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The Rise of the Sharing Economy

Everyday I hear new stories of friends and family offering
rides through Uber, renting out rooms in their home on AirBnB, Uber or selling product on Framestr. while it’s a fairly new way of making money, it’s here to stay. There are obvious changes in consumer practices and
an opportunity for new market entrants to support a sharing economy in Canada.

Why is this happening? It’s pretty clear that Canadians have
become stretched. Debt-to-income hovers at record levels, contract positions
have increased (at the detriment of full-time work), and housing becomes as unaffordable
as ever.

According to a study conducted by PWC, the sharing industry itself is projected
to rake in $15 billion of revenue in 2015, compares to $240 billion for traditional rental services, and $335 billion by 2025.

Such “collaborative consumption” is a good thing for several reasons. Owners are able to leverage what was previously an unused asset, in some cases, even a liability. According to Airbnb, “The typical Airbnb host in
Montreal earns $280 a month, renting out their home 52 nights per year.” Even
more pronounced are the benefits to the city, “Airbnb activity contributed
$55-million to the Montreal economy over 12 months ending last March 2014.”
Research illustrates that travellers using the service stay longer in the city
and spend more money than typical visitors as they roam well past the city
centre.

However, regulators and traditional service sector
businesses are struggling to adapt to the new economy. For example, should
room-renters be subject to hotel taxes? In Amsterdam, officials previously used
Airbnb
listings
to track down unlicensed hotels. In some American cities,
peer-to-peer taxi services, such as Uber and Lyft, have been banned after
lobbying by traditional taxi firms. The danger is that although some rules need
to be updated to protect consumers from harm, incumbents will try to destroy
competition. People who rent out rooms should pay tax, of course, but they
should not be regulated like a Ritz-Carlton hotel. The lighter rules that
typically govern bed-and-breakfasts are more than adequate.

In addition to regulation, there are also complex insurance issues at stake.
Take the case of Tawfiqul Alam, an UberX driver in Toronto, who was T-boned by
a re-right runner while transporting a passenger. The accident sent both him
and his passenger to the hospital and his vehicle was totaled. The real shock
came after; Alam’s claim through his personal insurance company was invalid
because the vehicle was being used for commercial use.

According to Isaac Zisckind, a Toronto personal injury lawyer at Diamond & Diamond, personal auto insurance
policies don’t cover drivers who are transporting passengers for commercial
purposes. Taxi drivers are required to get a special kind of commercial
insurance that is significantly more expensive than personal insurance, but the
vast majority of UberX drivers — Zisckind estimates 95 per cent — don’t have
any coverage beyond their personal insurance.

Like any new disruptive technology, there are growing pains.
It’s hard to imagine where we’d be as a society if we consistently derailed new
technologies created by greater connectivity around the world.

However, the sharing economy is the latest example of the
internet’s value to consumers and it’s hear to stay. Canadians are forced to become more efficient with their assets to make ends meet and the sharing economy will play a large part. This emerging model is
growing up and is a large enough force for regulators and companies to take
notice. That is a sign of its immense potential. Start sharing.