Catching up with the sharing economy

Websites and applications that let consumers rent out their home or give a stranger a ride in their car for a few bucks will drive sweeping changes in public policy in the coming year as cities and states rethink how they govern the so-called sharing economy.

In the past year, sharing economy businesses have moved from the fringe to the mainstream. But 2014 will be the year policymakers and regulators decide how much freedom to give these companies, according to sharing economy leaders, academics and attorneys.

"Every city will be looking at its laws and reviewing them," said Janelle Orsi, an Oakland, Calif.-based attorney and director of the Sustainable Economies Law Center. "The dust is going to settle in the next year. A few cities have outright banned these companies, but they will rethink that."

The sharing economy refers broadly to companies, many of which make mobile apps, that provide services using things people already own, whether that's a car, home or the clothes in their closet. It gives service providers the opportunity make some extra cash as, for instance, an ad hoc taxi service, hotel, or home-cleaning service.

Until recently, these entrepreneurs have been operating largely unregulated.

California in September became the first state to recognize ride-sharing as a legitimate transportation service with new regulations. It was seen as a landmark victory for ride-sharing and all sharing economy companies. Now, experts say, cities across the country are making room for services that just a year ago were slapped with cease-and-desist orders: Seattle has proposed regulations to legalize, with heavy restrictions, ride-sharing services, and Denver recently added public parking spots without meters for car-sharing programs.

"The most surprising thing is how fast it's gone from crazy idea to obvious," said Sunil Paul, chief executive officer and co-founder of Sidecar, a San Francisco-based ride-sharing service.

Still, Orsi cautions that public policymakers must wrestle with difficult health, taxation, safety and other issues in clearing the way for the new sharing economy services. What happens, for example, when ride-sharing cars crash, when rented homes are vandalized or when boutique hotels crop up in quiet residential neighborhoods?

"That's going to put pressure on the policymakers to try to understand this, and try to understand what is their role relative to innovation," said Susan Shaheen, director of innovative mobility research at the University of California-Berkeley Transportation Sustainability Research Center and an expert in car sharing. "They have a role in terms of public policy, but they have to balance that with not stifling innovation."

In the coming year, ride-sharing companies Sidecar and Lyft will have to undergo vehicle safety checks and audits by state authorities. Meanwhile, ride-sharing company Uber awaits a state ruling on how its black car service, which dispatches limousines or high-end sedans to passengers, will be regulated. How the regulations unfold in California could determine how other cities and states regulate the industry, and whether cities that have pushed out ride-sharing — including Philadelphia, New York and Austin, Texas — will change their minds.

Advocates of the sharing economy argue that it makes better use of resources and creates jobs. In a market with about three job seekers for every available job, and middle-wage jobs harder to come by, the opportunity to be gainfully self-employed is welcome and attractive to many.

Kathleen Ensign, of San Francisco, began selling clothes about two years ago on Poshmark, a Menlo Park, Calif.-based fashion-sharing platform. Ensign, a fashion blogger who works at The Gap, makes about $300 a month selling clothes through Poshmark. She used to haul her used clothes — she often buys items to photograph for her blog and wears them just once or twice — to consignment stores on Haight Street, where she'd get 30 percent of whatever the clothes sold for. On Poshmark, she keeps 80 percent.

"I can price the items," she said. "I have much more control."

But the sharing economy also comes with costs. Shaheen noted that Bay Area public officials will have to weigh decisions such as designating public parking for car-sharing services or occupying public or private property for a bike station. The Bay Area Air Quality Management District helped launch a bike-sharing pilot last year, and the $11.2 million program is funded by public agencies including the Metropolitan Transit Authority.

"It's the public providing a better service for the public," said Damian Breen, who oversees the program at the air district.

Now that regulators and consumers are paying attention, and public dollars are involved, the pressure grows for the sharing economy to resolve lingering security concerns and lawsuits. Airbnb, which launched in San Francisco in 2008 and lets people list and book vacation accommodations around the world online or on a cellphone, continues to face allegations of tax avoidance and concerns about homes being vandalized, even as the company settles into a snazzy 72,000-square-foot headquarters. Uber, Lyft and Sidecar, meanwhile, still face lawsuits from cab companies and drivers.

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