The New Sharing Economy

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Participant of Peerby, and the new sharing economy, in the Netherlands / Consumentenbond

“We are still making and selling too much stuff,” said James Slezak, the founder of Peers, a sharing economy advocacy organization, at the EcoDistricts Summit in Washington, D.C. This is a “waste of wealth” because more people could simply rent or borrow what they need in our burgeoning “sharing economy.” Why buy a car when you can simply order up a ride on an app? Why book a hotel room when you can stay in someone’s spare bedroom for much less? And why buy something when someone next door has what you need and will lend it to you for free? According to the proponents of the sharing economy, there are so many untapped opportunities to both make money and help other people. This new sharing economy then has huge implications for cities.

Slezak said the average car spends 90 percent of its engine switched off. And then, even when it’s in use, a big percentage of the time the car is idle, stuck in traffic or circling for parking. Why not share a car so it’s used more efficiently? Firms like Uber and Lyft enable this through a “less centralized model of ownership.” The same can be said for places to stay. Some people only use their apartments — or rooms in their apartments — some of the time. On Airbnb, users can rent out that extra space and make some money, while providing someone with a low-cost place to stay. “Instead of saying we have 600,000 hotel rooms, cities should say they have 600,000 apartments available.”

Still, many cities are only tip-toeing into the sharing economy, as there are many issues to work out. For one, how should sharers be regulated, given they are providing a form of service? The companies themselves still seem to be wading through these issues, too. Slezak said some questions still need to be answered, like: “What’s the impact on local communities? What’s the impact on people with jobs in the old model economy? Will the new sharing economy be equitable? What if someone has nothing to share?”

As Sharon Feigon, head of the Shared-Use Mobility Center, explained, at its best, sharing “increases options and helps us do things in a more efficient way.” But, there are definitely winners and losers. NYC taxi drivers, who can spend up to $1 million for a medallion, are fending off unregulated drivers taking their business. In San Francisco, the city is having a hard time finding cab drivers because drivers see Uber or Lyft as better opportunities.

She is focused on ensuring all ages — not just Millennials — benefit from sharing. This may be getting harder as the sharing economy is increasingly driven by a new set of corporations, whereas in the past sharing was a mostly non-profit endeavor. The private company Uber, with 1.2 million car sharers, is now worth $18 billion. Many other car sharing services have been purchased by established car rental companies (Avis, Hertz, etc).

For Daan Weddephol, founder of Peerby, sharing has great social value, but it won’t be lucrative for him unless he can convince everyone to do it. Peerby enables users of their web site to share “power tools, camping gear, things you only use once in a while.” Weddepohl said “80 percent of things we own could be shared. We have all this overcapacity that we can put into a system.”

Peerby matches those who need something with someone close by willing to lend it. “We fulfill 85 percent of requests in 30 minutes.” The web site makes money by offering optional insurance for damage or loss.

In Amsterdam, where the service started, there are already 60,000 users sharing one million objects. The service has spread throughout Europe and is now being piloted in multiple major U.S. cities. The goal is to launch the service in 50 U.S. cities by 2015.

Weddepohl seems the growing sharing economy as a return to the spirit of Medieval times, when communities were strong and sharing was done as a matter of practice. In that spirit, Peerby enables urbanites to “meet new people and connect.” The service improves sustainability because it means reduced greenhouse gas emissions from product consumption. The challenge, he said, is to create enough scale. With margins so small on the high-social value, but low-monetary value transactions, “we need many transactions to make money.”

Airbnb, if you haven’t heard, is a “platform for renting space in your home,” said Anita Roth, Airbnb. Already more than half a million worldwide have provided rooms for 11 million visitors. Roth said “the services allows people to move to a new city more easily and cheaply and enjoy new experiences.” It’s changing the “nature of hosting.”

To convince cities to create supportive regulations for Airbnb, the company has undertaken a series of economic impact studies. The company has found that 75 percent of Airbnb rooms are outside the main urban center. As a result, “tourism dollars are spread through the city.” Visitors spend about “50 percent of their total budget in the neighborhood” they are staying in.

The social benefits — amorphous yet valuable things like “cross cultural connections” or “increased neighborhood engagement” — are proving more difficult to measure, but Roth said they exist. In the wake of Hurricane Sandy, Airbnb played a role in helping people find new temporary housing. She said these kinds of social services only improve the resilience of a community.

While Airbnb ran right into New York City’s tough hotel laws, Roth said other cities are more open to letting people rent their apartments. Amsterdam, which was “skeptical at first,” has since “realized all the benefits and become a sharing city.” The city has changed its laws so people can legally rent our their apartment for up to two months a year. They have created regulations to address concerns and have done a lot to educate locals about how to rent out their apartment correctly, with fliers that have info about who to call if there’s a problem.

And there are so many more companies entering the sharing marketplace, with different degrees of success. Weddepohl thinks there is ultimately a limit to this new sharing economy — “you can’t share paper clips” — and the balance of what you can share or not share is coming near. These new services will need to partner with city governments to scale up these services in a way that also addresses cities’ concerns. Services offered by sharing companies need to be regulated, but they should also widely available — if only for the potentially positive economic and social impacts on all those neighborhoods beyond downtown.

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