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Welcome To Austin, SXSW! Here’s How The City And The Tech World Are At War

As the world’s attention prepares to shift to Austin, the city itself is in the middle of a battle between tech companies and local government.

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Ron Henry, Flickr // Via Creative Commons

Twitter didn’t actually launch at SXSW, but it might as well have. During 2007’s interactive conference, the company blanketed the convention—and the city—with a PR campaign that convinced people that they were missing out on a golden opportunity if they didn’t start documenting their actions in 140-character bites. The rest, as they say, is history—but history that hundreds of companies have tried to repeat. But it’s not just burgeoning startups looking to become the next Twitter that invest heavily in SXSW. Sponsors from McDonald’s to Mazda spend a fortune each year to reach the crowd of influencers, hipsters, next-Zuckerbergs, and guys who look a lot like the cast of Silicon Valley in Austin every March.

Austin needs these people too. Those downtown hotels that sprang up over the past few years didn’t get built in anticipation of people wanting to soak up the sun at Barton Springs, or because they need somewhere to house all of the people who are going to wait in line at Franklin Barbecue. Much of the development in Austin is built around the tech industry, and even specifically around SXSW. That’s led to tension—between, say, the Hyatt House going in near Red River and clubs like Cheer Up Charlie’s and Mohawk, which began facing legal and practical challenges as a result of the construction—but also to an economic impact that even Austinites who don’t go anywhere near SXSW benefit from.

It’s all complicated, in other words, and it’s not getting any less complicated anytime soon. In fact, over the past few months, the tenuous balance between an Austin that wants and needs the development a booming tech industry can provide and an Austin that wants to maintain control over how it’s governed has grown from “cold war” to pretty friggin’ hot.

Visitors to Austin during SXSW are going to be able to use Lyft and Uber to get from the airport to their hotel/Airbnb/friend’s couch/whatever-house-the-startup-they-work-for-rented-for-three-months’-worth-of-the-owner’s-mortgage/etc. They’ll be able to do that because those companies are still operating in Austin for the time being—though that’s not a guarantee for the future—and because when Austin-Bergstrom International Airport (which requires its own permits to operate) imposed restrictions that Uber refused to meet, the company opted to disregard those restrictions until the airport agreed to a sweetheart deal for both companies.

Things have only gotten more tense between the ridesharing companies and Austin in the year that’s followed. The city passed regulations that would require drivers to pass fingerprint background checks, and both companies responded by threatening to leave the city if those regulations are enforced. Since then, a nominally independent PAC called Ridesharing Works For Austin collected signatures for a recall of the ordinance that imposed the restrictions, scheduling a vote that would repeal the regulations voted on by Austin’s city council and replace them with regulations favored by Lyft and Uber themselves.

That vote happens in May, and it’s not the only case of tension between the tech industry and Austin’s local government. Another petition attempted to collect signatures to recall city councilmember Ann Kitchen, who’s one of the leading voices in the city in favor of regulation of peer-to-peer services like Uber and Lyft, or Airbnb and its local competitor HomeAway (which recently sold to Expedia for an eye-popping $3.9 billion). That petition was coordinated by a PAC called Austin4All, and helmed by political vets Rachel Kania and Tori Moreland, who’ve worked with the presidential campaigns of Rand Paul and Ted Cruz.

The money for the campaign to recall Ann Kitchen, though, came largely from Joe Liemandt of Austin-based software company Trilogy, who donated $20,000 to the PAC for its efforts. That petition was denied after the campaign failed to get the petition documents properly notarized—but it speaks to the level of displeasure among Austin tech industry vets with the regulatory efforts of politicians like Kitchen.

Mike Maples of the venture capitol firm Floodgate isn’t happy, either. He tweeted in late February that his company would no longer be investing in on-demand companies in Austin because local government is “too hostile” to the business model. 

That tweet came in response not just to the ongoing battle over regulations regarding Lyft and Uber, but also regulations that the city passed around short-term rental companies like Airbnb and HomeAway. Specifically, those regulations—which supporters told the Austin American-Statesman were intended to preserve the residential character of Austin neighborhoods—will prohibit “type 2” rentals shortly after SXSW in 2022, or rentals in properties that aren’t occupied by the owners the rest of the year.

Preventing swathes of residential neighborhoods from serving as de facto hotels has its proponents, but it also hit folks like HomeAway CEO Brian Sharples square in his feels. Sharples told the Statesman that the message he got from it is that “maybe the city isn’t the friendliest to innovation and change,” and that “I’m not sure it was intended to be a slap in the face of HomeAway, but it’s a little embarrassing for us to essentially have our prime product be illegal in the town in which we operate.”

All of this is tricky, and very complicated. Austin has an affordability crisis, particularly in housing, but every house or apartment that’s used as a full-time short-term rental property is one that isn’t on the market for someone who intends to live in the city full-time. At the same time, Austin’s reputation has been built over the past decade-plus around the idea of being extremely friendly to the tech industry, and it’s courted businesses and infrastructure to facilitate that. Changing course around that carries consequences that it’s unlikely that the city is prepared to weather—and regardless of whether fingerprinting Lyft drivers, or reserving Airbnb for people who want to rent out their house part of the time is as destructive to these companies as they claim, if the tech world sees them as prohibitively restrictive, then they can certainly bail on Austin.

What that means is that this SXSW, the city that hosts much of the tech world is facing an identity crisis. The ties between Austin and that industry run deep, but the future right now is a big question mark.

[Editor’s note: An earlier version of the article misstated that the city does not run Austin-Bergstrom International Airport. The city does own the airport—but the airport doesn’t receive tax money from the city, or pay into the city’s tax pool, and it requires operating permits different from those required to operate in the rest of the city. The airport is self-sustaining, and the permits it requires—independent of the city permits that Lyft and Uber already had to operate elsewhere in Austin—are used to fund the airport’s operations. We regret the error.]

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  • Jed

    what identity crisis? business models that profit by flouting existing safety regulations (e.g. uber) and externalizing their costs onto neighbors (e.g. homeaway) need not apply.

    that isn’t a war with technology, it’s a war on business models built on being bad neighbors. (if anything, *that* is more forward-looking than designing a phone app to call a cab, which is hardly breakthrough stuff.)

  • nickthap

    What a terrible article. The opponents of short-term rentals are the people that live in those neighborhoods, not the freakin’ “government.” Elected city officials are reacting to unhappy property owners. Jeez.

    • Jed

      last two houses i’ve lived in, my “neighbor” was an empty house that occasionally holds parties. no wonder the schools have to fight to stay open.

  • Kozmo

    Let ’em go. Austin has done quite well — TOO well — for decades, long before the hipsters and the California refugees carpetbagged their way into town. We don’t need what was once a comfortable and friendly and (long ago now) affordable place become another desolate Silicon Valley where only the rich can live and the companies make the rules, not elected officials answerable to the public.

    It’s already too late in most respects, but that doesn’t mean things should get worse as fast as they can.

  • jk

    “a nominally independent PAC called Ridesharing Works For Austin”

    Et tu, TM? I’m used to reporters from the Statesman and Chronicle not doing their homework and merely sourcing their info from other publications, but frankly I expect better from an award-winning monthly. Ridesharing Works is not “nominally” independent; it *is* independent. It’s a coalition of three well-established local nonprofits, and its campaign manager is ex-Mayor Lee Leffingwell’s chief of staff. Yes, Uber and Lyft contributed a nominal amount to it ($20K in cash and another $25K or so in in-kind donations), but that’s chicken feed by Silicon Valley standards; Airbnb spent EIGHT MILLION to defeat last fall’s ballot proposition in San Francisco that would’ve made short-term rentals illegal. Further, nearly all of that money was used for paying the fees of the City Lights Group, which has been managing the campaign. The hundreds of canvassers who managed to collect an unprecedented 65,000+ signatures for the petition — in under three weeks AND during the holiday season, no less — were all volunteers.

    “Regulations [for Type 2 rentals]—which supporters told the Austin American-Statesman were intended to preserve the residential character of Austin neighborhoods”

    Y’know, “preserving neighborhood character” was the same excuse used for much of the 20th century to defend deed restrictions that prevented “Jews and Negroes” from buying homes in a given area. But I digress: the vast majority of Type 2 rental owners, as well as their renters, pose no threat whatsoever to “neighborhood character.” Last year there were all of four complaints (!!) lodged with the city about problematic short-term rental houses, and two of them have since had their licenses revoked. The city’s ridiculous new restrictions on Type 2 rentals — which, incidentally, are likely violations of the Texas Constitution, but that’s a longer story — merely punish good actors while doing nothing substantive to stop the handful of bad actors, who will most likely continue to flout the law and rent out their homes despite a lack of licensure.