Two recent decisions of New York City’s Council have imposed stringent rules on platforms in the vehicle hire and in the short-term rentals markets (in short, this means Uber and Airbnb, respectively). The rulings create significant obstacles to the current business models of both companies, and show how the impact of these platforms on the life of cities is still, at best, unclear. Regulators are starting to move to protect workers and citizens from undesired effects such as rising rents and challenging work conditions for drivers; companies will have to engage constructively, and show stronger evidence of their positive impact if they want to avoid widespread regulatory intervention.
The rules pause new licences to for-hire vehicles, and set a minimum pay for drivers
The New York City Council has enacted legislation on 8 August 2018, to regulate the for-hire vehicle industry - which means services like Uber, Lyft, and similar. The council has taken four main decisions:
Waived the licence fee for taxis and for-hire vehicles if they are wheelchair accessible (current fees are $550 for taxi and $275 for a for-hire vehicle)
Created a new category for “High Volume For-Hire Transportation Services”. These are defined as services carrying out over 10,000 trips a day. Given the high amount of trips required to qualify as a high-volume for-hire service, the Council notes the new licence would only apply to “a handful of companies” at present. The licence would be valid for a period of two years, and the Taxi and Limousine Commission (TLC) will set the required licensing fee.
Launched a study on the impact of for-hire vehicles, during which no new for-hire vehicle licences are issued. The TLC will have one year to study and decide whether to adopt vehicle utilisation standards, or regulations on the number of for-hire vehicle licences. During this time, no new for-hire vehicle licences will be issued; exceptions will be made for wheelchair-accessible vehicles, and for geographic areas where the TLC finds a need for these vehicles without a substantial impact on congestion.
Set minimum payments for for-hire vehicle drivers. The TLC is now empowered to set minimum payments to for-hire vehicle drivers for trips dispatched by high-volume for-hire services (i.e. Uber, Lyft, and the like). The TLC is also required to study payments for other for-hire vehicle trips and will be authorised to set payments for those trips as well as set minimum rates of fare.
The ruling places significant obstacles on companies like Uber and Lyft. Not only does it introduce price regulation (the TLC will be able to set the minimum pay for drivers); by blocking new licences, it prevents these services from further expansion. Unsurprisingly, Uber had already voiced its discontent ahead of the Council’s vote, saying that the measures would result in increased prices, waiting times, and difficulty to find a ride outside of Manhattan. Lyft representatives also made similar remarks.
Airbnb is now required to share extensive data about its listings and rentals
A few weeks earlier, in July 2018, the New York City Council had also regulated short-term residential rentals (i.e. Airbnb’s business). A law now requires “online short-term platforms” (where short-term means less than 30 days) that provide booking services for a fee, to provide information about those transactions. Data will include:
the address of the short term rental;
name and address of the rental host;
the URL of the short term rental listing;
whether the short term rental was for the entire unit or part of it;
the length in days of the rental;
the fees collected by the online platform for booking services; and
information about rent collected by the booking service, where applicable.
Platforms that solely list or advertise offers for short-term rentals are outside the scope of this regulation. Those who fail to provide this information face fines of either $1,500 per listing for each reporting period, or the total amount of the fees collected during the previous year for transactions related to that listing (whichever is higher).
The Council’s objective is to use this information for its investigation on illegal short-term rentals, with a view to reducing them and their alleged effect on the housing market. A member of the New York City Council was adamant in stating that “landlords [...] illegally converted countless rent-controlled apartments [...] into hotel rooms and starved our neighborhood of desperately needed low-cost housing”.
Platforms will have to engage with regulators in cities, and provide evidence of their positive impact
The council’s regulations on for-hire vehicles have disappointed Uber; however, these measures did not come unexpected, and follow years of conflict between the New York City Council (and its Mayor in particular) and Uber, accused of flooding the market without caring about the consequences for drivers or anyone else.
Similarly, the ruling on short-term rentals comes after a long battle between New York City and Airbnb. A report issued by the New York City Comptroller in May had found that Airbnb is driving up rents in the city, and estimated renters had paid an extra $616m in 2016 due to the company’s activity. Airbnb responded with an advertising campaign (video) and with a letter, arguing that the report is based on flawed data and aims to hide policymakers’ responsibilities in addressing long-standing issues in the city’s housing market.
Similar conflicts between tech companies and regulators are ongoing elsewhere. Uber has had to fight hard to retain its ability to operate in several cities in the world (including London, where it nearly lost its licence in 2017); Airbnb is facing regulatory scrutiny in several cities in the world, such as Amsterdam, Reykjavik, and Santa Monica, among others. This shows that, at best, regulators are not yet convinced that, overall, these platforms have a beneficial impact on local communities and business.
Platforms need to minimise regulatory uncertainty to protect their value
Uber and other vehicle hire services have undoubtedly brought benefit to users, although issues around the work conditions of drivers continue to be on the table, and the impact on cities’ traffic is unclear (in fact, some reports suggest these vehicles have increased congestion, rather than reducing it).
Airbnb is seen as playing a huge role in rent increases where it operates. The company often highlights its positive impact in bringing tourism to new neighbourhoods, although reports such as the one issued by New York’s Comptroller, and one published by McGill university around the same time, show that listings overwhelmingly concentrate in New York’s most popular areas.
Both Uber and Airbnb plan to move toward initial public offerings in the stock market soon (2019 and 2020, respectively); regulatory uncertainty will be a significant issue to overcome in order for them to attract investors and avoid reduction in value. To reduce that risk, they will have to engage constructively with regulators on the issues raised within cities, and provide conclusive evidence that the positive impact they are having outweighs the disruption they have inevitably brought about.
