Apps are making us criminals

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Almost every week you read in the news about another taxi driver protest against Uber and its drivers. Taxi drivers go on strike, some rage against Uber and attack the drivers or damage their cars.

Similar protests – albeit not yet as violent or large – have been made against Airbnb for its effects on local property values and changing social conditions like the loss of rental properties.

These are just two of the apps whose effect on our society and culture are challenging laws and policies. There are others now that attempt to clone the success of their competitors with similar service (like Lyft and Homeaway – but I’ll concentrate on these two as examples of what can and does happen).

And in the process making criminals of its users.

That’s right: using these apps, both as a service provider for the companies and a user of those services often breaks existing laws, such as zoning or licensing. Renting your home for short-term rentals through Airbnb, for example, is illegal in many Ontario municipalities – including Collingwood – because zoning bylaws prohibit short-term rentals in residential areas.

Municipalities worldwide are increasingly challenged by these and similar programs that function counter to municipal bylaws, policies and operations. And they eventually cost taxpayers money.

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It’s not a small deal. These can hurt our economy, kill jobs, and put people and property at risk. The corporations that operate them don’t give a shit. They’re too busy laughing all the way to the bank every time you use them.

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These apps are changing the way people deal with many elements in their lives, like transportation (1), through the power of networking. But while they may offer convenience, they ignore many municipal functions, laws and operations such as licensing, taxation, inspections, zoning, health and safety, and, more importantly fees that help pay for municipal services we also depend on.

Consumers may be happy with what they see as the short-term gain of lower costs or revenue, and the lack of red tape, but the lost municipal revenue will eventually have to be recovered – mainly through higher taxes and increased user fees – or services will be cut. It’s a trade-off that benefits only the few – and, of course, the multi-billion-dollar corporations who publish these apps.

That’s right: Uber is worth an estimated $50 billion, and has the Koch Brothers as investors. Aribnb is worth more than $25 billion, more than most hotel chains, and is being funded by a Chinese fund manager, among others. No wonder taxi companies or hotels don’t have the money to fund competitive apps: they aren’t backed by billionaires or offshore hedge funds.

These aren’t little-guy startups or struggling entrepreneurs. They’re big, rich, multi-national corporations which don’t give a shit about local laws, ordinances, workers, safety or local conditions any more than the NRA cares about the victims of mass shootings. They only care about profits. Period.

Consumers seldom consider the grassroots backlash that might occur when using these apps foment unwanted, negative or unexpected changes to working conditions, the nature of neighbourhoods or condo units – which rowdy temporary visitors or unplanned traffic (2) can do. Even religious problems can arise in some nations! (2a)

Even when uses go smoothly – and to be fair, most appear to – there are many other horror stories (3) to match them. What could possibly go wrong in an uninsured, unregulated, untrained, unlicensed service?

Pretty much everything.

But the corporations’ executives don’t have to deal with the problems they create. They don’t have to face the taxi riots, the renters being forced out, the victims of accidents, the tickets or the shaming: they can sit back in their ivory towers and count their money while the people on the street take the harassment and pay the fines.

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Not only are municipalities feeling the pinch on revenue: workers and employees who depend on public use of existing services – hotels, bed-and-breakfasts, private parking lots, the travel industry and taxis for example – are suffering loss of income and even loss of employment. (4)

Uber rates, for example, are typically lower than comparable taxi rates, although Uber rates may increase opportunistically at peak times or during transit strikes to take advantage of stressed commuters (5).

So who doesn’t want to save $5 or more on a taxi ride no matter what it really costs our municipality? Who cares if it hurts someone’s business or makes taxes go up? or it makes someone else lose their job?

We live in a culture where gratifying our own needs tops any social, moral, legal or ethical concerns. The people who act on behalf of Uber and Airbnb see it as a way to make extra – and perhaps untaxed and unreported – income. They seldom care that it means someone else is losing theirs. It’s all about me, me me.

We’re taking a lesson from the executives of these corporations: we now don’t give a shit about our fellow human beings, either. Capitalism at its finest.

Lost revenue, however, can mean more people resort to unemployment insurance or even social assistance to survive. They put more pressure on food banks and subsidized housing. Which means that taxpayers – YOU – pick up the costs.

You don’t save when you chose Uber or Airbnb or other apps like them: you just pass the costs onto the rest of us.

The competition for income and employment, however, has generated a backlash against the corporate app owners and it’s a growing trend as the world tries to come to grips with the problems.

As of Oct. 5, 2015, Uber faced 173 international lawsuits. (7)

A $400 million class-action suit was recently launched against Uber on behalf of Ontario’s taxi drivers over lost income (6). Another, similar lawsuit was launched by a taxi union in Britain to demand Uber drivers in the UK receive higher wages and benefits (7a). France successfully took Uber to court to stop its service in that nation (but Uber is still lobbying for access to the French market). (25a)

But violence has broken out, too. In Mexico City, taxi drivers rioted and attacked Uber drivers and their cars (8). Other cities – including Paris – report similar anti-Uber riots. (8a).

Who pays for the extra policing to break up those riots? You, the taxpayer, of course. Who pays for the damage done to Uber cars by the protesters? You, if you’re a passenger in one when an anti-Uber riot breaks out… saving $5 on a cab ride might cost you $250 or more. Yes, it’s in the fine print of the contract you agreed to. (8c)

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Who pays for damage to your home or property if a renter damages it? Or steals your property? Or won’t leave and you need legal action to force them out? You do.

Municipal staff and elected officials are trying to cope with the multitude of impacts these apps are having, not simply loss of revenue. Increased traffic and congestion in residential neighbourhoods has been cited as a potential problem with ride-sharing apps. So have safety – for both the drivers and passengers. (9)

After all, taxi drivers are trained, tested, and carry heavy-duty insurance for their service. Uber drivers get a 15-minute online lesson in how to use the software. Which would you trust with your safety?

And most personal car insurance policies specifically state that you and your passengers are not covered if you use your vehicle for hire, so any accident won’t be covered.

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A 2014 report by the New York State Attorney showed 72 percent of Airbnb’s rentals in that state violated state zoning or other laws (10). New York City has been cracking down on violators (10a).

Short-term rentals are illegal in many municipalities across Canada, too. But residents are unlikely to read local zoning bylaws and thus are probably unaware that they have violated them. That, however, is not an argument in the eyes of the law. (10a)

But why take the time investigate to see if renting your home is illegal if it makes money? Why should real estate agents tell their house-hunting clients their planned Airbnb use is illegal, if it might threaten the loss of a commission? Our self interest matters most, right? Me above all else, above everyone else, right? (although this realtor makes some good points about issues with Airbnb).

The effect of such rentals may be unexpected and highly negative, especially on the neighbours: additional noise, traffic, and an influx of strangers always upsets the local ecology. They may affect property values or the reduce the availability of local rental stock (driving up rents of the remaining stock in the process) (11) (12).

In New York City, real estate listings in neighbourhoods popular with Airbnb users have dropped 10 percent, as owners switch to renting their units under Airbnb. (13).

Condo dwellers are clashing with unit owners renting their spaces out in violation of condo agreements, creating volatile confrontations with the other owners. (13a)

Municipal bylaw enforcement is often based on a complaint system, which depends heavily on the residents to call in complaints of infractions (14). This puts a heavy onus on residents to be the municipality’s watchdogs and inform on their neighbours. Apps like Airbnb have already created conflict between neighbours in some Canadian communities. (15)

These and similar apps serve the shared, collaborative or on-demand economy (16) – they are also part of the underground and untaxed economy, which is basically the illegal economy – that has arisen over the past two decades since the internet was launched. It’s money that flows between consumers and service providers ignoring the ugliness of taxation and reporting.

But as I said, it’s a deceptive economy that simply downloads the real costs onto the taxpayers while individual pockets are being lined. Your taxes pay for safety, security, services, health care, education, infrastructure. Your profits or savings from an app service contribute nothing to the community at large.

To date municipal attempts to control these apps or slow their growth have generally failed. Even the USA’s largest city, New York, backed down from its attempts to stem Uber’s expansion. (17)

The political challenges between these corporations and municipalities are often positioned as a battle between the rights of the individual and the controlling, big, bad government: a David-vs-Goliath contest. The consumers are portrayed as the victims, the city as the bully. But seldom do the arguments on behalf of the apps or their users address such issues as consumer safety, health, liability, security, noise, traffic, insurance, nuisance and simple lawbreaking.

Consumer protection from false claims and misleading ads, too, is an elephant-in-the-room issue, often overlooked or avoided in the defence.

The publishers have mastered Orwellian Newspeak in their arguments: they frame it as a battle between freedom and oppressive bureaucracy, new technology and old systems, between young and old – but it’s really a battle between corporate profits for the few and municipal services for the many.

Libertarian websites tout the apps’ publishers as innovators who think “outside the box” – not devious and misleading, or as lawbreakers. (18) They see the money, they see the dividends paid to shareholders – profit being their only measure of success – not the results in the neighbourhoods and towns.

Print articles praising the laissez-faire nature of the app services usually ignore workplace safety, wage and benefit issues, and the exploitation of workers.

In part, municipal failure to effectively manage these and other apps stem from the lack of adequate tools to deal with multi-national corporations headquartered outside their borders, often outside the country. The legal costs can be sufficiently staggering to deter small municipalities from entanglement.

Many infractions, too, simply go unpunished because they are unreported (neighbours may be reluctant to turn one another in…), or because the costs to enforce the many municipal bylaws is simply too high for bylaw to be effective in policing any particular area. (19)

In Alberta recently, Uber an executive shrugged off concerns about its legality, saying the laws don’t apply to them. (19a) They make their own laws, it seems, outside the democratic process. That isn’t unique to Uber, of course: in the age of Rampant Capitalism, multi-nationals owe their loyalty to no nation, let alone municipality. Their sole allegiance is to profit.

In part it’s also because the corporations behind these programs are hugely profitable and savvy enough to swing hefty political muscle and legal clout in any fray. New York’s mayor and council found themselves the target of Uber’s celebrity attack ads and powerful lobbying. (20)

In London, attempts to legislate Uber and similar services have been met with scathing criticism in the media by pro-Uber writers who glorify the services but ignore the issues. (20a)

It can become a nasty PR battle that casts municipalities and their politicians in a very bad light. Trying to protect the greater good makes you look like you’re against the individual. You can hear the executives laughing as politicians sputter their arguments for legality on the news.

Consumers have a choice, of course. When you choose to use the apps, you’re choosing higher taxes and user fees for everyone. Thinking about the greater good is a difficult lesson to teach a generation schooled on self-entitlement and self-interest.

Municipalities – governments in general – are generally slow to respond to technological developments at the best of times. And few geeks familiar with emerging technologies get elected to municipal councils where they might be able to advise or give heads-up before problems emerge.

Only the largest municipalities can afford to develop their own apps to provide services consumers want that complement or compete with private apps (21), so municipal response to change becomes based on enforcement, and thus inevitably confrontational.

Yet there are clearly advantages to the municipality to what some of these apps can accomplish if harnessed effectively. Uber’s carpooling option can help reduce commuter traffic congestion and reduce DUI deaths (22). Airbnb and rental services can help draw visitors and tourists who will spend their vacation money in the municipality (however, at the expense of hotels and motels).

Ride-sharing can take the pressure off over-crowded downtown parking lots (and don’t we promote car pooling?). Uber’s competition for fares has driven down taxi licence costs in some cities (good for the drivers, not necessarily the municipality). (23)

The best path to find accommodation mixes sensible, enforceable management with the recognition that absolute control is impossible and change is inevitable. But not at the expense of safety. Why shouldn’t Uber drivers have to take the same lessons and tests as taxi drivers? Why shouldn’t Airbnb home owners have to have the same fire inspections, and meet the same health and safety regulations as hotels and motels?

Of course they should, because if accidents occur, municipalities always get sued along with the drivers or homeowners, for not upholding bylaws or standards. Thanks to joint-and-several-liability laws, municipalities usually end up paying the lion’s share of any court settlement – millions of dollars – even if they had no part in the transaction. Which has to be paid by your taxes.

Meanwhile, the corporate execs buy another yacht or jet on their dividends, and laugh all the way to the bank.

San Francisco, Philadelphia, Jersey City and Amsterdam are among the cities which have passed legislation considered friendly to rental apps like Airbnb (24), but although they all differ, they they are not free passes to operate without controls, licences or fees. Other municipalities are grappling with similar laws. (24a)

San Francisco requires Airbnb to collect city occupancy taxes which it remits to the municipality. (25) In San Francisco owners can rent out a maximum of 90 says a year; in Philadelphia it’s 180 days.

This, however, still requires additional monitoring and enforcement by municipal staff (25a). Few municipalities have the resources to monitor all possible infractions of their bylaws already: these apps add more work and eventually more costs to municipalities.

Municipalities have the responsibility to oversee the interests of the whole community, not the private income of a few, and certainly not the corporate profits of some foreign businesses. Municipal leaders should start discussing the issues before problems become critical and generate more confrontation between users and government. (26)

Municipalities also need to let the public know what bylaws might affect them – and get them charged – if they use such apps. Get the public engaged in the debate. A PR campaign in local media explaining rights and responsibilities – as well as legalities and potential fines – should be started so no one can claim ignorance of the consequences.

In Paris, for example, where Airbnb guests passed the half-million mark in 2014, the fine for running an unlicensed tourist rental if caught is 25,000 Euros! (25a).

Municipalities need to explain the costs and legal trouble to potential providers who subscribe to such services.

Embracing technology and the changes it brings doesn’t mean giving in to bullying corporations. Liability, public safety, security and health must be paramount in any negotiation or discussion. But maybe some changes to licensing, zoning and fees can be brought to the table for reconsideration without compromising municipal authority or standards.

Keep in mind that crafting new policies and laws to accommodate these changes will also cost taxpayers money. (25b)

Maybe the laws need to be extended to require independent service providers using these apps to meet the same qualifications, licensing and approval conditions as equivalent to similar commercial operations. And maybe providers of such services such as short-term rentals should be taxed at a higher level than residential properties to help recover some of the lost income. Fees and taxes should be collected as they are on comparable commercial services.

That would at least be fair and equitable to the rest of the community.

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Sources:

(1) hbr.org/2015/07/what-the-auto-industry-can-learn-from-cloud-computing

(2) www.thestar.com/business/2015/03/18/noisy-airbnb-renters-raise-ire-of-willowdale-residents.html

(2a) www.moroccoworldnews.com/2015/10/170238/moroccos-religious-law-poses-challenge-for-airbnb-guests/

(3) www.huffingtonpost.com/2014/07/29/airbnb-horror-stories_n_5614452.html

www.nytimes.com/2015/08/15/your-money/airbnb-horror-story-points-to-need-for-precautions.html

www.oddee.com/item_99421.aspx

ww.thedailybeast.com/articles/2014/11/19/the-ten-worst-uber-horror-stories.html

www.whosdrivingyou.org/rideshare-incidents