Would you let a complete stranger stay in your home, if it meant you could put a few extra dollars in your pocket? What about that same stranger driving your car or borrowing your tools? While those ideas may seem foreign to many of us, there is a large and growing trend of using technology to rent out unused resources for a fee. That trend is so well entrenched now it’s been named the “sharing economy,” and just about anything you can think of can be rented for the day or by the hour.
If you need to rent a car for a few hours, there are services like RelayRides, where you can go online and rent a car with few of the hassles associated with working through a car rental company. If you just need a ride somewhere, you can opt for services like Lyft or Uber, which allow people with time on their hands to turn their car into an ad hoc taxi service. Airbnb lets homeowners rent out spare rooms, or even their homes, in an online exchange. There are similar services for tools and household appliances like mowers and power washers.
There are some advantages to the sharing economy; it’s more efficient to utilize existing resources than continually manufacture new ones. It’s also a way for consumers to recoup some of their investment on items that usually spend their idle time collecting dust. Like with any new disruptive technology, there are winners and losers, sometimes sore losers with a vested interest in the status quo. Other times there are genuine concerns by both regulatory bodies and those involved in both sides of the transaction.
The Insurance Industry Is Not Amused
Those opting to participate in car rental and ridesharing services could find themselves abruptly without auto insurance if word gets back to your insurance company that you’re renting your car to strangers. Even though services like RelayRides check the auto renter’s driving record and provide supplemental liability insurance, if the award is for more than the $1 million dollars in additional insurance, your insurance company could simply refuse to pay and leave you out there hanging.
Strangely, insurance companies routinely deal with individuals using their vehicles for part-time commercial services like pizza and newspaper delivery, yet it’s hard to get a straight answer out of any of them about rentals or ridesharing (Geico did not respond to a request for comment by press time). So most renters simply remain quiet about their sideline when it comes to the insurance.
Government Feels Cheated
In states like Florida, heavily dependent on hotel and rental car guest taxes, the robust Libertarianism of the sharing economy hits the state and counties right in the pocketbook. Palm Beach county sued four “couchsurfing” services for nonpayment of taxes, but even collecting what they’re due puts states and counties in the odd position of trying to collect taxes on services it won’t admit are legal. The terms of service at Airbnb put the onus on owners to pay taxes and ensure the legality of their services, but it’s likely few do much of anything in the way of paperwork or taxes. Beyond that, the paperwork processes supporting the collection of taxes are all geared toward hotels and other large businesses, not individuals paying taxes on the rental of a spare room.
Perhaps the biggest speed bump in the highway of the sharing economy is human nature itself. Airbnb owners have had homes vandalized and robbed; others find short-term renters turned their homes into meth labs and even a brothel in one case. A few owners offering cars through RelayRides report similar experiences with renting cars.
Renters have also had mixed experiences that include shabby accommodations, creepy landlords, flooding, and bedbugs. Sometimes it’s nice to know the Health Department is making hotels wash the sheets between guests.
The legalities about who is responsible or at fault when something goes awry can vary widely between jurisdictions. It’s clear that the unseen hand of the market is not up to the task of regulating the sharing economy — but neither is the government. People with rooms to rent and idle cars have to deal with the same red tape and complicated paperwork designed for Hilton Hotels and Avis. Many Airbnb owners don’t even consider themselves business owners and don’t see why they need to bother with all that paperwork.
In the meantime the real winners are the companies brokering the services, that manage to skim a margin from both sides of the transaction without putting any of their own resources on the line. They’re making enough money to afford good lawyers, leaving the little people to work out potentially life-changing issues on their own. For better or worse, the sharing economy is here to stay. Like usual, regulators will have to run to catch up with technology.