For Uber and Airbnb, New York City turns foe
New legislation may hamper them in a critical market
NEW YORK: For Uber Technologies Inc and Airbnb Inc, New York City has been a cradle of growth, with its 8.5 million residents and burgeoning tech startup scene. But the high-flying tech firms are also finding that their biggest US market is generating its own obstacles.
This week, New York has passed legislation that could hamper the Silicon Valley heavyweights at a crucial moment as they prep for potential initial public offerings expected as early as next year. Some investors and executives of the companies have privately expressed concern that New York’s restrictions could spur other cities to follow suit.
On Wednesday, despite weeks of lobbying by Uber, rival Lyft Inc and others, the New York City Council passed a bill to freeze new issuances of ride-hailing licences, a measure Mayor Bill de Blasio embraced.
And on Monday, de Blasio signed legislation that would require Airbnb to disclose to the city detailed information about its hosts, which could wipe out a share of listings by cracking down on illegal rentals and spooking other hosts from listing.
For now, the hold on new ride-hailing licences might not be a crushing blow: The freeze is for one year. And New York is unusual in that it requires licences, unlike other cities that let drivers simply get approved by Uber.
But New York’s latest measures show how regulation remains an immense risk to tech stars’ financial health. Roughly a decade after these companies were founded, cities around the world are still wrestling with exactly how to measure and manage their societal impact.
“These companies have tried to pre-empt a lot of regulation by reaching deals with states, but this move by New York really could empower cities and local governments across the country to find new ways to regulate them,” said Veena Dubal, an associate professor at University of California’s Hastings College of the Law.
The San Francisco companies have long fought regulation, especially early on as they barrelled into new cities, flouted local laws and sparred with powerful taxi and hotel lobbies.
They have overcome some of the regulatory onslaught – Uber is now in nearly 80 countries and took in more than US$7bil in revenue last year, while Airbnb is in about 190 countries and brought in US$2.6bil in sales.
Investors have valued Uber at around US$70bil on the promise its app will become the one-stop shop for urban transportation, driving down fares and reducing pick-up times enough to convince people to ditch their cars and hail rides – or rent bikes and electric scooters.
There are now about 80,000 ride-hailing vehicles licensed by New York, up from 25,000 just three years ago.
But the city argues that a lack of regulation for ride-hailing, compared with the fixed supply of yellow taxi medallions, has allowed a proliferation of vehicles to clog city streets. It capped new ride-hail licence issuances for at least a year to study traffic patterns; if it becomes permanent, Uber and Lyft couldn’t bring more drivers on the network to meet demand. In addition to the year-long cap on new ride-hail licences, the city also will set a minimum wage for drivers, with the companies on the hook to fill the gap if drivers don’t meet the threshold. Seattle, which sought to authorise contract drivers to unionise, is also considering a minimum wage threshold for drivers there. —WSJ