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Amid surge of the cut-rate 'sharing economy,' a backlash grows

They call it the 'sharing economy': people going online to rent out rooms in their homes, set up informal ride-shares, or repair car brakes in your driveway. Even as the trend booms, it is meeting resistance from established businesses, city officials, and even neighbors. Can they stop it?

By Staff writer / September 28, 2013

A taxi driver sits on the hood of his car during a July protest in San Francisco against ride-sharing programs, which taxi drivers there say are operating illegally.

Beck Diefenbach/Reuters



(Updated Sept. 29 3:30 EDT) June Suwara is getting to know her neighbors these days, and she's not happy with some of them. The retiree is among a group of homeowners in Silver Lake, a Los Angeles suburb of some 30,000, protesting the growing number of residents renting out their homes on a short-term basis.

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"They're ruining a nice, quiet neighborhood," says Ms. Suwara, pointing to a home across her street where the owners have moved out and new renters come and go every two or three days. "It's illegal, and they're making big bucks, and they don't even live there anymore."

But these homeowners – some earning thousands annually – do not see themselves as lawbreakers so much as pioneers in what has been dubbed the new "sharing economy." Mostly unregulated and unlicensed, a nascent sharing industry is being touted as a new mode of collaborative consumption in which private citizens from Seoul to Silver Lake are leveraging personal assets such as homes, skills, and cars on a person-to-person basis.

The movement is fueled by ventures such as Uber, YourMechanic, and Airbnb that use mobile phone applications and online listings to connect "customers" with providers, offering services ranging from ride sharing to an overnight stay in a local spare bedroom to a brake job performed in a customer's driveway.

As the sharing economy grows, cities and businesses are taking note – and raising questions. The fees for sharing ventures are far below what the "official" services might cost, partly because many don't pay taxes, fees, or insurance. San Francisco loses some $1.8 million annually to lost taxes, according to a recent study. And New York City disputed a short-term room rental by Airbnb host Nigel Warren, initially fining him $7,000 (later reduced to $2,400) before a city agency on Sept. 26 found in Mr. Warren's favor and rejected the fine.

With the sharing economy facing increasing scrutiny and controversy nationwide, the question is whether it can adapt when subjected to regulations, or whether mounting oversight will throttle the flexibility that has helped it flourish.

These conflicts are a familiar sign of clashing economic models, says Said Elias Dawlabani, author of "Memenomics: The Next-Generation Economic System." To Mr. Dawlabani, this new model represents a structural shift. Just as the Internet reshaped the music and book industries, for example, it is convulsing other industries by putting more power in the hands of individuals.

"People have to adapt their revenue-generation models to the new reality or become obsolete," he says via e-mail. Business analyst Stephan Liozu calls it a "big bang disruptive model" that has the potential to leave those who do not adapt "on the sideline."

The acceleration of the change and the innovation process is "phenomenal and has never been so impactful," he adds. "It matters to pay attention as other legacy sectors will likely be impacted very quickly."


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