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The Sharing Economy: Developing an Outcome-Based Strategy

Will local governments take the necessary steps to benefit from what the sharing economy has to offer?

Editor's note: This is part four of a four-part series in which Government Technology looks at some ways that local governments are using the sharing economy right now, and what it will take for cities to benefit from the full value of sharing resources in the public sector.

In 10 years, the global sharing economy is expected to be generating $335 billion in revenue, according to auditing and consulting firm PricewaterhouseCoopers. That’s a huge jump from today’s estimated $15 billion in revenue the various sectors of the sharing economy now generate. But as this report shows, the amount of direct government activity with the sharing of rooms, rides and goods is just a trickle.

There’s no question it will grow, but will local governments take the necessary steps to benefit from what the sharing economy has to offer?

The challenge will be changing the traditional mindset that calls for acquiring goods and services in order for government to deliver public services rather than rent services to get the job done. For that to happen, “governments need to focus on outcomes rather than outputs,” said Arizona State University’s Kevin DeSouza. “That’s hard to do because measuring outcomes is quite challenging. Everything in our current local government processes is output driven, because government is used to asking for resources that meet certain outputs not outcomes.”

To turn that idea around, local governments will need to make some fundamental changes. First, their contracting and requisition process needs to be more agile. Currently it’s hard for local governments to contract for services in an innovative way because of all the built-in inertia with the existing process.

Fortunately, IT has taken a lead on this problem as it pushes to rent cloud computing services rather than purchase computing hardware and software. Moving IT from a capital expense to an operational expense provides a model for other agencies to follow when it comes to renting goods and services provided by the sharing economy.

Second, local governments need to revisit the concept of regionalism. At first glance, the sharing economy presents some easy, short-term solutions: share a ride for jury duty; share a backhoe for a construction project. That kind of sharing is beneficial, but it’s not transformative. Eventually local governments will need to focus on what they do best and then figure out how they can collaborate with other local governments to get the other jobs done.

“We need to think more holistically about how to ensure that the taxpayer gets the greatest experience regardless of who is actually provisioning that public service,” said DeSouza. Only when that happens can local governments begin to reap real value from the sharing economy.

Once again, the IT sector has tested the regional waters with a variety of projects that include 911 technology, IT infrastructure and data centers as ways to reduce acquisition costs. Hopefully these and other models will emerge, opening the door to a more direct partnership between local governments and the sharing economy.  

Should Government Regulate the Sharing Economy?

On Nov. 3, San Francisco voters rejected a measure designed to restrict short-term room rentals by capping the number of nights a room could be rented. Advocates for the regulation said that the city, already one of the most expensive to live in, was losing affordable housing to tourists and others who rely on Airbnb’s online sharing system for lodging.

Called Proposition F, the measure is just one of many that city voters and officials have either proposed or enacted to manage and regulate the fast-growing sharing economy. Nearly two dozen states are grappling with the legalities of room sharing, according to the American Hotel and Lodging Association. California’s Legislature has introduced a bill that would require rental websites like Airbnb to collect a rental or lodging tax.

The most resounding — and negative — reactions to the sharing economy have come from cities where the legacy lodging and taxi industries are large, well-entrenched and politically active. Coverage by the media has painted a picture of cities that, for the most part, are quick to pull the trigger when it comes to regulation.

But when you step outside the 10 or 15 largest local jurisdictions, the picture is not so black and white. The National League of Cities released a report in June with results from a survey of its members that found 71 percent of cities support the growth of the sharing economy.

The concerns cities have are tied to public safety, not to protecting existing businesses, with 61 percent worried about issues tied to lack of insurance and general safety concerns, while only 10 percent cited the need to protect traditional service providers, and 9 percent suggested noncompliance with current standards as a problem. Most importantly, a majority of respondents — 54 percent — don’t want any regulation on the overall sharing economy, while 59 percent said there should be no regulation of ride sharing, and 58 percent said home sharing should not be regulated.

The survey found that city leaders are open to integrating sharing economy services more fully within their communities, and they want to capitalize on the opportunity. Asked to identify the greatest benefit of the sharing economy, 22 percent of city leaders identified improved services; 20 percent favored increased economic activity; and 16 percent cited increased entrepreneurial activity.
“Our survey shows that city leaders are becoming better prepared to successfully navigate the ever-changing developments that continue to change the course of our shared urban environments,” said Brooks Rainwater, director of city solutions and applied research at the National League of Cities.

The dividing line between heavy and light regulation of the sharing economy may depend on the level of technology innovation in a city, according to Kevin DeSouza, an associate dean for research at the College of Public Service and Community Solutions at Arizona State University. “In places where you have a high-tech mentality, and there’s less existing infrastructure to meet the needs, you will see jurisdictions innovating faster,” he said. “But in large cities where the infrastructure is well entrenched and has political clout, it’s less likely that government will collaborate openly with the sharing economy.”