Over-regulation of Airbnb is Bad for Startups, Property Owners & Politicians

Politicians protecting local companies now comes at a cost to homeowners in the sharing economy

The best scenario for tech companies forced to deal with local government is this: City councils exhibit self-control and avoid over-regulation, leaving room for entrepreneurs to to create and mold big ideas into real companies.

In some unfortunate situations local governmental bodies will go out of their way to undermine and stifle innovation by using the legislative process to favor incumbent companies in sectors facing new competition. The most obvious case-studies in this type of government collusion are in the communities where Uber has been disallowed from operating.

Over the last decade, as tech companies have sprouted up here in Chattanooga, TN, the powers that be locally have mostly applauded the idea that next-generation tinkerers, marketers and creatives would re-locate to our quaint mid-sized Southern city. Uber faced some early pushback, but now hundreds of locals earn extra income while also keeping Chattanooga safer from drunk drivers.

The tides turned last week, though, when the Chattanooga City Council rejected its own proposed regulations regarding “short-term rentals,” leaving Airbnb and others in a damaging gray area. Despite places like Chattanooga with threatened local hotel groups, Airbnb has grown to a valuation that equals the market caps of Hilton and Hyatt combined — $30 billion.

Technically, using Airbnb to list a home, apartment or room in Chattanooga is now illegal. But with a raging inner-city gang problem, it’s yet to be determined if local law enforcement will actually spend time enforcing the issue. Apparently, beginning with R-1 zoned properties (residential neighborhoods) the city council wants to bust young families looking to generate a little extra income by offering their residence through sites like Airbnb.

For many reasons, this is a move that will be ultimately detrimental to tech communities as well as elected officials’ political careers.

First and foremost, if the intention is in any way to use regulation to protect incumbent players like local hotel operators or the Visitor’s Bureau, which benefits greatly from hotel taxes, that is unethical. Secondly, the clumsy optics of being the “Gig City” on one hand, but the city that bans one of the titans of the sharing-economy on the other will make it easier for outsiders to stereotype Chattanooga as just another regressive small town fearful of change.

Lastly, by over-regulating or banning Airbnb, politicians are keeping property-owning Chattanoogans from reaping the greatest benefit of the new economy: additional income. I personally know people who have been able to rent rooms, or even their entire home, in North Chattanooga at convenient times of year and created $5,000+ in additional annual income.

What a time to be alive when you can pay for your vacation by allowing people to stay in your home while you’re gone.

Unless you happen to be alive in a place where politicians know best.

City councilmen in forward-thinking places like Chattanooga need to be leading the effort to provide baseline regulation to ensure that short-term rentals are safe and clean so that local property owners and tourists alike get to share in the upside of the sharing economy.

Agree? Disagree? How have you and your city been affected by Airbnb? Let us know in the comments.