How New York City earned its reputation for being tough on tech

Amazon received a less-than-warm welcome from New Yorkers who have some tough questions for the company and for other tech giants.

Community outrage over Amazon HQ2 is just one example of the city demanding oversight of tech’s expansion.

When Amazon unexpectedly dropped its plans to build a new headquarters in Long Island City, Queens, because of months-long vocal and sustained opposition from community activists, a frustrated New York City Mayor Bill de Blasio had a message for the company:

“You have to be tough to make it in New York City.”

De Blasio’s jeering words — while largely seen as a defense tactic to draw attention from his own boosterism of a failed deal — are nonetheless true. It’s tough in New York, and not just for Amazon. Several other major tech companies like Uber, Lyft, and Airbnb are facing ongoing political battles with local regulators over their ability to operate in the most populated city in the US. In the past few months alone, all these companies have been involved in new lawsuits fighting city regulation on how they run their day-to-day business.

Tech is currently the fastest-growing employment sector in New York City. Google is doubling its workforce in Manhattan to total over 14,000 employees in the next decade, and has plans to open a 1.7 billion square foot, billion-dollar office in Hudson Square. Unlike Amazon, the internet giant did so quietly, without asking for tax incentives from the government and, as a result, without political opposition. Other major tech companies — Facebook, Uber, and Apple — have all also expanded their campuses in New York in the past several years. WeWork — which started its business renting office space to tech startups — is now the top leaseholder of office space in Manhattan. And New York City has seen three times faster growth in tech talent than other US cities over the last decade, according to the city’s Economic Development Corporation, which has invested heavily in public-private partnerships in the sector.

But a rising number of local politicians, weary of the influence tech titans have wielded in places like San Francisco and Seattle — with their skyrocketing costs of living and ever-widening income inequality — are making a sustained push to draft and enforce stronger regulations on the industry. While they say they welcome the high-paying jobs and innovation that tech can bring to the city, they’re cautious to make sure those gains are enjoyed by a wide swath of New Yorkers, rather than a smaller number of highly skilled technical workers.

“I’ve spoken to political leaders on the West Coast about what the tech industry has done to places like San Francisco,” said New York State Senator Michael Gianaris, a leading figure in opposition to the Amazon deal. “They’ve rolled over these cities — completely displaced the people who have lived there and turned it into an area of great wealth inequality, sent rents soaring, with very little consideration for protecting the communities. We’re learning from them.”

Growing political opposition

Aside from Gianaris, other New York local politicians like New York City Council Speaker Corey Johnson (who has announced his run for mayor in 2021), newly elected Public Advocate Jumaane Williams, and US Representative Alexandria Ocasio-Cortez, have all taken a vocal stance in calling for more government oversight of tech companies at the local — and in Ocasio-Cortez’s case, national — level. These politicians, backed by the city’s strong labor unions, grassroots community, and political organizations — plus a growing progressive arm of the Democratic party on these issues — will likely only see more support in their efforts to set rules around the industry’s expansion.

This has been a headache for the fast-moving, California-based companies looking to expand their office presence and consumer market in New York City. Many now face regulations that have raised the cost of business or, in some cases, heavily restricted their ability to operate in the area.

Meanwhile, other New York politicians, including Governor Cuomo and the broader business community, worry that being overly restrictive on tech could result in unintended negative consequences that limit economic growth. They point to the failed Amazon HQ2 deal as a major loss that could have a ripple effect: discouraging other businesses from expanding into the city.

“We don’t know what we’ll be missing out on — what company is going to decide not to take a big bet on New York or expand here or grow here or move here, based on what happened,” said Julie Samuels, executive director of the tech business group Tech:NYC.

On Friday, March 1, 70 business groups, politicians, and some supportive unions signed a letter that ran as a full-page ad in the New York Times asking Amazon to reconsider its position and pledging support for the company.

Around the same time, Governor Cuomo was reportedly speaking with Jeff Bezos, asking him to bring back Amazon’s plans to build its new headquarters in New York City.

In an interview with local radio WNYC Friday morning, Cuomo characterized the Amazon HQ2 ordeal as a “blunder” and an “oddity” due to a vocal minority whose interests didn’t reflect the broader public — who he said is supportive of companies like Amazon moving in.

“Please don’t be confused,” said the governor, in a direct message to other companies coming to New York. “We are open for business.”

But even as Governor Cuomo was publicly pleading for more tech businesses to come to New York, he has been a tech critic on privacy issues. Last week, Cuomo launched a statewide investigation into Facebook’s collection of sensitive health data from people’s smartphone apps.

“When it comes to consumer privacy, it’s about right over wrong,” wrote a spokesperson for the governor’s office, Tyrone Stevens, in an email to Recode.

It’s too soon to say what the findings of Cuomo’s state investigation into Facebook will be or if the governor will push for regulation on the social media giant as a result. But so far, it’s been the local, city-level regulations that have set hurdles for high-growth tech startups like Airbnb, Uber, and Lyft.

Airbnb v. New York City Council

New York City Councilwoman Carlina Rivera has been one of the strongest advocates of regulation on home-sharing apps like Airbnb. “Big tech is here [in New York] and it’s here to stay,” said Rivera. “We have to establish clear law and rules like we did for other sectors years ago.”

Politicians like Rivera in support of these restrictions say that they are protecting the rights of the working class. For consumers, though, that means these services can be less available or more expensive than in other cities.

For example, it’s technically illegal in New York in most cases to rent an entire apartment through home-sharing apps like Airbnb for less than 30 days — a rule that supporters say is designed to stop hosts from running illegal hotel rings on the platform that can contribute to higher neighborhood rents. Airbnb has argued that these cases are exceptions and already go against the company’s rules.

Recently, New York City passed a law that will strengthen its ability to go after suspected cases of illegal Airbnb rentals, by requiring the company to turn over data about their users to a city government enforcement agency tasked with cracking down on illegal hosts.

Airbnb is suing New York City over the matter, arguing that it’s an overreach of government power. The company has accused the city council of being influenced by the hotel lobby, tallying the donations council members have received from hospitality industry interest groups that the company says have a vested interest in seeing Airbnb’s business suffer.

In the meantime, New York City’s strict set of rules on home-sharing platforms affects tourists’ accommodation options in the city — which is one of the most expensive places to stay in the US. Last year, the average hotel in Manhattan currently went for around $215 a night; in many cases, Airbnb can be a significantly cheaper alternative.

The company and its supporters also argue that the city’s rules make it harder for New Yorkers making extra cash renting out their place while they’re on vacation or out of town. The average Airbnb host in New York City makes around $6,000 a year from bookings, according to the company.

“We understand New York is a tough place and it’s fine to be tough on a sector or company, but not to the everyday people trying to make money on the platform,” said Chris Lehane, head of global communications and policy at Airbnb.

After years of fighting with San Francisco over regulation, Airbnb has been able to reach a compromise. It now works with the city to register all hosts and verify they are following the city’s mandates — and in the process it has booted thousands of unregistered hosts. While the rate of new Airbnb rentals being added to the platform has slowed down, there’s been an increase in the duration of travellers’ stays.

“In San Francisco, there was a serious political interest from the city. We could do the same thing tomorrow in New York if there was the same serious political interest,” said Lehane.

Uber, Lyft, and the mobility wars

Ride-sharing companies like Lyft and Uber have similarly run into a wall in their negotiations with the city.

After the city implemented a wage floor for drivers in December, Lyft and another ride-hailing app, Juno, filed a lawsuit with the city over the implementation of this rule, saying that it would benefit Uber, the larger competitor in the market. Uber, meanwhile, is suing the city over an imposed cap on ride-hail drivers, a rule that went into effect last August and limits the supply of its workforce. Lyft and Uber have said these new regulations will increase prices for riders in the city; both companies blame the influence of the taxi lobby. Supporters, like the Machinists’ Union affiliate Independent Drivers Guild (IDG), which represents more than 70,000 app-based drivers in New York City, argue additional costs are worth it to give drivers in the city a living wage in New York City, where rents are increasing twice as fast as wages.

“Regulations on the tech industry can make sense,” wrote Lyft spokesperson Campbell Brown in an emailed response to New York’s approach to regulating ride-hailing. “But we get concerned when a city takes a regulate-first-ask-questions-later approach that will ultimately harm not only their residents but valuable innovation that will improve the city’s economy and mobility.”

Electric scooter companies, a relatively recent addition to the streets of New York, are being more deliberate in their roll-out approach. Currently, it’s illegal for companies like Lime, Bird, or Jump to operate scooter rentals in the area. Instead, these companies have negotiated pilot programs to rent dockless bikes in specific neighborhoods of the outer boroughs. While companies are trying to petition the city to let them expand into denser areas of the city (namely Manhattan), it’s been slow going compared to how these companies bombarded the market in San Francisco or Shanghai — moving fast, without permission, and asking forgiveness later.

“I wouldn’t say New York is worse than any other city, but I think they’re being more cautious, and I think that’s reasonable,” said Phil Jones, senior director in the East Region for Lime, about politicians’ approach to regulation in the city.

Ultimately, whether it’s e-scooter companies like Lime or home hosting like Airbnb, New York City and tech companies are stuck in a standoff.

The city needs tech to diversify its economy away from the financial sector and offer New Yorkers affordable access to the tech services they want. For its part, the tech industry needs New York City because it’s an unparalleled consumer market and a place where talented tech workers want to live. The question is whether these parties will be able to reach lasting compromises, or whether they will continue to duke it out via public attacks in the media, expensive legal battles, and dramatic political hearings.

Though Amazon abruptly backed out of its New York HQ2 plans, it wouldn’t make any sense for a company like Uber to make a comparably drastic move — for example, by stopping rides in New York City, which is one of its largest US markets. Instead, these companies will have to deal with the increasing oversight from politicians, labor groups, and activists, like it or not.

“I think on the West Coast, the tech industry developed the ability to control the conversation a little better than in New York,” said David Mertz, New York City director for the Retail, Wholesale and Department Store Union (RWDSU), which backed anti-Amazon HQ2 Long Island City protest efforts.

“A lot of folks were initially starstruck by the money and innovation involved, and didn’t ask a lot of the questions that they are asking now. But maybe we should be asking questions and holding these companies to a higher standard,” said Mertz. “Maybe it isn’t okay to allow corporations to completely control what is happening in a certain industry or be held accountable in any way by the community.”

Originally Published HERE
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