What NEED does this meet?

Joe needs an electric drill with a 2cm masonry bit. He needs it for 5 minutes. Under business as usual, he goes to the DIY shop, buys the equipment, uses it, then lets it languish in his shed for the next 20 years. MEANWHILE, on his street, Fred, Freda, Frederik, and Frederika had exactly the thing he needed languishing in their sheds. They would have been happy to lend their drills to Joe, IF THEY HAD HAD THE OPPORTUNITY TO OFFER THEM, and IF JOE HAD BEEN ABLE TO SEEK THEM OUT. Furthermore, this lending of useful things among neighbours, if it could be promoted, WOULD ENHANCE COMMUNITY SPIRIT, helping people get to know each other.
It’s like ebay, but (a) without money; and (b) local.
It’s like freecycle, but (a) organized better, like ebay (searchable, etc); (b) allowing many sorts of exchange, not just giving things away.

What is the APPROACH?

The idea needs a cool name that, like “google” and “ebay”, will pass into common parlance. Something like “koodle”. .
Set it up with the same look and feel as e-bay, including user accounts, but with the added detail that every object has associated with it a “street”. Each person who registers can associate themselves with a bunch of streets that are their community. When you search for a wood saw, the default is that it searches only in your street. If the search is unsuccessful, you can choose to add “saw wanted in this neighbourhood” to the “things-wanted scrolling-list thingy” that people see on their home page. Such requests for things-wanted would die off the wanted list on a time-scale of a few days.
Every time you find something is available you use the secure koodle communication interface to contact the person offering the thing. It sends email to them, or texts their mobile phone, or whatever method they have agreed. Like a dating site. Then the two of you get the chance to have a mutually consenting koodle. The koodle itself is the legal responsibility of those people alone, just like a dating agency isn’t responsible for your safety on your date.
WHEN THE KOODLE IS CONSUMATED, THE PERSON WHO LENT THE THING GETS A KOODLE CREDIT IN THE REGISTER OF KOODLES. (Like the ebayer rating system.) Koodle credits would have no obvious value, but it would be cool to be the koodle king on your street. Borrowing stuff through koodle would not use up any koodle credit. If you turned out to be a useless koodler, though, the lender could leave negative vibes. How to stop someone with negative vibes from just opening another account? Aha! The trick is to associate every person with a STREET ADDRESS. If anyone has any suspicions about someone they have never met before, they can just ask them to prove their address. With everyone identified by a userID and a street address, creating multiple identities would be much harder.
We’d have to figure out a good protocol for meeting people for the first time to make sure you are not ripped off by burglars.
I don’t think security would be an issue, though. People could include photos of themselves standing in their street, accessible by public key. The fact that DJCM lives at number 19 is in the public domain already. A typical exchange would be “Hi Freda from number 93! I’m DJCM at number 19 (maybe you’ve seen me on my bike) - I see you have a saw; please could I borrow it?” Freda checks that DJCM has got a 300-heart koodle rating, uses the secret key that DJCM has sent with the request to access DJCM’s photograph, confirms that it is a familiar face, and agrees the deal. Once the two of them make personal acquaintance, they can inform koodle that they are willing to open their full repositories to each other. Y’see, koodle allows you not only to list “stuff for the whole world to know about, that you are happy to lend”, but also “stuff that is fairly valuable, and that you are happy to lend to people on your street whom you come to trust, but want to keep secret from the general public.”