LA Needs To Be A-OK With Innovation

A response to The Los Angeles Times editorial, “L.A. is A-OK with taxing illegal Airbnb rentals”

Innovation often precedes government regulation. The car was invented before the driver’s license and Orville Wright flew from Kitty Hawk before the Federal Aviation Authority was created. Likewise, new innovations from Silicon Valley, such as ridesharing and home sharing platforms, pre-date regulations, even if black cars and short-term rentals have existed for decades.

Yet, rather than having an honest discussion about the benefits of these innovative services, opponents try to pit “Big Tech” against community members in an effort to advance regulation that harms innovation.

Even now, a deal to tax home sharing until broader regulations can be agreed upon is being portrayed not as a pragmatic approach that brings millions of dollars to benefit all Angelenos and aligns government and innovation, but as akin to taxing illegal drug trafficking.

While a recent piece admits that “renting out a room on Airbnb isn’t as bad as peddling heroin or killing sharks for their fins,” the metaphor alone both connects these activities and completely misses the issue.

Worse, this narrative distracts from the true motive of opponents. Advancing harmful short-term rental regulation and fighting the lodging tax deal is designed to kill home sharing to the benefit of hotels. The arguments fail to recognize the core value proposition of home sharing platforms; they’re an engine of opportunity that many Angelenos require to make ends meet, pay their mortgages, save for their kids’ education, and participate in the local economy.

The real victims of an effort to stop home sharing in Los Angeles would be LA residents and businesses who rely on the income from home sharing to get by. In fact, the vast majority of home sharing dollars go to homeowners and hosts and then into the local community and local businesses.

Seventy-four percent of homeowners who rent their home as a short-term rental generate enough rental income to cover 75 percent of their mortgage, and another 10 percent of hosts said that their income from hosting has saved them from losing their home to eviction.

Rental opportunities are often offered in areas underserved by the hospitality industry, allowing local businesses to benefit from tourist spending. In 2013, short-term rentals generated $1.4 billion of economic activity in LA.

It’s unsurprising that 72 percent of LA voters support making short-term rentals legal in the city. Critics are failing to understand the magnitude of what’s truly at stake.

LA must be a place that welcomes all types of home sharing. All varieties of short-term and vacation rentals, including second home vacation rentals, have been a vibrant part of the Los Angeles economy for decades, and distinctions only harm the local community that relies on home sharing income. A regulation that overly restricts short-term rentals belies logic and fails to recognize the value the home sharing community has provided Los Angeles since before the internet. But the way LA has approached internet-enabled innovation in this space leaves much to be desired.

For instance, the ordinance being discussed by the City Council institutes a new liability regime on platforms, making them the de facto police force online. Enforcing the full legal compliance of all listings on platforms at scale, like Airbnb, HomeAway, and even vacation rental advertisements offered by the Los Angeles Times is operationally impractical given the sheer number of jurisdictions in which they do business.

Not only is this liability a potential violation of federal law, but it creates new burdens on internet-enabled businesses not asked of businesses offline. For example, the ordinance requires that internet platforms violate consumer privacy by requiring them to blindly hand over data to the government without any sort of due process.

Los Angeles cannot be a place that wants to welcome tech companies to Silicon Beach while simultaneously disallowing them from competing and doing business here.

By allowing platforms to pay their fair share of taxes and be part of the local community, LA is signaling that it’s embracing the tech industry. Next up is a regulatory framework that works for platforms and Angelenos over the long run.