Most municipalities have abandoned their efforts to resist the Ubers and Airbnbs of the world. But there’s a lot both sides can do to heal the rift.
In the course of just a few years, the sharing economy has progressed from a few scrappy start-ups to an industry of mega-companies worth tens of billions of dollars. These platform-based businesses run on equal parts tech innovation and contract labor, with cities serving as the underlying foundation for success.
To put it simply, cities make the sharing economy work—they provide the dense, free agglomeration of customers, labor, and infrastructure these companies’ business models require. But it remains an open question whether cities and the sharing economy can be friends or enemies.
In the beginning, cities and platforms navigated an adversarial relationship, as companies like Uber, Lyft, and Airbnb proudly worked to “disrupt” (or “break,” as the term of art was once known) existing laws and regulations. Cities fought back by imposing fines, taking companies to court, sending cease and desist orders, and generally seeking to regulate the companies the way they did existing businesses. That early antagonism created a challenging environment for long-lasting partnerships. But now, as these companies mature and begin to reach market saturation, these earlier missteps are being corrected—and new opportunities are being found.
As our research at the National League of Cities shows, relationships between cities and the sharing economy have grown and mellowed in recent years. In Cities and the Innovation Economy: Perceptions of Local Leaders, we surveyed city leaders (that is, mayors and councilmembers) on their views of the sharing economy.
Broadly speaking, city leaders say that they welcome the innovation and improved services that these new technologies provide to their constituents. But clear challenges remain: 51 percent of cities describe their relationships with sharing economy companies as good, while 33 percent say they are very poor—leaving little middle ground.
More promisingly, our results indicate a growing interest from city leaders in partnering with sharing companies. Some early adopters like Portland, Chicago, and Washington, D.C., (and now a great swath more of cities) have developed tax collection arrangements with home-sharing companies. In Central Florida, first the Orlando suburb of Altamonte Springs and now a cluster of 5 cities have established public-private partnerships with Uber aimed at augmenting local transit programs and helping to alleviate first- and last-mile challenges in the communities. Lyft has similarly partnered with the city of Phoenix. Currently, 16 percent of cities report they are partnering with a sharing-economy platform—and, of the 84 percent not currently partnering, a full 79 percent expressed an openness to doing so.
Sixty-two percent of cities say they support the overall sharing economy—roughly the same rate as in 2015. Support for ride-hailing versus home-sharing in 2015 was relatively consistent with our new findings as well, with significantly lower support for home-sharing compared to ride-hailing. But the key finding that both cities and the sharing economy companies can take to heart is that partnership is being celebrated and sought out.
Ultimately, four critical lessons can be drawn from our research:
Innovation is welcome—but laws are in place for a reason
Laws are passed in cities primarily to protect the health, safety, and welfare of the public. Our cities’ long-standing laws surrounding for-hire vehicles and lodging services are no different. But as digital innovations have unlocked new approaches in those industries, companies have been eager to bypass cities and seek state level approval.
Despite the challenges with home-sharing surrounding safety, zoning, affordable housing, and taxation, the positive economic outcomes for hosts and the benefits to travelers and surrounding local businesses are very real. Similarly, while challenges remain on ride-hailing, in light of many of the new opportunities provided—more options for community members, lower costs, and theoretically more equitable service—most cities that once barred companies like Uber and Lyft have changed their tune.
The private sector moves faster than government (and the tech sector moves even faster)
New technology has accelerated product cycles, consumer expectations, and the churn of industry; tech companies that did not even exist 20 years ago are now among the largest in the world. Profit-driven enterprises have to be responsive to shareholders and as such, move at a speed that is anathema to government, which needs to answer to citizens and be more risk averse.
As technology infuses the civic sector, that’s starting to change, and governments can learn to respond more quickly to what residents want and need. The (relatively) swift response to the sharing economy over just a few short years serves as a case study in how city government can move much faster than it once did, and as a result deliver better services and enhanced civic experiences.
Business models need to be equitable, and data must be shared freely
Inequality in the U.S. continues to sharpen, especially inside big cities, and sharing economy companies should be part of efforts to improve inclusivity.
That hasn’t always been the case, as issues with Airbnb and discriminatory host behavior have demonstrated. The company has since developed much more stringent measures, but in order to have more measurable outcomes that can be verified, the state of California is now testing hosts with fair housing requirements to confirm they are in compliance.
Similarly, limited corporate data releases have shown that ride-hailing provides better service delivery than taxicabs to low income residents and communities of color. However, as researchers have tested these hypotheses, we are learning that some Uber and Lyft drivers employ the same negative practices seen in the traditional taxi industry—that is, denying service to individuals based on race. While most companies have been responsive to these reports, the issue reinforces the need for consistent and shared data.
Cities need to be partners from the beginning
In fact, there’s a lot that cities could do with these companies’ data. Uber and Lyft’s ridership information would be extremely useful for transportation planning; data from Airbnb, HomeAway, and others could help inform long-range planning and economic development efforts. With data driving so much of our lives, it is worth reiterating the need for data transparency writ large. Data should be a shared resource for all. But so far, most sharing-economy firms have been less than forthcoming.
That will need to change. To move forward together, cities should be seen as partners from the beginning. It’s particularly important now, as cities think about how autonomous cars and other far-reaching technological innovations stand to reshape urban space. Since we are at the nascent stage of this cycle, we now have an opportunity to build shared, equitable growth from the ground up. If cities and private companies can work collaboratively, the sharing economy can be a platform for shared success—with the public and private sectors as a powerful team—to make cities better for all of us.