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The Sharing Economy In Focus Part 2 of 2

Despite all the claims for the success of the “shared economy” circulating on the internet, one report seems to hit the nail on the head as to why things such as shared cars and shared housing have become so popular, it’s that the US economy for most of us continues to be so bad. At a time where the growth of low paid part time work far exceeds the growth of full time well paid jobs it is little wonder why so many Americans are becoming desperate in making ends meet. This sentiment headlines journalist Kevin Roose’s piece for New York magazine “The Sharing Economy Isn’t About Trust Its About Desperation”, nymag.com/daily/intelligencer/2014/04/sharing-economy-is-about-desperation.html . According to Roose as more people lose their full time jobs, many of them being replaced by sharing services or part time workers, they sign up to rent out their services or stuff in order to just pay the bills. Nationally, those who claim to work part time currently sits at 1,260,0000 which outnumbers full time workers at 1,2500,000. This downward trend really accelerated in 2009 with the continued collapse of the economy. Before the great economic bust the last time part time positions outnumbered full time ones was in 2005 (see article for graph). Average part time work jobs have grown by about 28,000 compared to full time jobs which have grown on average by 25,612.

If this was not sobering enough, most of the working population which doesn’t fit into the 1% bracket has seen their wages increase by less than 15%. Those in 95 percentile have seen an increase of about 12%. The 70th percentile saw a growth of about 3%. Lower wage workers have actually seen a decrease in their salaries. The bottom 20 percentile saw their salaries fall by 4%. And this does not account for the 3.7 million citizens who have been out of work for 6 months or more. So it is no wonder so many people are taking such desperate actions to make ends meet and with so many people looking for ways to bring home a salary various “sharing economy” companies are making a killing. The big advantage that these companies have over small operation is that they have no real operating costs to account for.

In a piece by Alexandra Letellier of the LA Times, “Good for the Sharing Economy Bad for everyone else”, she quoted a Jeremy Rafkin Op Ed where he compared a company such as Airbnb to that of any hotel chain. Rafkin pointed out that if Airbnb wants to expand the rooms provided on their site they simply bring in new clients who are more than happy to make a little money out of the deal. If a regular hotel wants to add rooms, they have to actually build the space which comes at a financial cost in the form of construction fees including workers. So from a business stand point the sharing economy seems to be a win win situation. From a workers and home owners stand point it is a nightmare. www.latimes.com/opinion/opinion-la/la-ol-lyft-expansion-sharing-economy-.... In New York, for example, legitimate taxi drivers who operate yellow cabs must purchase a medallion which now costs in the ballpark of $1,000,000 dollars - almost double the $550,000 cost in November 2008. This does not account for the money they must spend on gas and renting their cars along with insurance costs. Anyone who has walked around Manhattan certainly knows how aggressive these drivers are in picking up a fare. After all, paying a $1,000,000 dollar medallion charge is, in reality, like paying a hefty mortgage. When one considers the possible competition with the so called “car sharing” operations such as Uber, along with the green taxi system, it is not hard to see the strain that it puts on the Yellow Taxi service.
When it comes to companies such as Airbnb operating in New York City, the real losers tend to be the full time tenants who live next door to what amount to illegal hotels. Rachael Monroe touched on this very issue in Slate recently. As she noted Airbnb’s top hosts in New York City have brought in a combined $35 million dollars. Many of them are known as so called “Super Hosts” that is, they own or are renting 29 or more units which they use for transient commercial hotels. These units are rented out for far less than what it would cost a tourist at anyone of the major hotel chains in the city. While in theory this may sound like a good thing, the reality is that it exasperates an already fragile affordable housing market.

Landlords and building owners had been engaged in Illegal Hotel practice for years; the nuisance of trying to co-exist with noisy tourists was handy for driving tenants away and making a lot of extra money in the bargain. However apartment buildings aren’t the only places being affected and NYC is far from being the only locale where this is a problem: http://www.slate.com/articles/business/moneybox/2014/02/airbnb_gentrification_how_the_sharing_economy_drives_up_housing_prices.html#lf_comment=138186969 .
According to Monroe in the Slate article, parts of Portland Oregon are also seeing Airbnb’s affect on the housing market. In Marfa for example where fewer home owners live the area. As Monroe noted, “Airbnb causes costs to rise across the board, but benefits are spread in unequal ways. Median household income in Marfa rose 84 percent between 2000 and 2009, but more than a third of the population still lives in a household earning less than $20,000 a year. Home values rose at even more dramatic rates during the same period (more than 131 percent between 2000 and 2012).” And while everyone will see their property taxes go up next year, young white hosts, mostly females make out better when bringing in the extra income from Airbnb or some other hotel service chain. Black hosts as noted in this article charge considerably less than white hosts for the use of their house. In short what the town is seeing is the onslaught of gentrification.

Much like New York, the Germany Senate has passed new legislation to regulate what is called peer to peer renting of one’s home for Berlin, another popular tourist destination. The move into install these laws came after the cost for rent in the city went up 8% between October 2012 and 2013. Lawmakers are hoping that these new regulations will save as many as 12000 from completely leaving the housing market.
Until next time...