Two years ago, Sarah Kesseler published an article titled “The Sharing Economy is Dead, and We Killed It.” In it, Kesseler details how, what was once the beginning of a bail-out for an economy that was crumbling, is coming to an end.

The sharing economy, alternatively called the collaborative economy, has a number of definitions, depending on who you ask. Ultimately, the sharing economy, which comes with the recent advent of new-age capitalism, claims to be an alternative to the current mode of economy. It is built on the notion that individuals can exchange – or share – their goods or services with one another in economic transactions through ‘aggregate platforms.’

Over the past decade, a number of platforms have taken flight as part of the sharing economy, labeling themselves startups, and taking the world by storm. Platforms like Uber, Airbnb, Amazon, eBay, and countless others are not only children of the sharing economy, but are also perpetrators of its alleged killing, to use Kesseler’s words.

Airbnb, considered one of the most successful of such platforms, is the par excellence of how companies in the sharing economy identify a problem and begin to find innovative solutions for it. As an alternative platform for hotel services in cities around the world, Airbnb has changed travel as we know it. But despite the endless benefits that have come out of Airbnb, the platform is partial to the ramifications that the sharing economy has had on cities and economies around the world.

Looking at Airbnb as an aggregate platform and how it is influencing cities and economies around the world can further explain exactly how the sharing economy benefits or harms cities, economies, and the world at large.

“Rent an Experience”

When in 2007 roommates and designers Joe Gebbia and Brian Chesky couldn’t afford rent for their San Franciscan loft, the two ingeniously came up with a solution to their predicament. They decided to place an air mattress in their living room and turn their loft into a bed and breakfast for people who couldn’t find alternative accommodation – “just to make a few bucks,” as they put it. More than 10 years later, the brilliant idea-turned-company is worth $31 billion.

The concept behind Airbnb is simple and efficient: Open your home to travelers, vacationers, and everyone in between in return for a per-night fee. Gebbia and Chesky’s solution does not only rival the hotel industry, it also provides residents with an alternative source of income. Through ‘collaborating’ and ‘sharing,’ travelers and city residents exchange their goods and services and, in return, receive an ‘authentic experience’ in a new city.

Airbnb has approximately four million housing units available for rent, from rooms and flats to yachts and castles, in more than 191 countries. Since the website was founded at the epoch of the economic recession in 2008, more than 200 million guests have stayed in Airbnb accommodation somewhere around the world. The company’s numbers seem impeccable and will probably grow in the years to come.

But despite the social and economic success of Airbnb, many cities are complaining about how it is doing more harm than good.

There is no doubt that Airbnb has made traveling easier and changed how we travel. But who has paid the price for Airbnb’s success?

Live Like A Local

Airbnb offers a practical solution to a very common problem: finding suitable, affordable accommodation to visitors in a city. Coupled with the complexities of cultural and linguistic barriers, and the discomfort that some find with staying at hotels, Airbnb is often the perfect fix. In a matter of minutes, one can survey the market for accommodations to rent in a given city, check photos of the space, read reviews of the host, and book a room, flat, or house. The precision and efficiency of Airbnb as an accommodation platform is part of the reason for its widespread popularity.

Staying ‘at an Airbnb,’ as it’s become more commonly known, has become an experience on its own. In cities with expensive or limited hotels, booking an Airbinb can provide travelers with an experience they may not have had otherwise.

It also absolves hotels – which are notoriously uniform in their offerings – from the responsibility of simultaneously accommodating dietary restrictions, hygiene necessities, budgetary requirements, proximity to city centers, and practicality. For most, Airbnb provides decent accommodation that mostly suits their needs at a reasonable price in comparison to most hotels.

At Airbnb, hosts double as tour guides a lot of the time, offering tips and tricks to visitors in their city. The Airbnb experience is rendered more “authentic,” allowing visitors to simulate living like a local, while contributing to hosts’ incomes. For travelers, it seems harmless.

What went from remedying a simple problem, which the founders of Airbnb themselves had begun on their own, grew into a niche market. The platform suddenly went from providing alternative accommodation in cities with limited beds to facilitating an entirely different mode of traveling.

Between 2014, seven years after Airbnb began operations, and 2018, the number of Americans who used shared-lodging increased by more than two-fold, and that number is expected to increase by almost three times by 2020. Many were genuinely convinced that, with Airbnb’s exponential growth, the hotel industry would plummet to its death. (Citation) But contrary to popular belief, the hotel industry is alive and thriving, expecting a five to six percent growth this year alone.

Putting the company’s ‘live like a local’ experience aside, Airbnb as part of the sharing economy’s positive growth completely flipped on its back. What went from a collaborative platform where individuals ‘share’ their goods and services became a profit-driven venture that not only shapes how we travel, but also affects how residents live in their own cities.

Same But Different

In the company’s hometown of San Francisco in 2014, Chris Butler, a resident of the Bay Area, was allegedly evicted from his rental apartment in San Francisco so his landlord could put the apartment up on Airbnb. The landlord claimed that he needed the apartment for his spouse, but Butler saw his apartment listed for rent on Airbnb after he was evicted. Butler’s case is one of countless claimants that believe Airbnb is complicit in their eviction.

When residents found that renting out accommodation on Airbnb draws decent money from the well, many vacated their flats, bought other flats, or opened their homes to house travelers. This created two types of renters: “owner occupiers” who live full time in their houses and rent them out periodically, and “absentee landlords” who rent their houses year-round. Eviction, however, is one of dozens of ramifications that Airbnb has had on cities around the world.

sharing economy

A platform called “Notfairbnb” mocking Airbnb. (CC: Notfairbnb)

In Berlin, rent prices in 2012 increased by an astonishing eight percent due to the number of apartments listed on Airbnb for rent. In Paris, 40,000 housing units were advertised on the website in 2015, making it the city with the most Airbnb listings in the world. In response, city officials pushed forward legislation limiting the number of days that homeowners could rent their apartments for short-term rentals to free up homes for local tenants.

New Orleans, a city where tourists outnumber residents 25 to one during peak months, passed legislation to ban Airbnb rentals from the city’s historic French Quarter and limit short-term rentals to 90 days a year per accommodation.

So what happens when cities’ housing units are saturated with Airbnb listings? Residents who live in these cities can no longer find affordable housing, forcing them to pay more for housing or to move further away from the city center. And while tourism arguably brings economic activity, revenue, and other benefits to cities, it often does so at the expense of the local population.

In response to city officials fighting to keep Parisians in the city, Airbnb published a report in 2015 claiming to have helped usher in €2.5 billion (a little over $3 billion) into France’s economy. The report asserts that the company created more than 13,000 jobs and helped families pay rent across 13 of the country’s provinces. Airbnb’s numbers are not inaccurate, and the company often does, in fact, boost tourism and bring extra cash into a city’s economy. But what Airbnb has chosen to ignore is how the company has reaped its benefits off of the backs of city locals.

What is being called into question is how Airbnb, as part of the sharing economy, is actually making cities less liveable, more expensive, and less organized due to the influx of tourists into cities looking for a cheap bed to sleep on. The foundation of collaborative or aggregate platforms is rooted in the understanding that they engage individuals, not corporations, and that, through a process of exchange, the ‘community’ is evoked. This, however, isn’t necessarily taking place.

Cities Fight Back

Back in 2016, United States’ Senator Elizabeth Warren, alongside a number of others, called for a regulatory probe into Airbnb’s impact on American cities. Warren’s claim was on grounds that the company was part of the reason that long-term renters were losing housing, and that it was driving up rent prices and facilitating host-driven racism against customers. Warren’s call is one of many measures that cities are taking to understanding how Airbnb may be harming rather than helping cities.

In 2016, Airbnb began working with city leaders to enforce a hotel tax in 700 cities to regulate the company’s financial gains with its hotel-like rental service. But the hotel tax targets competition with the hotel industry and does not do much for the average city resident.

Approximately one-third of host revenues through Airbnb are made through ‘commercial listings’ on the website. These listings refer to homeowners who buy up flats or evict tenants to make room for customers through Airbnb. And although commercial listings only make up 10 percent of Airbnb’s total listings, more than 61 percent of U.S. hosts on Airbnb are renting out their entire housing units, generating 81 percent of Airbnb’s U.S. revenue.

sharing economy

Picture from a protest in San Francisco (CC: Steve Rhodes)

Commercial listings, a major source of revenue for the company, help keep vacant housing minimal and drive up rents. To combat this, some cities have limited the number of homes an individual can list on Airbnb. The City Council of Vancouver voted in November 2017 to limit some 6,000 houses that are not primary residences from being listed on Airbnb in an attempt to free up houses for the market.

Barcelona’s experience with Airbnb serves as the epitome of how the sharing economy can have a detrimental effect on society and the economy. Almost half of the city’s 16,000 listings are unlicensed and, as of 2017, rent prices rose by 23 percent within a three-year time span. Scores of Barcelona’s residents took to the streets with slogans like “Tourism Kills” and “Tourists Welcome, Locals Not Welcome.” 

The city has struggled to strike a balance between maintaining a decent living standard for locals while accommodating the influx of tourists. Airbnb’s response to these claims, aside from the challenges posed by the city itself, was a press release touting its own horn on how much the company has achieved for Barcelona. The struggle with Airbnb in the Catalan capital adds to its challenge of enjoying ‘sustainable tourism’ without harming the city’s residents.

Dead or Alive: Does The Sharing Economy Kill?

What was once seen as a solution to a problem has, in many communities, become the problem itself. The sharing economy, both as an economic model and a social phenomenon, has proven it can’t absolve itself of the impact felt in communites around the world. Whether or not Airbnb, along with Uber, Amazon, and the countless other ‘aggregate platforms’ that dominate the sharing economy, do more harm than good isn’t necessarily a simple question to answer.

But as the sharing economy continues to grow, it is becoming obvious that, as it looks to find solutions to existing challenges, it is also creating new challenges. From gentrification and rising rent prices to eliminating jobs and driving up the cost of living in communities, many aggregate platforms are not the wholesome startup-turned-corporations they claim themselves to be.

The extent to which the sharing economy, as a disruptive, novel, and dynamic aspect of life in the 21st Century is succeeding is very well supported by its financial gains within the past decade. Recognizing this success, however, doesn’t necessitate ignoring those who continue to bear the brunt of the sharing economy’s success. Should the sharing economy sidestep the necessary regulations, it will continue to grow and ring in more money, while, simultaneously, being partial to the suffering of communities in cities around the world.

*Never miss a story like this - subscribe to our weekly highlights and stay up-to-date