The Sharing Economy and Discrimination

The sharing economy is a real thing, people. It’s a movement that’s branded itself as a technologically driven, cultural and economic realignment that shuns the excess and waste of generations past in preference for a more collaborative and open sharing of goods and services.

In theory, a sharing economy makes a lot of sense. If you have excess room in your car on your morning commute, why not share the seats? If you’re going to be out of town for a few weeks, why not rent out your rooms? The sharing economy can help eat up some of that waste and simultaneously put a little bit of money in your pocket.

At the same time, the sharing economy can be a bit scary because many of the businesses we associate with the sharing sector circumvent costs and regulations traditional service providers have to comply with. Sometime purposefully and sometimes not, these companies bypass important rules we’ve collectively put in place to ensure that certain negative outcomes do not occur.

Take Airbnb for instance — a website where people can rent out individual rooms, apartments or whole houses for a short period of time. A potential renter can log-on to the site, search a destination and choose from a host of potential properties available. After selecting a property, the website notifies the landlord and facilitates the financial transaction. It’s as simple as that.

Only, Airbnb seems to be mimicking the traditional economy in a very troubling way as early research is showing that property renters on the Airbnb websites are potentially discriminating against black landlords.

How does this happen?

Well, Airbnb allows landlords to create detailed profiles showing images of the apartment, surrounding amenities and… of the landlord herself. With this additional information renters get a feel for who they’ll be doing business with and can select the property that best fits their needs. At the same time, seeing the face of who they may be doing business with opens the door for our implicit biases to creep in and ultimately discriminate against those we have a negative perception of. Earlier this year researchers at the Harvard Business School decided to see if this was the case.

Gathering data from a snapshot of Airbnb rentals in New York City, Benjamin Edelman and Michael Luca collected information on location, size, and quality of the property, as well as perceived race of the landlord. Their results confirmed what you would expect:

We find that non-black hosts are able to charge approximately 12% more than black hosts, holding location, rental characteristics, and quality constant. Moreover, black hosts receive a larger price penalty for having a poor location score relative to non-black hosts. These differences highlight the risk of discrimination in online marketplaces, suggesting an important unintended consequence of a seemingly-routine mechanism for building trust.

Completely unintended, Airbnb creates a marketplace in which black landlords are systematically paid less for offering the exact same product.

The social narrative that all of us are given tells us that blacks are less trustworthy, less professional and less agreeable than other groups. When a renter sees that a property is owned by a black person, subconsciously they react, limiting demand of black-owned rentals, and ultimately pushing down the price of black properties. None of this may be intended, nor is the racism overt, but the end result is the same.

Adding insult to injury, because of the lack of regulation around the sharing economy, Edelman and Luca point out that many of these landlords would have little discernible recourse;

In a litigation context, the posting of names and photos—with nothing more—is unlikely to create liability for platforms such as Airbnb. For example, Chicago Lawyers Committee for Civil Rights Under Law v. Craigslist Inc., 461 F. Supp. 2d 681 (N.D. Ill. Feb. 3, 2006) considers affirmative statements of racial, gender, and familial status preference (“NO MINORITIES”, “No children”) that are plainly unlawful under the Fair Housing Act—but finds that Craigslist is not the publisher or speaker of these unlawful statements since Craigslist does nothing to induce a user to post any particular listing or express any particular preference for discrimination.

In contrast, a similar case against Roommates.com found liability when Roommates.com asked users to describe their age, gender, sexual orientation, occupation and children, and then to answer similar questions about roommate preferences. Fair Housing Council of San Fernando Valley v. Roommates.com, LLC, No. CV 03-09386PA (RZX). But Airbnb’s general-purpose photos fall far short of the specificity of Roommates.com’s requests to its users.

Airbnb disputes the findings of the study, contending that the methodology is flawed and that the researchers are utilizing outdated information. Here’s an additional link to Airbnb’s official FAQ on discrimination.

Regardless, the results aren’t all too surprising. The sharing economy, of course, is not immune to racism; and discrimination in housing existed well before the creation of Airbnb. This is not an argument against the usefulness of such a website nor is it a complaint against innovation.

But it is a something to consider for those who see innovations such as those encompassed in the sharing economy as a “rising tide that will lift all boats”. The economy may change as will the services it provides, yet the subconscious racism that lives within those who participate will continue to have impacts on those unlucky enough to be deemed undesirable.

 

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