As Short-Terms Rentals Boom, Regulation an Issue

By: - June 6, 2013 12:00 am

Popular short-term rental websites like Airbnb, FlipKey and HomeAway are making it easier for property owners to rent out their homes to travelers looking for a place to crash. Those three companies now have more than a million listings for everything from spare bedrooms to luxurious oceanfront villas.

But thesurging popularity of these casual short-term rentals is generating an array ofcomplex questions for state and local lawmakers.  Among them: Should these hosts pay licensingor registration fees? Will short-termrentals detract from the character of residential neighborhoods? Should these propertiesbe regularly inspected or have overhead fire sprinklers or offer onsite parking?

Too muchregulation could drive up prices and prevent frugal travelers from visiting alocality at all. But too little could expose guests to dangerous situations andcreate unfair competition in the tourism industry.

Thepolitical dynamics around the issue are shifting as the sector grows and thehotel and bed-and-breakfast industries grow more concerned about these rentalscutting into their business.

Many statesand cities already have laws on the books that could spell trouble for casualshort-term rental owners if enforced, from zoning laws and building codes tolaws governing hotels and bed-and-breakfasts. Many lease agreements and condoassociations also ban such arrangements.

Any statelaw or regulation that applies to a hotel could be interpreted to apply to ashort-term rental depending on how the definitions are written, said JanelleOrsi, director of the Sustainable Economies Law Center.

For example,the California Health and Safety Code “has regulations on things like handtowels, swimming pools, restrooms, playgrounds, rodents, fire retardant hotelfurniture … regulations that the average citizen is probably not researchingbefore renting a room to a traveler,” she said.

Despite thelaws, however, short-term renters continue to pay the websites to post theirproperties. Airbnb warns potentialhosts that many cities have restrictions that could prohibit them from rentingtheir space or require them to register or get a license. By agreeing to Airbnb’s terms and conditions, hosts agree to follow allrelevant local regulations and pay relevant taxes.

But they don’t always heed that advice. A judgeordered Nigel Warren, an Airbnb host in New York City, to pay ,400 in finesin May under a 2010 state law. The law authorizes New York City to takeenforcement action against illegal hotel operations and applies to residentialcondo and apartment buildings that are being rented out for less than 30 days.

This was the strictest interpretation of the law todate. The judge rejected the argument that the visitor should be exemptedbecause one of the regular residents was home at the time of the rental. “(The exception) does not apply to completestrangers who have no, and are not intended to have any, relationship with thepermanent occupants,” the decision says.

David Hantman, head of global public policy for Airbnb, said in a statement that the ruling should not be interpreted to mean that every Airbnblisting in New York is illegal. “Webelieved, and still believe, that as long as a host is present during a stay,the stay is legal,” he said.

New York state Sen. Liz Krueger, who sponsored the2010 New York law, said in a statement that the state’s law and the city’s enforcementsystem were designed to target large, ongoing illegal hotel operations ratherthan people like Nigel Warren.

But Krueger, a Democrat, did not let Airbnb off thehook. “The real problem here is thedevil-may-care attitude companies like Airbnb have taken toward the legalconsequences for their users,” she said. “Companies like Airbnb or Flipkey arerecruiting private citizens into their business model without sufficientlywarning them that it may not be legal and could even lose them their homes.That’s pathologically irresponsible.”

Doug Coates,directorof the Oregon Association of Vacation Rentals and author of a blog on vacation rentalregulations, said he would like to see morestates follow Florida, which passed a law in 2011 that prohibits localgovernments from banning short-term rentals. He is working with Oregonlegislators on the issue and hopes to see a bill modeled after Florida’s lawpass next session.

Meanwhile, the industry is putting forward its own ideasfor regulation through a new Short Term Rental Advocacy Center created by Airbnb, HomeAway, TripAdvisor andFlipKey in February. The goal is “smart short-term rental regulation thatsafeguards travelers, alleviates neighborhood concerns and provides a frameworkfor ensuring compliance.”

The center points to an ordinance that Palm Desert,California, put in place in 2012 as “the right approach.” Palm Desert had earlier required a three-dayrental minimum and permits costing or more, with mandatory public hearingfor all applications and an annual cap on rentals. Its new policy requiresshort-term rental permits for properties that are rented for 27 days or less ayear, with an application fee of per property.

But passing a local ordinance can be easier saidthan done, even when the industry itself is asking to be regulated. The city ofOcean Springs, Miss., has been debating an ordinance that would requireregistration and basic inspections, but appears stalled because ofdisagreements about possible additional requirements.

Beth Riley, who rents out two Ocean Springs vacation homes through the website, said she supports the proposed ordinance because it would provide her more clarity and security. “A neighbor couldn’t just make a complaint and shut you down,” she said. “It sets a standard.”

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Melissa Maynard

Melissa Maynard oversees the Pew state fiscal health project’s Fiscal 50 online resource, which helps policymakers understand fiscal, economic, and demographic trends affecting their states by tracking tax revenue, reserves, employment rates, Medicaid spending, and other issues important to long-term fiscal health.