In Seattle, Uber has transformed the taxi industry—for better of worse, depending which side you're on
The sharing economy has upended established markets and irritated entrenched industries in cities around the world. The West Coast of North America is particularly fertile ground for this libertarian, tech-forward way of living, with Uber, Lyft, Airbnb and other now-multibillion-dollar enterprises dominating the competitive landscape. So why has Vancouver been so slow to hop on board?
Jeffrey Casebolt is not your usual taxi driver. The 23-year-old, making his way this Friday afternoon through slow-moving downtown traffic as he pilots a customer from a bookstore to a hotel, is an accountant getting his master’s in business administration. He plans to work for Microsoft someday. And he’s driving a car that he’s leased specially for the job: a Toyota Prius with spotless, buttery-feeling taupe seats. Casebolt is one of the world’s new breed of taxi drivers—he drives for Uber. Driving a cab is not a job he likely would have considered before Uber, the dominant app-based ride-hailing service that now operates in more than 100 cities around the world. His parents were a bit skeptical at first about him taking on what has often been seen as work dominated by immigrants who can’t break into the job market any other way. But it’s different driving for Uber. “It’s more middle class. It’s a little cooler. I have no boss. That’s kind of a cool feeling,” says Casebolt, who usually works two full days a week to pay his bills and save for a car. (No nights—he’s not a night person, he says; an experience with a drunk who almost vomited in his car confirmed that preference.) Five other people in his MBA class are also driving for Uber, making as much as their colleagues working as bartenders—an easy $230 a day, after expenses.
None of this is happening in Vancouver, of course, where Uber is still begging to be let in. Ohio-born Casebolt, his classmates and dozens of others are doing this just 200 kilometres down the road in Seattle, where the city council voted to allow Uber, along with other ride-hailing operations like Lyft and Sidecar, to operate as of last July. It was the fourth major West Coast city to allow this disruptive new business that launched five years ago in San Francisco, even though traditional taxi drivers protested in the street to try to prevent it. Portland became the fifth in late April—although for a 120-day trial only, with strict conditions and a demand that Uber and other ride-hailing businesses turn over their data to the city as part of the pilot. That leaves Vancouver as the only holdout among major cities on the West Coast, after B.C.’s provincial government and various city councils in Metro Vancouver have successfully stalled Uber’s entry for the last three years. (The province, cities, the taxi industry and Uber are currently holding joint meetings to discuss how to proceed, but it’s a slow process and one where details on how things are going are scarce.)
But any observer has to wonder how long the finger can remain in the dike, as Uber—along with all the other ride-hailing apps—tantalizes both drivers and customers with the concept of a city where they can come together in a second on a smartphone screen. No more waiting for one of the few licensed taxis to finally appear at your door, with little clue as to how long the wait might be or who your driver is. Or being refused a ride from downtown to a distant suburb because the driver doesn’t want the long, empty ride back. Or trying futilely to flag an empty cab in the rain.
It’s a tough one for local politicians to deal with. That’s true everywhere in North America. The National League of Cities (a U.S. association representing more than 2,000 municipalities) published a 44-page report in mid-April documenting the struggle cities are going through with all the new “sharing economy” businesses—in particular, house-sharing and ride-hailing services. Cities are the places where these kinds of network-intense operations thrive, so civic officials are being hit full-on by the change. “We are on the cusp of a monumental shift taking place in cities around the world,” the report begins, as it documents how 11 cities are welcoming, resisting, ignoring or drafting new rules for “sharing economy” businesses. “From innovative technologies and business models to redefined concepts of equity and safety, the sharing economy is impacting cities.”
People who work with traditional taxi companies are also acknowledging there’s more than just a small-scale earth tremor going on. The technology plus the rhetoric of sharing plus changing definitions of work plus a new mindset among workers are blowing up old models, and not just for the taxi business. “We’ve had the agrarian revolution, the industrial revolution. And now this one,” says Leonard Smith, director of organizing for the International Brotherhood of Teamsters in Seattle. His union is working with both taxi drivers and ride-hailing drivers in Seattle to figure out a set of rules that apply to both groups, an unusual move that the Teamsters in several cities are making.
One of the biggest challenges for cities, and the traditional industries that have operated in them, is the seductive language used by the Ubers and Airbnbs—with messages designed to evoke the idea of a new utopia and reflect the preoccupations of a 21st-century generation. “It really provides a smart-city solution,” says Xavier Van Chau, Uber Canada’s spokesperson. It is an essential part of the new economy “that is asking for more options for people.” Airbnb’s “country manager” in Canada, Aaron Zifkin, also talks about how his company makes the world a better place: “This model could change humankind—we have figured out a way to create trust among strangers.”
When pressed about the impact they’re having on existing businesses—which labour under the burden of taxes and regulation that the sharers don’t have—both of these new powerhouse operations say they’re expanding the market, not taking anything away. Van Chau says that San Francisco’s taxi industry used to be a $140-million-a-year sector, but with taxis plus Uber it’s now a $500-million-a-year operation. Zifkin says hotels are seeing their highest occupancy ever and that their studies show that people staying at Airbnbs are people who never would have stayed as long—or even travelled to a city—without that option. “The pie is just growing.”
That’s not completely smoke and mirrors. At least one academic study suggests that Uber-type services, for example, help “thicken” what is traditionally a thin market. People often don’t take taxis because they seem hard to get and unreliable—but once it feels as though getting a ride is easy (that there’s a “thick supply”), they’ll become more likely to use all taxi-type services more regularly, says the paper from UBC researchers Simon Harding and others. And, after all, that’s the argument used for transit: demonstrate to the public that the service is fast and frequent and they’ll pile in.
On the other hand, other independent research shows that Airbnb, for one, is having an impact. A recent Texas study concluded that hotel revenues declined by about half a per cent for each 10 per cent increase in Airbnb supply. In Austin, the city where Airbnb is the most popular, that meant a 13 per cent revenue loss overall—with lower-cost hotels, the ones catering to tourists, the most affected. It’s the same story when it comes to another Airbnb impact that people worry about, which is the way it sucks up relatively low-cost housing space that becomes unavailable to local renters. Again, Zifkin says that Airbnb is “too small to have an impact”—which might be true in some cities, but where there’s a high demand for both tourist and resident space, maybe not. The New York City attorney general issued a report in 2014 concluding that, with 4,600 units in the city being rented out almost exclusively as Airbnb rentals year-round, the city was losing housing units that would otherwise have gone to long-term residents. As for Uber, UBC transportation consultant Joe Sulmona argued in a recent GeekWire piece that the service could be a suicide bomb that destroys not just taxis but also transit. “Destructive competition drives prices so low, at some point it comes apart because people can’t make a living at it,” he wrote. “Cars fall apart. You are into safety issues.”
In spite of those potential hazards, however, politicians have one big challenge when it comes to clamping down. The people using and providing these services love this brave new world.
Vancouver is particularly fertile ground for the sharing economy. It’s a city where a significant proportion of residents are stressed by high housing costs and where many of them have been trying to make ends meet already through various real estate moves—renting out their basements, even at times when it’s been illegal, taking in language students or buying condos as investments. (There’s even a thriving exchange of parking spaces, so far un-apped, in condo buildings downtown.) The peoples of the West Coast have a looser definition of work, as anyone from Toronto is always ready to gripe about. They also run more one-person self-employment operations than elsewhere, and have been quick to monetize their homes to run everything from freelance engineering consultancies to auto-repair businesses. And they’re less patient with regulation. All of this means that where Airbnb has thousands of listings throughout Metro Vancouver (including 448 in the West End alone), in a city such as Calgary, where homeowners are less financially stressed, it has only 859 listings in the entire metropolitan area.
It’s for reasons like these that Sylvain Senez and Alexis Fletcher, who own a modest stucco bungalow in east Vancouver, decided to start renting out their two spare bedrooms five years ago through Airbnb, once Senez’s children didn’t need them. And then, encouraged by more than just the extra cash, they converted their rented basement suite to another Airbnb unit when a long-time tenant gave notice. “It started with us needing help making ends meet. Vancouver is expensive,” says Fletcher, a dancer with Ballet BC, where Senez is the rehearsal director. “The amazing thing about Airbnb is, you start out with finances in mind but it becomes much bigger. It allows you to welcome people from many other countries and cultures who come into your neighbourhood.”
Far from getting complaints from their Commercial Drive-area neighbours, say the couple, people are curious and wonder about doing it themselves, or have come to appreciate the economic benefits that the Airbnb units bring to the area. “Guests will go out, walk on the Drive, have dinner there, go shopping there,” says Fletcher, who scrupulously pays taxes on their rental income (though not the money for a city business licence). “It seems like there’s so many more upsides to the neighbourhood.”
Vancouverites Sylvain Senez and Alexis Fletcher rent out rooms in their Commercial Drive bungalow through Airbnb
The trick for both those interested in the possibilities of sharing economies and those with the job of regulating them is trying to figure out what is genuinely innovative, consumption-reducing, public-serving and sharing—and what is just rule-breaking with a fancy new name. A lot of city politicians, planners and community activists—especially in liberal cities such as San Francisco, Portland or Vancouver—are enamoured of the original sharing-economy model (or, as its purists call it, “collaborative consumption”): cooperative car-share services like Modo, bike-sharing, impromptu outdoor neighbourhood book exchanges, used-clothing trades, tool libraries and more. They see those kinds of services as ways to help people buy less in favour of sharing things that were going unused. They also help create community connections. But many of those same people, along with the groups trying to deal with the new businesses calling themselves part of the sharing economy, are less enthusiastic about the Uber-type operations.
Alexandra Samuel, a Vancouver tech researcher and analyst who co-authored a report on the collaborative economy, is excited about the possibilities of what it promises: a chance for regular people to improve their incomes and reduce their spending by sharing through technological platforms. “I think it has the potential for people to enrich their lives.” But, she says, the term “sharing economy” glosses over what are a lot of different things going on: on-demand services, peer-to-peer connections and consumption through access (not ownership). And “big companies bankrolled by big money” can come up with systems to provide part of that but not all. The risk is that there will be massive disruption—with social, political and economic consequences, including a depleted tax base and an increasingly itinerant, unsecure workforce—but with none of the utopian positives.
“If you strip away the veneer of the technology,” says the Teamsters’ Smith, talking about Uber, “all we’re dealing with are labour brokers. It’s the same thing as what you have with farm workers or day labourers and the same level of exploitation that exists with those models.” Still, Smith acknowledges that there’s more than just technology at play. “We’ve got a new economy developing that is strictly task-focused. And we’re going to see it everywhere.” Many businesses have opted to shift to a more contingent, contracted-out workforce, even those without apps. Estimates are that about 30 per cent of people working in Canada and the U.S. now operate as contract or contingent or on-call employees in the new “open-talent” economy, a percentage that rose sharply in the last decade. The technology has just made that more possible for some sectors. Uber, for instance, has 2,000 full-time employees but 160,000 drivers as of the end of 2014.
Uber and its accomplices are the most troublesome for everyone because, of all the new-economy businesses, they are taking on what has been the most regulated industry—the one with the strictest limits on numbers. Taxi regulation developed during the Great Depression, as illegal “bandit” cabs proliferated and turf wars broke out. Taxi medallions or licences have, over the years, turned into a strange market of their own in many cities. In B.C.’s Lower Mainland, taxis have been so restricted that the value of a licence in the market soared far beyond what any driver could hope to recoup simply by driving cab. In 2014, there were 588 licences available in Vancouver trading for $800,000 apiece; another 983 taxis are licensed for all the suburbs, with a half-share of a licence reported as selling for about $200,000 in one court document. Sandy Garossino, a Vancouver political commentator and one-time council candidate who inherited several taxi businesses from her family, says the licences have become the equivalent of condos—a speculative play, based on what buyers think they might get on the market in the future, not on what they can get from the “rent.”
That’s quite a different situation from other businesses confronting the sharing economy. Hotels might be worried about Airbnb, but Airbnb isn’t busting up a closed shop. There’s never been anything to stop anyone from opening a dozen new hotels or bed-and-breakfasts tomorrow alongside the existing ones. That’s likely the reason why hotel associations in Vancouver and Seattle, for example, are far less militant than the taxi industry, opting for muted responses suggesting that cities should ensure they follow regulations and are safe. It’s the same for restaurants or tradespeople or office landlords, who are facing new operations like Feastly, TaskRabbit or ShareDesk; they’ve always had to deal with the possibility that someone will start up a new noodle shop, roving home-repair business or office building. Those essential differences are why, for example, Portland decided to tackle regulation of Airbnb before Uber and why Seattle, like Vancouver, is essentially ignoring Airbnb for the moment. Airbnb is the easy thing. Uber et al. is the swamp.
The taxi industry is also unusual because it’s viewed as part of the transportation system. Disruption to it isn’t like disruption to the restaurant business or the tool-rental business. “It is a semi-public utility,” says Smith, down in Seattle. “And if it is part of the public transportation system, you need a market in place so everyone can make a living.” If cities don’t ensure that there’s a fair regulation system for that market, says Smith, there’s a risk that Uber will drive regular taxis out of business. And the city relies on regular taxis to provide an unstratified form of transportation—one that will pick up disabled people, unpleasant drunks, teenagers stuck out in the suburbs and other customers who aren’t considered premium or may not get the highest rating from an Uber driver. (And it doesn’t take much to get a low rating and drivers avoiding you. Maureen Dowd of the New York Times recently discovered she had a low rating because drivers said she kept them waiting—and that was enough to make it more difficult for her to get a driver willing to pick her up.)
So there’s that factor politicians have to consider. As well, they face pressure from the region’s strong taxi companies, who are generous campaign donors and dominated by a community, the South Asian one, that is renowned for its political activity with the ruling political parties in Vancouver, Surrey and Burnaby, as well as B.C.’s governing Liberals. “I think the taxi industry in the metro area generally has acquired a political heft that is not healthy,” says Garossino, who got out of the business in 2000. “We need more taxis, everybody knows it, but it’s in the interest of the taxi-licence holders to suppress supply.” But that has led to a situation where people are frustrated with the city’s existing taxi services. In a December 2014 poll done by Insights West for a putative ride-hailing service called Ripe Rides, almost 70 per cent of Metro Vancouver residents said that cabs in the Lower Mainland were unreliable; another 54 per cent said they were unsafe.
Another consideration for politicians: it’s no fun being the negative Nelly standing in the way of millennials enamoured with this new model. That’s true for Airbnb, Uber and all the other new sharing-economy businesses. “I think governments are totally caught off-guard,” says one political adviser who has worked at both the provincial and municipal level. “Even though a city or province knows they’re breaking the rules, they don’t want to enforce anything because they don’t want to be seen to be behind the times.” Vancouver (backed by the province), Montreal and Toronto are holding out for now, perhaps a legacy of the Canadian culture of conservative government and low tolerance for American-style revolutions, but elsewhere, mayors and councils are giving way. In Vancouver, councillor Geoff Meggs says that, as much as everyone acknowledges the region needs better taxi service, “I don’t think we should just tell the taxi industry, ‘Here comes the disruption.’” But at the same time, he acknowledges, “there’s a generational gap in this. I’m constantly receiving criticism from people under 35 for not just allowing this in wholesale.” The League of American Cities report also underscored the fact that cities don’t want to be perceived as stifling innovation, which has influenced their decisions about the Ubers and Airbnbs. The unhip factor. Enough to make anyone in public life pause.
People who offer these services generally love the new model, particularly because of the feeling of control they have. That was the theme of all seven Uber drivers sampled on a Friday afternoon and evening in Seattle. David Britt, a retired stockbroker originally from Tennessee, now living in a suburb east of the city, works only days and in the areas he wants. It’s part of a great, fun game when he snaps up a customer going to the airport and then snags another one going from the airport to Federal Way on the return trip. For retired vending-machine supplier Charles Birnie, it’s freedom after the grind of his previous job. Like many others, he chooses not to work nights because he’s not fond of what he calls the “tavern trade.” Tsegereda Weldemichael, a 36-year-old Ethiopia native, says she likes the flexibility that working for Uber gives her to take care of her mother, who has medical issues. “I used to work in a nursing home and it was so hard to take care of family,” she says as she zips across the bridge in her Toyota Corolla between Seattle’s downtown and the university district to the north. She usually does three nights a week, often choosing not to go out until she sees that the prices are rising during a busy time. (Uber, unlike regular taxi businesses, raises prices when things get busy—so-called “surge pricing”—and alerts riders with a friendly sounding notice that they’re doing so “to bring out more drivers.”) Tonight, there’s a Mariners game on in the city, so it’s worthwhile for Weldemichael to be out. She’s already taken two sets of people to the stadium by 7 p.m.; there will be another rush when they all get out.
But all these disruptive businesses are about more than just customers and providers. Others get caught up in the change, as houses and condos become mini-hotels and everyone turns into a taxi driver.
Despite the positive experience of Sylvain Senez and Alexis Fletcher in east Vancouver, complaints are starting to trickle in from homeowners in other areas—distressed to see a house on the block become a major traffic generator or, from condo residents, startled to see units in their buildings advertised on Airbnb. Strata councils are tussling with routine discoveries that units in their buildings are being used as Airbnbs—which they find out about in odd ways. “Sometimes somebody who is renting mistakes us for the rental manager, so they call saying there are no towels or they can’t find the key to the pool,” says Jason Kurtz, vice-president at Stratawest Management, whose strata-management company oversees about 130 condo buildings in the Lower Mainland. Kurtz says that even strata councils with relatively relaxed policies about rentals are not happy about the rentals that are for a few nights at a time; it makes others feel the building isn’t secure, and there are always concerns about the wear and tear on the building.
However, it turns out that strata-council rules often aren’t written strictly enough to prevent Airbnb-type rentals. People renting regular apartments aren’t supposed to lease them out for overnight stays—but they do it anyway, and landlords often don’t know. They’re not around enough to spot the traffic, and Airbnb visitors are sometimes coached to say they’re visiting. Adding even more uncertainty to the issue is a recent B.C. Supreme Court ruling that put into question the City of Vancouver’s bylaw stipulating that only hotel rooms can be rented by the night, while all other rentals are supposed to be for 30 days or more. “We’re just starting to deal with the ramifications of that,” says Kurtz.
There’s more than just discomfort or rule-breaking involved; there are also the high-profile stories about disasters. There are infrequent but alarming tales about Uber passengers who say they have been raped by drivers or, on the less life-threatening but still annoying side, those who have found their accounts charged for startlingly high amounts. The house-sharing business has its risks too. There’s the Stockholm woman whose apartment got used as a brothel, the Oakland house used by a meth addict or, recently, the Calgary family whose house got trashed by a group of party animals. But there hasn’t been anything like that in Vancouver and they don’t appear often enough globally to outweigh the word-of-mouth “I made good money and it was so easy” stories that we like to tell each other. The City of Vancouver’s communications department blandly observes that there were fewer than 10 resident calls about Airbnb in 2014 and only five to date in 2015.
Uber, like Airbnb, is also widely popular among Vancouverites— even though the company’s town-car service only operated here from July to November of 2012. (Social media is still filled with its mournful fans; Uber Vancouver has 4,400 followers, and spokesperson Van Chau says the petition urging Uber for Vancouver has 30,000 signatures.) Donna Fox, a 35-year-old who lives a car-free life near Main Street with her husband and baby, is one of those who jumped on Uber when it operated briefly in the city. “The service was really handy, and I liked the ability to know a car was coming really fast,” she says. “We called one for deepest darkest east Van and it came in five minutes. It was a nice unmarked car, and the guy was super-nice.” But, adds Fox, she’s less impressed with Uber these days after reading about what it does to compete with other businesses, its vice-president’s suggestion that the company should go after hostile journalists by digging into their personal lives and more. “It’s a turn-off. Ethics in business is important to me.”
All of that has left cities in a challenging game of Twister. The public says, Let us take advantage of all these new ways to make or save money. But make sure they’re safe. And don’t let them get away without paying taxes, if they’re running something that’s just like another business paying taxes. But don’t ruin the low-cost advantage for me when I’m using them. Both the traditional businesses and the new ones are fighting hard to prove to regulators that either: (a) the new sharing-economy businesses are dangerous and a threat to the city’s economy; or (b) the new sharing-economy businesses are a godsend for cities and their strapped citizens. And it’s all so new that there’s not a lot of data to prove one way or another what’s really happening.
That’s why when Portland decided to give Uber and others temporary permission to operate, there was no chatter about the sharing economy. It was all about trying to understand what rules to set for all the ride-giving businesses, whether they were traditional taxis or ride-hailing newcomers. “This is not something any of us saw coming,” said Mayor Charlie Hales, in advance of the four-hour meeting where city lawyers and staff spelled out all the conditions the new transportation network companies would have to operate under. His transportation commissioner, Steve Novick, added: “Nobody’s going to come in and just make up their own laws.”
Seattle tried to do something similar to ensure that all companies would be on an even playing field. But for some taxi drivers, it doesn’t feel that way. Friday night, a line of them in front of the Renaissance Hotel in Seattle watches a middle-aged couple prance out of the hotel with a bottle of wine and get into an Uber car. A taxi driver, flagged on the street later that evening, at a time when the downtown is hopping and it’s easier to find a cab even than to tap an iPhone screen, is pessimistic. Samson Gimbot, a 31-year-old originally from Eritrea, says he’s taking courses in how to drive a truck. “Fifty per cent of the cab drivers, they are not working now.” Those who are surviving drive for Uber during the day, the regular taxi company at night. “This business is dead.”