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San Francisco Start-Ups Cause Headaches for Lawmakers

Lyft

In this Jan. 17, 2013, file photo, a Lyft car crosses Market Street in San Francisco. Jeff Chiu / AP file

In dense, wealthy San Francisco, where parking spots and decent apartments are at a premium, a battle is brewing over whether government officials should be regulating the so-called "sharing economy."

It's a city that has created a lot of tech millionaires and has sky-rocketing rents to show for it. Recently, people have been questioning whether services like Lyft, Uber, Airbnb and MonkeyParking are “disrupting” archaic business models backed by bloated bureaucracies, or whether they are simply taking advantage of gaps in regulation and enforcement.

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MonkeyParking's name is goofy and the premise is simple: People auction off their parking spots for up to $20 to drivers using an app. On Monday, the city slapped the company with a cease-and-desist letter, warning it to stop operating in San Francisco by July 11 or face a penalties of $2,500 per transaction.

Uber economics vs. US taxi cabs 2:22

"Sometimes the sharing economy enables new models that existing laws did not contemplate," Matt Dorsey, press secretary for the San Francisco City Attorney, told NBC News. In the cases of Uber and Airbnb, he said, it's up to local politicians to create new regulations — something many of them are working on.

The MonkeyParking case, however, involves a practice that has been illegal since the 1980s, he said.

"Imagine an enterprising person going down to Candlestick park when Joe Montana was playing, getting some orange cones, blocking off public parking spaces and selling them," he said. "You could not do that in 1985 and you can't do that today."

The city attorney's office warned two other companies, Sweetch and ParkModo, to avoid similar business models. (The latter actually offered to pay drivers $13 an hour to find and take up parking spots in the bustling Mission District so that they could sold later).

While MonkeyParking CEO Paolo Dobrowolny would not comment on the cease-and-desist letter, he did tell NBC News in an email that "as a general principle we believe that a new company providing value to people should be regulated and not banned."

San Francisco parking space sells for $82,000

He added, "This applies also to companies like Airbnb, Uber and Lyft that are continuously facing difficulties while delivering something that makes users happy."

About those companies: All of them have been recently targeted by activists and local lawmakers.

The rent might be "too damn high" in New York, but San Francisco has the highest median rents of any major U.S. city, according to the latest numbers from the U.S. Census Bureau. That has created fears that Airbnb — which lets people rent out their rooms to travelers, sans the regulations that hotels face — might reduce the already dwindling number of affordable apartments.

In November, San Francisco residents could vote on a measure that would force Airbnb renters to register their apartments with the city, buy insurance, get permission to rent out their rooms from their landlords, and collect city taxes. Another less restrictive measure, proposed by San Francisco Supervisor David Chiu, could be enacted if the ballot measure does not get the required 9,700 valid signatures by July 7.

Similar battles have erupted over ride-sharing apps like Uber and Lyft. They let users summon a ride with the push of a smartphone app from drivers who don't have to deal with the regulations and fees that taxicab companies face.

On New Year's Eve, a man who drove for Uber hit and killed a six-year-old girl with his car on the streets of San Francisco, sparking a controversy over whether ride-sharing companies are liable for the actions of their drivers and whether using the app violates California's distracted driving laws.

In March, Supervisor John Avalos began rallying to apply some local taxicab regulations to Uber, with whom, at least according to Twitter, he does not share the closest relationship.

Of course, lawmakers don't want to bite the hand that feeds them. The tech sector was "responsible for virtually all of San Francisco’s local employment growth since 2010," according to a report released earlier this year by economists and city staff through SPUR, a non-profit formerly known as the San Francisco Planning and Urban Research Association.

Ultimately, being a center for tech innovation might always be a double-edged sword.

"In San Francisco, even before we saw the advent of the sharing economy, we have been in litigation with online travel companies like Expedia because we thought they needed to collect taxes from people who were renting hotel rooms," Dorsey said.

Local lawmakers might not be able to predict what new apps and websites are coming next, but it's a good bet that they will have to deal with the aftermath.