Talking Point: Government must get out of the way of bold new market

Greg Barns gets excited by the potential of the brilliantly disruptive Airbnb movement.

Anna Yip, 31, from Surry Hills, uses website airbnb to earn extra income at her Surry Hills apartment. Anna "welcoming" guests with a cuppa and the keys.

GOVERNMENT is the problem, said newly minted US President Ronald Reagan in 1981. This Reaganism is certainly true in the case of the tourism and accommodation industry in Tasmania.

Hobart City Council, and no doubt other local governments in this state, are heavying homeowners who are taking advantage of the brilliantly disruptive technology called Airbnb.

Hobart council has no doubt been captured by vested interests scared of the impact of Airbnb. The hotels, motels, B&Bs and others have had no competition from private individuals until now. Vested interests are telling local government to bully homeowners who offer rooms and houses to Airbnb customers.

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That the planning laws of local government are written to suit the self-interest of the establishment tourism and accommodation industry is obvious. Take this example. If I offer to allow people to stay in my home and don’t charge them for it, I would never come to the attention of local government. Or if my relative from the mainland comes to live with me and pays rent for a room, likewise local government busy bodies won’t come near me and nor will sniffy spies dob me in to eager bureaucrats who love nothing more than exercising power.

But Airbnb represents a direct threat to economic self-interest and therefore the Hobart council will try to drive me out of business.

It’s ironic those Tasmanian politicians and commentators who think of tourism as the latest incarnation of economic nirvana for Tasmania stay quiet when this newspaper reports, as it did two weeks ago, that Hobart council was determined to make life difficult for the most innovative and welcome tourism and accommodation industry development in decades.

MORE: AIRBNB BUILDS STATE’S BRAND, SAYS LOCAL OPERATOR

Local Airbnb host Jill Saunders at her property in Lindisfarne.

Of course the reaction of the regulators and their self-interested friends in industry is futile. Like Uber in the taxi arena, Airbnb is here to stay. It offers consumers a choice and is giving homeowners a chance to earn an income by letting out spare capacity.

But what if they don’t have wheelchair access or insurance say the hotel lobby. So what? The market assumes, unlike regulators and those who profit from government intervention, that consumers are smart and can make a choice as to whether they will stay in an Airbnb place or a traditional hotel.

No doubt there will emerge, as there does in every market, price and quality differentiated offerings. Some homeowners may wish to charge a premium on the basis they have wheelchair access or they offer occupiers’ insurance to cover guests. Or they have a spare parking space. But there is no need for the dead hand of government to force people to offer all these add-ons because the hotel and accommodation industry wants to create barriers for competition.

The disappointing aspect of the Hobart council’s tactics and that of the tourism and accommodation industry is that Airbnb increases economic activity. A recent paper by Roberta Kaplan and Michael Nadler published online by the University of Chicago Law Review notes that Airbnb does not enter a market at the expense of the existing industry. Airbnb grows the pie. In peak times and in small places like Hobart where a conference or an AFL match can fill available hotel, motel and B&B rooms, Airbnb offers expanded capacity. A study focusing on the busy Texas market found a 1 per cent increase in Airbnb bookings results in only a 0.05 per cent reduction in hotel bookings.

The paper also notes Airbnb improves housing affordability – at least half of those letting rooms through Airbnb are using the income to make mortgage payments.

Kaplan and Nadler conclude that “because the threat of enforcement actions can have a chilling effect on start-ups and their users, state and local government officials should consider how their actions may affect burgeoning businesses. Officials should encourage sharing the economy’s growth through collaborative efforts rather than seek to protect incumbent businesses.”

The State Government ought to deregulate the industry and roll back the red tape on existing players.

If Tasmania presents as friendly to the sharing economy and the technologies that are developing, this will prove attractive to the IT industry globally.

Government should not stand in the way of technological innovation that revolutionises industries, nor curtail consumer choice. Tasmania needs Airbnb.

In the meantime, if you get a harassing letter from your council officer because you offer a product on Airbnb, tell them to go away. Government is the problem, remember.

Lawyer Greg Barns was an adviser to NSW premier Nick Greiner and the Howard government. He was disendorsed as the Liberal candidate for the seat of Denison in 2002, and later joined the Australian Democrats. In 2013, he was the Wikileaks Party campaign adviser for the federal election.