When passing new laws regulating business, rarely do policymakers consider the unintended consequences. But they are always present.

In this case, it has to do with a 2011 New York law aimed at regulating Airbnb—the service that allows people to rent out living spaces on a night-by-night basis as a sort of bed and breakfast—hence the name. Like ridesharing services Uber and Lyft, Airbnb is considered a part of the growing “sharing economy” that has both liberals and conservatives cheering the smart use of existing resources for the mutual benefit of willing parties. The sharing economy is an example of the free market at work, satisfying the needs of consumers and padding the pockets of anyone with an extra room or car (see here for more).

Like ridesharing, Airbnb has been wildly popular. Also like ridesharing, or really any innovative new service, it has a huge target on its back for local and state bureaucrats wanting to regulate it. Aiding this effort is the fact that the hotel industry has loaded for bear against its new, smaller internet-oriented competitor.

So back to the New York law. In 2011, the State of New York passed a law that defines “illegal hotels” so that state and local agencies can more easily regulate them.  The Cato Institute’s blog Cato@Liberty has a post up explaining how the law has had the unintended consequence of affecting actual bed and breakfasts—the very kinds of businesses the law was intended to protect!

Apparently, New York City bureaucrats are now using the law to investigate not only Airbnb properties, but also actual bed and breakfasts (B&B), throwing up tons of red tape to make doing business harder than ever.

The blog quotes from a Crain’s New York Business article that puts in clear terms the difficulty borne by the city’s B&B industry in the wake of the law.

The law, along with competition from home-sharing service Airbnb, has decimated the already small bed-and-breakfast business in the city, current and former B&B operators say.

One wonders if the law would have passed had interested policymakers taken the time to speak with real-life bed and breakfast owners and Airbnb operators to see how they would be affected. Maybe, just maybe, they would have seen that adding layers of regulations to small business owners would put them out of business.