Complaints about Airbnb are deeply misplaced

Airbnb Offers a Property-Rights Opportunity by Christina Sandefur.

"Masada Siegel’s complaints about her home-sharing neighbors (“The Airbnb Hotel Next Door,” op-ed, Sept. 3) are deeply misplaced. City hall, not Arizona’s home-sharing law, is to blame if nuisance ordinances are not enforced.

Though websites like Airbnb and HomeAway are relatively new, offering one’s home to paying overnight guests is centuries old. The vast majority of home sharers are respectful to neighbors. True, there may be times when guests are discourteous, but cities already have ordinances to crack down on noisy neighbors. The law Ms. Siegel complains about—Arizona’s 2016 Home-Sharing Act—in no way diminished that authority. Instead, it blocks cities from imposing across-the-board bans on home sharing—bans that punish the innocent for the wrongs of a few. We don’t outlaw all backyard barbecues just because people sometimes get rowdy. Arizona’s law rightly takes the same view: It simply says cities must use existing laws to crack down on bad actors, rather than stripping all property owners—the great majority of whom are law-abiding—of their fundamental private property rights.

Home sharing is an important opportunity for millions of homeowners across America to make extra income to help pay their mortgages, maintain their properties and invest in local communities. Home sharing boosts small businesses by bringing visitors into local communities, and it creates an incentive to fix up properties that otherwise would have fallen into disrepair. All that economic growth is destroyed when city hall imposes one-size-fits-all bans instead of enforcing existing nuisance laws.

Christina Sandefur
Goldwater Institute
Phoenix" 

Actually, Curbing Uber Won’t Relieve Heavy Traffic

The real factors for congestion are increased freight movement, construction activity and tourism, population and job growth

By Liya Palagashvili. She is an economics professor at State University of New York-Purchase.
Excerpt:

"A ban on new ride-hailing drivers will not solve the problem of road congestion since it is being primarily caused by other factors. The City Council should look to more effective proposals to address road congestion. One is congestion pricing: charging higher prices during high-traffic times, such as imposing higher fees on bridges and tunnels during peak hours. The idea is to discourage people from driving during those times, and the revenue generated should be used to invest in improving public transit as a viable alternative. According to some studies and trials by cities around the world, congestion-pricing schemes have been effective at reducing traffic and raising revenues. In past discussions with Gov. Andrew Cuomo, Mayor Bill de Blasio has not been open to this solution.

Yet the proposal Mr. de Blasio does support will harm an already existing congestion-pricing scheme. Ride-hailing companies have a built-in congestion-pricing mechanism — “surge pricing” or “peak pricing.” These higher prices deter riders from frivolously using ride hailing during busy times because prime-time fares are higher. Higher prices encourage many potential customers to opt for the subways. For comparison, taxis have a fixed $1 surcharge only between 4 p.m. and 8 p.m. on weekdays, which is too small an amount to effectively deter many riders.

Before the City Council chooses to limit ride-hailing services to New Yorkers, especially those in the boroughs outside Manhattan, it should test whether claims about those services are well-founded. As it stands today, there is no compelling evidence that ride hailing has been a primary or significant cause of New York’s traffic problems."

"From 2009 (before ride hailing) through 2015, the study finds that reductions in vehicular speeds began long before ride hailing hit the stage, and the pattern did not change after ride hailing. The primary factors of reductions in vehicular speed, according to the study, are increased freight movement, construction activity and tourism, population and job growth."

"From 2009 to 2015, pedestrian growth in Manhattan’s central business district grew by about 18 to 24 percent. This slows cars down; at turns, they have to wait for crossing pedestrians. Furthermore, last year, New York City set a record of hosting almost 63 million tourists — a nearly 30 percent increase from 2010."

"Critics may dismiss this report by pointing to a 60 percent jump, since 2015, in for-hire vehicles. But according to a recent New York City Department of Transportation study on traffic speeds in Manhattan’s central business district, between 2015 and 2017, traffic speeds fell by about 4 percent. 

From 2010 to 2014, before ride hailing took off, speeds fell by 12.1 percent. In fact, every year before 2015 the reduction in speed was greater than the yearly reductions in speed after 2015. The sharpest reductions in speed were between 2012-13 and 2014-15 — i.e., before ride hailing “conquered” Manhattan"

"Subway ridership has been declining since 2015, and so far this year, it is down by about 2 percent. However, in that same survey, respondents indicated that they were just as likely to substitute a car option (taxi, car service or personal vehicle) for ride hailing."

"peak-hour subway ridership is not the problem. The decline in subway ridership is coming from off-peak hours and ridership within and between the boroughs outside Manhattan. This is precisely where there is the least amount of traffic, and notoriously where the subway is the least reliable. In fact, according to Mr. Mulligan, the neighborhoods farthest from Manhattan were the same neighborhoods that have seen the largest growth in ride-hailing usage. Sixty-six percent of people in Northern Manhattan and Northern Bronx indicated they use ride-hailing services to replace transit trips." 

New York Times Editorial Board Thinks Uber Is Too Popular, Demands Price Floors: America's paper of record demands an end to transit innovation

By Christian Britschgi of Reason.

"The problem with ridesharing is it works too well. Or that's the thesis of an editorial this week in The New York Times.

Sure, the Times concedes, these app-based transit companies are making intracity travel easier. Ridesharing apps have "been a boon to people trying to get around town," especially those ill-served by public transit. But they also "lay waste to the livelihoods of taxi drivers and turn New York's already busy streets into glorified parking lots."

To remedy this problem, America's paper of record taps a couple ideas that have been gathering dust since the 1930s, including a price floor for rides, a minimum guaranteed fare for drivers, and subjecting ridesharing companies to the same regulations as taxis (because "it makes little sense for the city to regulate the old and new guard of for-hire cars differently when many New Yorkers use them interchangeably").

Some of these ideas are already getting traction. New York Mayor Bill de Blasio has suggested capping the number of ridesharing cars allowed in the city, while New York City Councilman Brad S. Lander (D-Brooklyn) has introduced a bill that would give the city's Taxi and Limousine Commission the power to set a price floor for ridesharing drivers and to mandate that these drivers be paid at least the same as drivers of traditional taxis.

What these politicians and editorialists are missing is that what the Times calls the "Uber problem" is evidence of the model's success.

Falling returns to taxi operators means consumers are opting for a service that better meets their needs and is offered at a lower price. Increasing traffic congestion shows that consumers are making the switch, and indeed that ridesharing is expanding the market for trips within New York City.

In other words, more people are travelling to places they want to be, and they're doing so at a lower cost. These benefits are accruing to riders because of an innovative business model that allows ridesharing companies to both route around the taxi cartel and to rapidly expand or contract the size of their fleets in response to how many people want rides at a given time. Far from welcoming this innovation, the Times and likeminded officials want to tear it all down with price floors and one-size-fits-all regulations.

Such rules will only make the city's transportation problems worse.

For starters, trying to craft regulations that treat taxi companies and Uber drivers the same because customers flit between the two services is nonsensical when their business models are so different. You might as well decide to regulate Greyhound and Southwest identically because both service the same demand for intercity travel.

The likely result—particularly given the Times' interest in protecting the taxi industry—will be to saddle rideshare companies with ill-fitting regulations that raise costs and deter them from even operating in the city.

A price floor would likely be even worse, pricing sensitive riders out of the market while failing to provide drivers with a better wage, to help the taxi industry, or even to tackle congestion.

Currently, drivers for Uber, Lyft, and other services enter or leave the market based on the price they can fetch for offering a ride, which is in turn based on the number of people demanding rides at a given time. Should the government impose a price floor on rides while changing nothing else, fewer riders will be willing to pay the higher mandated fares while more drivers will not get the hint that their services are no longer in demand.

The result will be plenty of drivers still circulating the city's roads hunting for a shrinking pool of customers, increasing congestion and competing with taxis, but without the benefit of actually taking people to and from their destination.

The only fix proposed by the Times that has any promise is congestion pricing—basically a dynamic toll that rises or falls with the number of cars on the road—and then plowing that into shoring up the city's ailing public transit system.

At the risk of having to hand back my libertarian card, I don't think there's anything wrong with asking drivers to pay more for a faster trip, then using that that money to compensate deterred motorists with better transit service that offers them a real alternative to driving. In theory, that should work in a place like New York City, and particularly Manhattan, where transit can serve as a substitute for a lot of automobile trips.

In practice, it's far from clear that the dreadfully incompetent Metropolitan Transportation Authority, which runs the city's buses and trains, would actually spend any additional revenue wisely. So even this solution has problems.

Still, points for a proposal that mimics one of the innovative elements of ridesharing—a dynamic price managing supply and demand across the road network—rather than trying to squeeze innovation out of the system altogether.

The goal should be to create more options for riders looking to get where they want go. Companies like Uber and Lyft are doing just that. Any future reforms should build on what they're doing, not regulate them out of existence."

Airbnb May Affect Rents But New York City Study Doesn't Tell Us

By Adam Millsap of Mercatus.

"A new study from the New York City Comptroller’s office claims that Airbnb has contributed to higher rents in the city. The study has been picked up by several new outlets who have repeated this claim, even though the study doesn’t establish a causal relationship between more Airbnb units and higher average rents.

The comptroller office’s study uses Airbnb listing data to calculate the number of Airbnb units for 55 neighborhoods in New York City. The key variable of interest is the proportion of all housing units in a neighborhood that are listed on Airbnb. The authors also control for a bunch of other neighborhood characteristics using data from the American Community Survey. Using this data, they estimate the relationship between changes in average monthly rent and changes in the proportion of Airbnb units in a neighborhood by year from 2009 to 2016.

They find that average rent and the proportion of Airbnb units in a neighborhood move together, which is not particularly surprising. What they don’t find, despite claims to the contrary, is that a higher proportion of Airbnb units causes average rents to increase.


The comptroller office’s theory is that a higher proportion of Airbnb units available for overnight stays means there are less units available for long-term renters, and this decrease in supply of long-term units leads to higher rents. This theory is consistent with basic supply and demand, but estimating the effect statistically is tricky since the relationship between prices and quantities of related products runs both ways.

For example, a decrease in supply of long-term rental units due to an increase in the supply of Airbnb units would increase average rents if nothing else changed. Alternatively, an increase in rents could induce more people to rent out their apartments—or extra rooms in their apartments—via Airbnb in order to take advantage of the higher prices. In fact, in the latter scenario some renters may rent out extra rooms to earn additional income to offset their higher rent.

In the first case, more Airbnb units would be causing rents to increase. But in the second case, higher rents due to some other factor would be inducing more people to rent out their units on Airbnb. Both stories result in higher rents and more Airbnb units, but the causes are completely different. If all we see is that average rent rises along with the number of Airbnb units, we have no idea which is causing which.


Statistically estimating the effects of prices on quantities and vice versa is difficult because prices and quantities are determined simultaneously, meaning they each cause the other. Economists have come up with advanced techniques to deal with this issue, but they aren’t used in the comptroller’s study.
Because of this, all this new study can say is that average rents and the proportion of Airbnb units in New York City neighborhoods were positively related to each other from 2009 to 2016. The study can’t say which one caused the other and doing so is misleading."

The Inexorable Logic of the Sharing Economy

By Nobel Prize Winning Economist Michael Spence. Excerpts:

"The insight (obvious in retrospect) underlying Airbnb’s model – and the burgeoning sharing economy in general – is that the world is replete with under-utilized assets and resources. How much time do we spend actually using the things – whether cars, bicycles, apartments, vacation homes, tools, or yachts – that we own? What value do office buildings or classrooms generate at night? 

Answers vary by asset, individual, household, or organization, but the utilization numbers tend to be astonishingly low. One recent answer for cars was 8%, and even that may seem high to someone not burdened by long commutes. 

But those numbers are changing, as the Internet enables creative new business models that increase not only a market’s efficiency but also the utilization of our various assets. Hundreds of experiments are being conducted. Clearly, not all of them will experience the astonishing growth of Airbnb and Uber. Some, like Rent the Runway for designer clothes and accessories, may find profitable niches; others will simply fail. 

The digital platforms that act as the basis of all this e-commerce need to meet two related challenges. The first is to produce a network effect, so that buyers and sellers find one another often enough and rapidly enough to make a business sustainable. Second, the platform must create trust – in the product or the service – on both sides of the transaction."

"The power of these platforms derives from overcoming informational asymmetries, by dramatically increasing the signal density of the market. 

Indeed, in order to encourage infrequent e-commerce users, innovators and investors are exploring ways to combine the evaluation databases of separate, even rival, platforms."

"the Internet is lowering the costs of dispersion that once compelled the concentration of work in factories and offices."

"the Internet-led process of exploiting under-utilized resources – be they physical and financial capital or human capital and talent – is both unstoppable and accelerating. The long-term benefits consist not just in efficiency and productivity gains (large enough to show up in macro data), but also in much-needed new jobs requiring a broad range of skills. Indeed, those who fear the job-destroying and job-shifting power of automation should look upon the sharing economy and breathe a bit of a sigh of relief. "