Larger Ontario cities are grappling with how to deal with the advent of the sharing economy—the arrival of highly efficient, yet highly unregulated, service-based businesses that have moved into markets traditionally occupied by established players, such as taxi firms and hoteliers.
These companies predominantly rely on smartphone apps to allow users to easily share services: take ride-sharing service Uber, which connects passengers to drivers, or house-sharing service Airbnb, which enables people to rent out their dwellings to prospective travelers.
But as these companies reach significant scale, safety standards, labour rights and accessibility issues aren’t being addressed by new businesses’ built-in safeguards—for example, readily available user reviews—prompting local governments to step in. Uber is currently being sued by the City of Toronto for breaching taxi by-laws and operating an unlicensed dispatch, while in Ottawa the city has ticketed individual drivers.
A recent paper from the Mowat Centre, however, argues policymakers need to be careful to avoid creating burdensome legal barriers around services that are in clear demand.
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“They’re here, they’re growing, and that’s happening for a reason,” Noah Zon, co-author of the Mowat Centre report, told TVO. “They’re providing value, but they’re also operating in regulatory grey areas. That means we’re in an untenable place.”
In Uber’s case, municipal politicians allege the company is operating unfairly by not complying with taxi-licensing regulations, while Uber claims its service doesn’t fit into existing regulations because it facilitates ride-sharing rather than providing rides itself.
“That’s exactly the conversation we’re hoping to help local, provincial and national policymakers move past,” said Zon. “It’s not a constructive conversation, and it’s not a realistic conversation. Governments need to find a way, not to increase or lessen regulation, but to modernize regulation.”
Take the Innkeepers Act, which in 2015 still contains a section providing innkeepers the power to seize and sell the horse of a guest to settle an unpaid bill—a regulation from a bygone era when renting a room necessarily included also keeping stables.
To that end, Uber and Airbnb have changed what’s suitable for governments to regulate: city hotel inspectors don’t scrutinize somebody’s home for letting a friend stay during summer vacation, even if that friend helped pay the bills, nor do health and safety inspectors visit neighbourhood children running a lemonade stand (with some regrettable exceptions). Cities mostly leave small-scale activities alone.
But Uber and Airbnb are reaching a scale that can’t be ignored. According to the Mowat report, “the sharing economy means a greater share of the market is filled by activities that look more like these informal transactions. However, the sharing economy’s technology may also make it easier for governments to track and enforce previously un-regulated activities.”
The question becomes: should the companies of the sharing economy be treated the same way as the legacy business they’re pushing out once were? For instance, should Airbnb be taxed like a hotel at some point? Should Uber be regulated like a cab company?
George Mason University Professor David Schleicher argues if cities are willing to drop their opposition to new forms of business, regulating the sharing economy is possible.
In a paper published earlier this year, Schleicher and Yale’s Daniel Rauch articulated three ways for cities to regulate new sharing services: allow businesses to operate under the condition they provide social benefit; use new sharing companies as contractors to city services; and actively subsidize and promote the companies as a way to build city brands.
For example, Uber could be allowed to operate in Toronto if it committed to maintaining a substantial presence in parts of the city that currently have limited cab service. (Uber claims it’s already improving service for visible minorities: it says groups that face discrimination by traditional cab companies are using Uber instead.)
Airbnb, which effectively manages a large inventory of other people’s properties, could be contracted by a city to make use of under-used community centres (or in Toronto’s case, repurpose under-enrolled schools).
Despite the attention the leaders of the sharing economy are receiving, Schleicher, like Mowat, cautioned cities shouldn’t overreact. Uber, Airbnb and other companies of their ilk still only make up a small part of the overall economy.
“The sharing economy comprises a small percentage of urban industries,” he said. “It’s not replacing banks or anything.”
Image credit: Lucy Nicholson/Reuters