As Short-Terms Rentals Boom, Regulation an Issue

Beth Riley stands in front of one of her two vacation rentals in Ocean Springs, Miss. The City of Ocean Springs is working on creating an ordinance to regulate short-term vacation rentals. (AP)

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

Too much regulation could drive up prices and prevent frugal travelers from visiting a locality at all. But too little could expose guests to dangerous situations and create unfair competition in the tourism industry.

The political dynamics around the issue are shifting as the sector grows and the hotel and bed-and-breakfast industries grow more concerned about these rentals cutting into their business.

Many states and cities already have laws on the books that could spell trouble for casual short-term rental owners if enforced, from zoning laws and building codes to laws governing hotels and bed-and-breakfasts. Many lease agreements and condo associations also ban such arrangements.

Any state law or regulation that applies to a hotel could be interpreted to apply to a short-term rental depending on how the definitions are written, said Janelle Orsi, director of the Sustainable Economies Law Center.

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

Despite the laws, however, short-term renters continue to pay the websites to post their properties. Airbnb warns potential hosts that many cities have restrictions that could prohibit them from renting their space or require them to register or get a license. By agreeing to Airbnb's terms and conditions, hosts agree to follow all relevant local regulations and pay relevant taxes.

But they don't always heed that advice. A judge ordered Nigel Warren, an Airbnb host in New York City, to pay $2,400 in fines in May under a 2010 state law. The law authorizes New York City to take enforcement action against illegal hotel operations and applies to residential condo and apartment buildings that are being rented out for less than 30 days.

This was the strictest interpretation of the law to date. The judge rejected the argument that the visitor should be exempted because one of the regular residents was home at the time of the rental. “(The exception) does not apply to complete strangers who have no, and are not intended to have any, relationship with the permanent 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 Airbnb listing in New York is illegal. “We believed, 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 the 2010 New York law, said in a statement that the state's law and the city's enforcement system were designed to target large, ongoing illegal hotel operations rather than people like Nigel Warren.

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

Doug Coates, director of the Oregon Association of Vacation Rentals and author of a blog on vacation rental regulations, said he would like to see more states follow Florida, which passed a law in 2011 that prohibits local governments from banning short-term rentals. He is working with Oregon legislators on the issue and hopes to see a bill modeled after Florida's law pass next session.

Meanwhile, the industry is putting forward its own ideas for regulation through a new Short Term Rental Advocacy Center created by Airbnb, HomeAway, TripAdvisor and FlipKey in February. The goal is “smart short-term rental regulation that safeguards travelers, alleviates neighborhood concerns and provides a framework for 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-day rental minimum and permits costing $500 or more, with mandatory public hearing for all applications and an annual cap on rentals. Its new policy requires short-term rental permits for properties that are rented for 27 days or less a year, with an application fee of $25 per property.

But passing a local ordinance can be easier said than done, even when the industry itself is asking to be regulated. The city of Ocean Springs, Miss., has been debating an ordinance that would require registration and basic inspections, but appears stalled because of disagreements about possible additional requirements.

Beth Riley, who rents out two Ocean Springs vacation homes through the website VRBO.com, 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.”