Airbnb is making city life worse by catering to worsening social inequality.

Thomas Piketty’s monumental Capital in the Twenty-First Century came out in the wake of the Occupy movement. Both sounded the alarm over rising wealth and income inequality. Piketty put numbers to a reality that Occupiers understood and opposed.

Financial inequality has a plethora of material expressions. The poorest of the poor suffer abject deprivation. This comes along with mental health challenges that compound the effects of the structural causes of poverty. Meanwhile, the wealthiest of the wealthy have lavish lifestyles, which also contributes to mental illness. Between the two extremes the majority experience myriad socio-economic transformations as businesses chase dollars trickling upward to the already-rich. Increasingly, businesses look to cater to those with disposable income or those going into debt trying to consume like the wealthy. Systems of production and consumption are shaped by our one-dollar, one-vote economy.

It is in this context that Airbnb has become socially harmful. When it first came to public attention, Airbnb exemplified the promise of the so-called ‘sharing economy.’ The idea was that some people have spare rooms and other people need access to cheap, short-term accommodations. It seemed like a win-win. It also seemed like a tick in favour of the good, old-fashioned market, as well as new-fangled platform capitalism. Airbnb was supposedly facilitating the law of supply and demand to more completely fulfill its potential. For just a small slice of the price charged to the renters, Airbnb provided the means for people to rent their own homes when they were travelling elsewhere or to make some money renting a room in their home. The reality has been much different.

A Toronto Star / Munk School of Global Affairs and Public Policy investigation found that Airbnb has facilitated the rise of “ghost hotels”. These are short term accommodations for tourists in what would otherwise be lived in by owners or long-term renters. Tourist accommodation is displacing housing. UN Special Rapporteur on the Right to Adequate Housing Leilani Farha says the reason is that this is “simply more profitable.”

Airbnb approached the issue of the accommodation market as simply a technical matter. It completely ignored the social context into which that technology was entering. Many of its effects now seem predictable. Perhaps they would have been if the company had social scientists on staff.

The effects of Airbnb are externalities to the markets in which it operates. Some of these are positive externalities. Many businesses cater to tourists. With more rental options more tourists will come to a city. If accommodations are cheaper then tourists can spend their dollars elsewhere. However, the effects on long-term rentals are a negative externality. The consequences will compound and cascade. As people are priced out of a housing market they move further away. Many will leave the local labour market. The same businesses that benefit from more tourists will have more difficulty finding workers. Businesses frequented by lower wage workers will lose their customer base and close.

Whatever ‘sharing economy’ ideals may have motivated the company’s founders, Airbnb is now emblematic of the significant damage a tech company can do outside the digital world.