditional lodging facilities.
As the shared economy upends traditional businesses and
disrupts local regulatory environments while also fueling innovation and growth,
the attitude toward these sharing businesses has also shifted in cities,
according to the study.
"Specifically, ridesharing and homesharing companies that often came into
cities with more of an aggressive posture are now starting to focus on working
with the cities in terms of regulatory and taxing issues," Rainwater said. "We
are hopeful the trend continues."
Last August, NLC formed the Sharing Economy Advisory Network composed of businesses,
policy leaders and city officials to identify the regulatory challenges posed by
the technologies that power the sharing economy. The Network is creating and
promoting model solutions that can be adopted by cities as they work to resolve
The Network is also identifying ways that cities can support and encourage
the growth of new businesses in this space.
While there are emerging models in how cities address the new shared
economy, Rainwater said the newness of the issue precludes long-term best
practices. "There is no one-size-fits-all regulatory solution," he said.
Rainwater said the biggest issues cities face are consumer safety, tax
fairness and the existing regulatory environment.
"What has been really great to see is that our cities are reacting rather
quickly," he said, noting that the cities’ existing regulatory framework
"doesn’t quite work the same way" in the shared economy.
"It is a balancing act, where cities are making sure they focus on public
safety and taxes," he said.
is a shared
economy expert who often consults with public, private and social sectors and
frequently writes about the issue on her website
national publications. She emphasized that the sharing economy can be an
"extremely useful, effective tool" to improve life in cities.
"It is a new lens by which we
can unlock value in assets all around us," she said. In her article, "Rethinking Cities as a Sharing Platform
," Rinne suggested city
officials should first build awareness within government about the sharing
economy then figure out what assets the city owns and might be able to share.
Next, they need to take a hard look at their policies and figure out which
regulations are in the way.
"This isn’t easy, but it’s where the real opportunity is," she said. "The
sharing economy isn’t about unregulated activities; rather, it’s about
developing appropriate regulations that maximize the (economic, environmental
and social) benefits while balancing public needs."
Finally, officials need to get involved. Rinne said city leaders can start
by joining a sharing platform and giving it a try. City officials should also
talk to community members who use shared platforms. "Ask them about their
experiences, their results and what’s missing," she concluded.
The impact of the sharing economy is becoming more evident in South
Carolina. A recent search of Airbnb’s website revealed accommodations offered in
a number of cities. For Charleston’s historic district alone, there were 89
listings. Hilton Head Island had 488 listings. Airbnb had 89 listings posted for
Clemson. Smaller cities that draw tourists, host special events or are located
near water or other natural amenities are also being impacted.
Many state legislatures are
wrestling with the tax and regulatory issues related to these new types of
businesses. The South Carolina General Assembly tackled its first sharing
economy issue in June by passing legislation
that allows transportation network
companies such as Uber to operate in South Carolina. The Municipal Association
worked with Uber and other interested parties to ensure the new law allows
cities flexibility to fairly collect taxes from the companies and ensure the
safety of riders and drivers.
Attendees at the Association’s 2015
in July can learn more about the NLC report and its findings
during the Friday afternoon breakout session, “Cities and the Sharing