Airbnb crowdsources its lobbying

San Francisco is a city with multiple identities. On the one hand it is supposedly on the cutting edge of capitalism. It is often seen as a place where the best minds of Harvard or Stanford or nowhere at all flock to set up new and innovative companies centred on technology. The city is filled with young entrepreneurs and techies with an eye on providing more efficient products than older market players. They’re the sort of people who might well book a room – or let one out – through Airbnb.

On the other hand, San Francisco is also a city mired in poverty and crime. Despite the rosy image of it as a trendy, rapidly gentrifying hub of innovation, the many residents of the Bay Area still suffer from high rates of poverty, low wages and unemployment. According to the city’s public defender, Jeff Adachi (said the Los Angeles Times), “in San Francisco, you definitely have this tale of two cities. You have a lot of very rich people. The top five percent have a median income of $350,000. And then you have 23 percent of the population at poverty levels”. Those people certainly won’t be using Airbnb.

Firms such as Uber and Airbnb aggressively enter cities and build up a customer and client base

The city is suffering from a crisis in affordable housing. The exact cause of the crisis – beyond the obvious reason of demand outstripping supply – is disputed, but the implication is clear: an increasing number of San Franciscans’ are unable to keep up with rapidly rising rental and property costs.

Priced out
In April last year, the average cost of rents in the city reached $3,458 per month, while the cost of renting a single room apartment recently soared to over $2,500 a month.

According to Quartz, “eviction rates have steadily increased over the past five years, and San Francisco’s chief economist Ted Egan recently estimated that the city would have to add around 100,000 new units to see a meaningful increase in affordability. Just 3,454 new units were added in 2014. And only 757 were for affordable housing”.

Some say the sharing economy website Airbnb is to blame for this housing crisis. By allowing the city’s scarce property to be used as an outlet for short-term rent, it is argued, the site has contributed to a lack of adequate housing supply for long-term residents and boosted renting costs. Other’s dispute these claims, pointing towards the large revenues San Franciscans have been able to accrue thanks to Airbnb – often allowing them to pay off their mortgages, or contribute to their own crippling rent costs.

The issue was put to a ballot in early November, with a law proposed that would have severely curtailed short-term rents in the city. According to Ballotpedia, the proposed law (Proposition F), would “have restricted all such private rentals to 75 nights per year and imposed provisions designed to ensure such private rentals were paying hotel taxes and following city code. It would also have required guest and revenue reports from rental hosts and ‘hosting platforms’ every three months”.

All of this would have severely curtailed the ability of anyone in the city to make use of Airbnb’s services. The law, however, was defeated, with 55 percent of voters rejecting Proposition F. Airbnb survived in San Francisco.

The clash between the two sides of the city’s identity shed light on the manner in which many tech firms operate. Rather than asking city regulators for permission to operate and how best to work within the guidelines of city bureaucracy, firms that view themselves as part of the “sharing economy” tend to work along the lines of what Mike Isaac from The New York Times referred to as “ask forgiveness, not permission”.

Firms such as Uber and Airbnb aggressively enter cities (or districts or towns) and build up a customer and client base. As Isaac explained: “Airbnb starts up widely in an area — San Francisco, for instance — and gets to a large enough scale that renting out one’s home starts to become a normal thing. Perhaps people even support it publicly, or at least rave about it to their friends.

“Years, or in some cases months, later, regulators pick up on the fact that hey, a lot of folks are doing this. And there’s no tax structure or really zoning rules around any of it. We should probably do something.”

Mobilising the base
In many cases it is too late for disgruntled city or government officials to do much as the sharing economy firms have become embedded in the local economy. By exploiting the gap in time between market entry and interest from regulators, firms such as Uber and Airbnb are able to build up a loyal army of customers – who come to see themselves as dependent upon the service – and employees, or contractors or others who rely on income generated from the service.

Whenever regulations attempt to restrict or curtail these activities, the firms can draw on their base for support, especially as they have their contact details, allowing them to directly alert them of proposed new laws. For instance, when the UK’s Transport for London agency proposed a series of rules to make life harder for Uber users and drivers, the taxi-sharing app was able to directly alert all its existing customers of the changes.

Airbnb in San Francisco directly contacted users of the site in the area in a (successful) attempt to mobilise support from those who had come to use the service in the Proposition F ballot (some went so far as door-to-door campaigning). Similarly, a law proposed to stymie the growth of Uber in New York was abandoned partly as a result of it becoming clear that the move would mean retroactively axing the jobs of about 700 drivers. Even the most reactionary and zealous regulator would have to think twice about causing such a large number of layoffs.

Sharing economy apps are increasingly coming under fire from regulators, but their model of entering a market and apologising later seems able to ensure their continued existence. By building up brand loyalty and making their services indispensable to citizens – through employment, supplementary income and/or convenient services – they are able to draw upon a pool of support when the regulators come knocking. While tech firms often spend large amounts of money lobbying regulators, their power to survive also lies in their ability to lobby their users – a sort of crowd-sourced lobbying (or just political campaigning) – which has become integral to their business models.