the uber app. | ap photo/mary altaffer by dana rubinstein 10/27/16 06:54 am edt in new york city, uber has flourished. by contrast, its tech sector compatriot, airbnb, just suffered a nasty blow, courtesy of the state legislature and governor andrew cuomo, who last week signed a law that could seriously undermine the company<u+2019>s operations in the five boroughs. as of nov. 1, thousands of airbnb hosts could face steep fines (up to $7,500) for advertising entire apartments on the home rental platform. depending on how the new law is enforced, it could have a serious chilling effect on a significant portion of airbnb's operations in new york city. story continued below so why did two tech industry giants with multi-billion dollar valuations that purport to partake in the <u+201c>sharing economy<u+201d> arrive at such diametrically opposed destinations? why does uber flourish in regulation-heavy new york city, while airbnb encounters so many obstacles? ask smart people in and around both companies that question, and they say, with caveats, that airbnb<u+2019>s problems boil down to two things: entrenched, publicly sympathetic adversaries, and political self-sabotage. when uber sought to enter the new york city market, it had one nemesis: the taxi medallion owners. big taxi, in turn, was (unfairly or not) symbolized by fleet owners like evgeny freidman, a kingpin the attorney general sued for ripping off drivers, and who described the new york city taxi commissioner as a carbon copy of her male predecessor <u+201c>in a little indian dress.<u+201d> (she<u+2019>s of indian descent.) when airbnb entered the market, it drew opponents of a different ilk and level of political sophistication entirely, the hotel trades council most prominent among them. the union representing hotel workers has for years now run a tight, effective political operation, one that donates generously to campaigns, and is adept at developing narratives that play well in liberal, union-friendly new york city. thanks to a union-backed coalition called share better, the press met a steady stream of city dwellers who didn<u+2019>t fancy their next-door neighbors hawking apartments on airbnb to strangers, and affordable housing advocates who argued that airbnb allows greedy landlords to deplete affordable housing stock in new york city, swapping struggling tenants for international tourists eager to pay big bucks for short-term stays. <u+201c>what airbnb wants to do is something that is opposed by broad constituencies,<u+201d> said micah lasher, who worked for attorney general eric schneiderman when he, another union ally, took on airbnb. <u+201c>that<u+2019>s not true for uber.<u+201d> conversely, uber is able to mobilize new york city residents in a way that airbnb quite simply can<u+2019>t. roughly 40,000 new york city residents advertise apartments on airbnb, according to the company. thousands more rent those apartments, but they come from elsewhere and are therefore politically irrelevant. in the week ending august 27<u+2014>the most recent week for which data is available<u+2014>uber-affiliated drivers in new york city provided more than 1.5 million trips, according to the taxi and limousine commission. <u+201c>some guy from stockholm has a lovely stay in an airbnb in new york city, and dutifully sends an email, and some legislator says, 'i don<u+2019>t care what some guy in stockholm thinks,<u+2019><u+201d> said bradley tusk, an uber consultant. at the same time, both critics and supporters of airbnb say it has undermined its own case that it<u+2019>s a trustworthy company by waiting so long to weed out bad actors who use its site in flagrant violation of the law, allowing adversaries to paint airbnb hosts with a broad, unflattering brush. the initial law banning many short-term rentals of entire apartments in new york city when no host is present dates back to 2010. airbnb didn<u+2019>t start culling bad actors from its site until a year and a half ago. it didn<u+2019>t start making the case that its hosts should pay hotel taxes until 2014. it was only last winter that the company publicly said it would try to limit new york city hosts to one apartment in the five boroughs. since june, when the legislature passed the law instituting steep fines for violating the original 2010 edict, the company says it has made the case to lawmakers for an alternative regulatory framework, the framework its chief strategist, chris lehane, outlined in an october daily news op-ed. the company has recently also shown itself more willing to compromise with legislators, acknowledging the failure of its regulatory deal in san francisco and agreeing to what the company says is a more stringent scheme in chicago. (critics say it<u+2019>s too soon to tell how successful the chicago experiment will be.) in the meantime, regulatory hurdles mount for airbnb in new york state <u+2014> hurdles that airbnb has had little role in shaping. that<u+2019>s not how uber played it. people inside and outside of uber will tell you that no city in the united states has succeeded in regulating uber as tightly as new york city has, and in no american city has uber submitted itself to such stringent regulation. related: there is also no u.s. market more valuable to uber. as a result, there is no ridesharing in new york city. rather, uber operates as a slightly updated version of an old-fashioned black car company. it has <u+201c>bases<u+201d> with which drivers must affiliate vehicles. drivers must be licensed and fingerprinted. the company must share data with the local taxi regulator. so far, it has worked. <u+201c>uber wants to work within the regulatory framework,<u+201d> said ben kallos, the upper east side legislator known as the tech guy on the city council. the one time uber had a big blow-out conflagration with new york city regulators, it was able to prevail by targeting another easy-to-demonize foe, mayor bill de blasio, who quite inconveniently for him had taken a lot of money from taxi medallion owners and parroted their rhetoric. "they didn<u+2019>t seem to understand they don<u+2019>t have the same situation as uber,<u+201d> said tusk, who helped manage the anti-de blasio campaign for uber. <u+201c>taxi medallion owners are sympathetic to no one. affordable housing advocates and hotel workers are sympathetic." new york city is also, presumably, airbnb<u+2019>s most important market in the united states. but lawmakers and would-be allies haven<u+2019>t sensed the same willingness to compromise. <u+201c>uber engages with regulators and complies with regulation,<u+201d> said kallos. <u+201c>and airbnb does whatever it wants in violation of the law.<u+201d> about two and a half years ago, airbnb reached out to the real estate board of new york, according to a knowledgeable source. but the two sides didn<u+2019>t start meeting seriously until after the state legislature, in june, passed a bill that would impose fines of up to $7,500 on thousands of apartment dwellers who advertise on airbnb, in violation of that 2010 law. the real estate board was supportive of the hotel union<u+2019>s and affordable housing advocates<u+2019> anti-airbnb position, but it was open to compromise, the source said. more precisely, it wanted landlords to be able to opt out of airbnb. airbnb was willing to compromise, according to both the company and the source. the company signaled its seriousness by sending big guns to meet with the real estate board, including airbnb chief financial officer laurence tosi and belinda johnson, the company<u+2019>s chief business affairs and legal officer, according to the source. then airbnb went and ran ads against a republican state senator backed by the real estate board, sue serino. and the board disengaged. there's some dispute at to what role the real estate industry's ongoing support for the anti-airbnb bill played in the governor's decision-making. airbnb says it only ran the anti-serino ads after it had became clear cuomo planned to allow the bill to become law. either way, he signed the legislation. and airbnb failed<u+2014>despite working with some of new york city<u+2019>s and new york state<u+2019>s most seasoned political hands, from lobbyists like bolton-st. johns, brown and weinraub, and capalino and company, to operatives like bill hyers, de blasio<u+2019>s 2013 campaign manager, marathon strategies<u+2019> phil singer, who was a hillary clinton spokesman in the 2008 campaign, and risa heller, who earned her chops under chuck schumer and david paterson. chris lehane, the company<u+2019>s chief political strategist, worked for cuomo when he was bill clinton<u+2019>s housing secretary. they are still friendly, according to someone who knows both men. the best case scenario for airbnb in new york city in the near-term future is a tenuous one. airbnb<u+2019>s filed a lawsuit that it clearly hopes will at least temporarily halt implementation of the new penalties. it<u+2019>s possible new york city will merely use the new law to police the really bad actors more stringently, and leave the good actors alone. maybe an uneasy detente will take shape in which everyone continues to look the other way while thousands of new yorkers engage in what is technically an illegal activity. maybe hosts won't be frightened by the prospect of thousands of dollars in fines. maybe the legislature, under pressure from new airbnb allies like al sharpton , will amend the law next session. or maybe not. a free synopsis of our pro morning email about new york education policy and politics a free synopsis of our pro morning email about new york energy policy and politics a free synopsis of our pro morning email about new york health care policy and politics a free synopsis of our pro morning email about new york real estate policy and politics our morning email with must-read analysis and breaking news on state news and politics a morning email with must-read analysis and breaking news on city news and politics. a weekly round-up of legislation in city council for politics and policy professionals. a reported briefing on money in politics, executive moves, and trends in communications, lobbying and consulting. our twice-a-week digest of news on courts and the law in new york azi paybarah and jimmy vielkind's must-read briefing informing the daily conversation among knowledgeable new yorkers.
why uber and airbnb met very different outcomes in new york city
dana rubinstein