The City of Vancouver will hold a public hearing on Tuesday evening regarding its proposed regulations for short-term rentals. Vancouver is one of several local governments in Canada wrestling with how to regulate Airbnb, Uber, and other services in the so-called “sharing economy.”

Erez Aloni, a professor at UBC’s Peter A. Allard School of Law, researches and writes about the challenges of regulating this economy.

Your research has found that not everyone uses Airbnb and Uber in the same way, and that two types of transactions are particularly important to distinguish. What are they?

The first is what I call work in “increased excess capacity” — that is, people casually monetizing what would otherwise be wasted or underutilized goods. For example, if I go on vacation twice a year, instead of leaving my apartment empty, I use platforms to lease it to somebody else, temporarily. That’s one type of activity. The other is people using these platforms to do something very similar to what conventional service providers do. If I buy a car and use it as something equivalent to a taxi, and work three-quarters of my time for Uber or Lyft, then I’m not leveraging my excess capacity — I am not using pre-existing infrastructure, goods, or time — I’m just doing the work that conventional service providers do, minus the regulation. Which means that I can provide similar services or goods for much cheaper.

How are regulators dealing with these nuances in jurisdictions you’ve studied?

The approaches vary widely – from banning such activities altogether to taking a very permissive approach – but the general regulatory regime that emerges is one that tries to capture the distinction I made: legalizing work in increased excess capacity and banning commercial work done via platforms. So how do you do it? For short-term rentals, you can limit the number of nights people can rent it out short term. San Francisco, for example, has a 90-day limit rule. Vancouver proposes something more innovative, and that is trying to distinguish between principal residents and non-principal residents. This approach aims to restrain the potential harm from commercial work, while still allowing those who do it casually to benefit from the extra income. So far, I don’t think there’s one that has been very successful. San Francisco has enacted an ordinance that prohibits short-term rental platforms from posting units from lessors who haven’t registered with the city, so they are now going to work with the city. Without the cooperation of the platforms, I don’t see how you are going to enforce it.

What does available data say about how much these platforms are being used for the more traditional, professional-type activity?

Companies don’t provide full access to their data, so the data we have is partial, and is often provided by interested parties. If you look on AirDNA.co – a website that tracks Airbnb data – you see that Vancouver currently has around 3,700 active hosts, but 22 per cent of them have multiple listings. The city’s data shows that last year, three per cent of properties were rented for 10-12 months, and nine per cent were rented 7-9 months. So, around quarter of the units are rented commercially. What’s important to understand is that Airbnb derives significant revenue from these commercial players. A study commissioned by the American Hotel & Lodging Association — an interested party, for sure — showed that mega-operators renting more than three units constituted 6.5 per cent of hosts and yielded almost 25 per cent of Airbnb revenues in 14 cities that were examined.

So what is the central challenge for regulators?

There are multiple constituencies and interests at stake. All of them are important. The hotel industry pushes one way, the taxi industry pushes another way. Homeowners say, “Look, the price of housing is so expensive. Allowing us to rent every once in a while helps us pay our mortgage.” Uber drivers say it brings them extra income, supports them with a flexible job, and helps them stay in the city. Consumers love the choice, being able to see a town through the eyes of a local or paying less for their rides. But neighbours may be justifiably concerned when the apartment next door is rented constantly and there’s loud music and unfamiliar faces in the hallways. Others are concerned that the commercial use of short-term rentals exacerbates a city’s rental shortage. So the challenge is to balance all those interests, efficiently distinguish between the different types of activity, and then enforce regulations, especially when dealing with a high number of small-scale transactions.