Homesharing shake-up

The rapid expansion of the short-term rental sector is increasingly being met with new regulatory hurdles, as cities from New York to Paris seek to rein in the segment.

By Christina Jelski

Illustration by Vectorpouch/Shutterstock.com

Illustration by Vectorpouch/Shutterstock.com

Illustration by Vectorpouch/Shutterstock.com

In a very brief period of time, short-term rentals have ballooned in popularity. A little more than a decade after Airbnb’s launch, shared accommodations have permeated the market so thoroughly that even old-guard hospitality giants — including, most notably, Marriott International — have made forays into the category.

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One consequence of the segment’s rapid rise has been that local governments and regulatory bodies have largely been left in the dust. In many markets, however, legislators are no longer content with playing catch-up. A wave of regulatory pressures in New York, Miami, Barcelona, Paris, London and many other major destinations now threaten to hamper the sector’s breakneck expansion.

“Cities haven’t really figured out how to deal with this beast yet,” said Alex Nigg, founder and CEO of vacation property management startup Properly. “Regulation has had a very crude framework and hasn’t been able to catch up to the realities of what’s actually going on. So now cities find themselves taking a sledgehammer approach. First they didn’t do anything, and now they’re over-regulating.”

Few in the short-term rental space have as much to lose from industry over-regulation as Airbnb, the homesharing pioneer now synonymous with the segment. And with a presumed initial public offering on the horizon, it’s not surprising that Airbnb more often than not is at the front lines of these legal skirmishes.

"Cities find themselves taking a sledgehammer approach. First they didn’t do anything, and now they’re over-regulating."
—Alex Nigg, Properly

David Wachsmuth, an urban planning professor at McGill University, described Airbnb’s relationship with local regulators as “increasingly acrimonious.”

“The regulatory status quo so far has basically been that Airbnb is happy to cooperate with measures that boil down to paying money,” Wachsmuth said, alluding to the company’s general willingness to collect and remit taxes. “But now, they’re locked in big legal battles where the efforts of regulators are no longer about taxes but really about restricting the market, effectively. And Airbnb is unwilling to cooperate with any efforts that restrict the activity of their hosts.”

Meanwhile, a recent study released by the Economic Policy Institute suggests that short-term rentals might be markedly impacting housing inventory and inflating rents across the U.S.

Josh Bivens, the institute’s director of research, said, “Short-term vacation rentals in, say, 2011 or 2012 were a trivial part of any city’s potential housing stock. Now they’re no longer trivial, especially in certain neighborhoods. It’s taking dwellings that could potentially be on the long-term rental market for residents and swapping them to short-term rentals, and it doesn’t take much of a decline in housing supply to have a statistically noticeable effect on rents.”

"Short-term vacation rentals are no longer trivial, especially in certain neighborhoods."
—Josh Bivens, Properly

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"Big Apple" battleground

Among one of the more contentious short-term rental battlegrounds is New York, where the vast majority of apartments cannot be rented out for less than 30 days unless a permanent resident is present in the unit at the same time. That particular rule, however, has done little to discourage short-term rentals in any meaningful way, though crackdowns by New York enforcement officials have ramped up in recent years.

Eugene Bordallo, a longtime resident of Manhattan’s East Village, found himself caught in the crossfire surrounding New York’s escalating crackdown in 2015, when Bordallo’s landlady began forcing tenants out of his rent-stabilized building, ultimately converting about 10 of the property’s 16 units into short-term rentals. Bordallo and his neighbors reported the activity to the city, and in 2017, his landlady was sued by New York for $1.2 million for operating illegal short-term rentals across three different buildings.

“We started reporting suspicious activity, and soon enough inspectors came out and they knocked on every door,” said Bordallo, who described the short-term rentals in his building as loud “frat pads.”

“I totally get the idea behind the origin of Airbnb, but it’s completely run amok,” Bordallo said. “People are just gaming the system.

“I totally get the idea behind the origin of Airbnb, but it’s completely run amok. People are just gaming the system.”
– Eugene Bordallo

The short-term rental situation in New York is expected to continue heating up, with the city passing a bill last year that would require Airbnb and other homesharing platforms to disclose information about its hosts, including their names and addresses.

When Airbnb sought to block that legislation in a lawsuit against the city, a federal judge in January issued a preliminary injunction against the city’s data collection efforts. That temporary injunction was overturned in mid-May, however, granting New York City the ability to obtain data on rental transactions in Manhattan, Brooklyn and Queens from Airbnb.

“The majority of activity in New York City on all these platforms are entire-home short-term rentals,” Wachsmuth said. “So there’s no dispute that they’re all illegal. But it’s nearly impossible to enforce any serious regulations without having data on who’s operating listings. And in the next few years, I think that the regulatory trend toward cities figuring out how to get this data is going to intensify.”

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Short-term rentals rules and regulations

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San Francisco

Once you have received a Short-Term Residential Rental Registration Number, you may:
• Put up listings on hosting platform websites (include your registration number in all listings).
• Rent a portion of your unit for less than 30 consecutive nights while you are also present for an unlimited number of nights per calendar year.
• Rent a portion or your entire unit for less than 30 consecutive nights while you are not present for a maximum of 90 nights per calendar year.

What you may never do with your registered dwelling unit:
• You may never rent your residential unit or a portion of your home for more than 90 nights per calendar year while you are not also present overnight during the time of the guests’ stay.
• You may never rent illegal residential units or those areas within your home that were built without completed building permits.
• If you are a tenant in a rent-controlled unit, you may never make more than your monthly rent from your short-term rental fees charged in the same month to guests.
• You may not offer more than five individual short-term rental reservations within your dwelling unit at the same time; i.e., offer no more than five individual beds as separate, bookable listings.

New York City

• You cannot rent out your entire apartment or home to visitors for less than 30 days.
• You may have up to two paying guests living in your household for fewer than 30 days, if every such guest has free and unobstructed access to every room and to each exit within the apartment and has the right to use at least one bathroom.
• You must be present during the guests’ stay if it is for less than 30 days.
• No key locks may be installed on any internal door as all occupants in the premises need to maintain a common household. A common household exists when every member of the family and every guest has access to all parts of the dwelling unit.
• Property owners will be issued a violation for any illegal short-term rentals at their property, even if it is conducted by tenants. Under the city’s Administrative Code, property owners are responsible for ensuring their properties are maintained in a safe and code-compliant manner at all times.
• New York state law also prohibits the advertising of an apartment in a Class A multiple dwelling (generally, a building with three or more permanent residential units) for rent for any period less than 30 days. Fines for doing so range from $1,000 to $7,500 and will be issued to the person who posts the advertisement.

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Short-term rentals rules and regulations

San Francisco

Once you have received a Short-Term Residential Rental Registration Number, you may:
• Put up listings on hosting platform websites (include your registration number in all listings).
• Rent a portion of your unit for less than 30 consecutive nights while you are also present for an unlimited number of nights per calendar year.
• Rent a portion or your entire unit for less than 30 consecutive nights while you are not present for a maximum of 90 nights per calendar year.

What you may never do with your registered dwelling unit:
• You may never rent your residential unit or a portion of your home for more than 90 nights per calendar year while you are not also present overnight during the time of the guests’ stay.
• You may never rent illegal residential units or those areas within your home that were built without completed building permits.
• If you are a tenant in a rent-controlled unit, you may never make more than your monthly rent from your short-term rental fees charged in the same month to guests.
• You may not offer more than five individual short-term rental reservations within your dwelling unit at the same time; i.e., offer no more than five individual beds as separate, bookable listings.

New York City

• You cannot rent out your entire apartment or home to visitors for less than 30 days.
• You may have up to two paying guests living in your household for fewer than 30 days, if every such guest has free and unobstructed access to every room and to each exit within the apartment and has the right to use at least one bathroom.
• You must be present during the guests’ stay if it is for less than 30 days.
• No key locks may be installed on any internal door as all occupants in the premises need to maintain a common household. A common household exists when every member of the family and every guest has access to all parts of the dwelling unit.
• Property owners will be issued a violation for any illegal short-term rentals at their property, even if it is conducted by tenants. Under the city’s Administrative Code, property owners are responsible for ensuring their properties are maintained in a safe and code-compliant manner at all times.
• New York state law also prohibits the advertising of an apartment in a Class A multiple dwelling (generally, a building with three or more permanent residential units) for rent for any period less than 30 days. Fines for doing so range from $1,000 to $7,500 and will be issued to the person who posts the advertisement.

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A World of tightening regulations

New York isn’t alone in its attempt to effectively devise and enforce short-term rental regulations. In London and Paris, tightening regulations have limited the number of nights per year that hosts can rent out their property. Paris also requires hosts to register their rental properties with the city.

Susie Hollands, founder and CEO of the realty group Vingt Paris, said the rules have put a damper on vacation-rental listings.

“In Paris, many people have sold their short-term rental properties or converted them into long-term rentals,” she said. “When people say ‘Oh, we want to invest in a property and use it as a short-term rental,’ we have to explain the situation to them. They have to be careful; you can’t just put your Paris property on Airbnb like you might in Mexico or somewhere else. And the city’s not letting up on it.”

"You can’t just put your Paris property on Airbnb like you might in Mexico or somewhere else. And the city’s not letting up on it.”
– Susie Hollands, Vingt Paris

The short-term rental situation appears to have also hit a boiling point in Spain, where cities like Barcelona, a market notoriously plagued by overtourism, have implemented short-term rental licensing requirements to enable more government oversight.

In Madrid, a recently approved mandate requires short-term rentals in the city’s center to have a separate entrance apart from the rest of a residential property, meaning guests cannot have access to entryways or elevators used by regular residents.

Tine Mathiassen, founder and CEO of the international real estate group Casamona, which has offices in Barcelona, Copenhagen and New York, said, “The problem in Barcelona is that [the onus is now on] you to prove that you are not renting out a property as an Airbnb. The city can levy fines without having 100% proof of what’s going on. People are really scared of it and are not doing it anymore. A lot of properties are for sale because people are selling out of the [short-term rental] business.”

Dense urban centers aren’t the only place where local governments have butted heads with short-term rental operators and platforms.

Traditional vacation markets such as South Lake Tahoe, Calif., for example, have also made headlines in recent months over newly passed regulations that severely limit legal short-term rental inventory.

A screenshot of AirbnbHell.com, an online platform for guests, hosts and neighbors to air grievances against the homesharing giant.

A screenshot of AirbnbHell.com, an online platform for guests, hosts and neighbors to air grievances against the homesharing giant.

A screenshot of AirbnbHell.com, an online platform for guests, hosts and neighbors to air grievances against the homesharing giant.

Dan Weber, founder of the website AirbnbHell.com, which provides an online platform for people to publicly air grievances against the homesharing giant, said he sees two major issues regarding regulatory complaints.

“The first is the sort in New York, San Francisco, L.A. or anywhere that has a very high population density,” Weber said. “The primary complaint in those areas is that short-term rentals are jacking up the prices, making it impossible to live there. But then there’s the second kind of issue, and it is one that can pop up anywhere, including rural areas. And that is the ‘I don’t want a party full of strangers happening every weekend next to my home’ complaint.”

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Airbnb listings in the Roads neighborhood just outside downtown Miami, where residents are battling the spread of homesharing. Earlier this year, a judge overturned an injunction that blocked enforcement of a short-term rental ban in single-family neighborhoods in Miami, including the Roads.

Airbnb listings in the Roads neighborhood just outside downtown Miami, where residents are battling the spread of homesharing. Earlier this year, a judge overturned an injunction that blocked enforcement of a short-term rental ban in single-family neighborhoods in Miami, including the Roads.

Airbnb listings in the Roads neighborhood just outside downtown Miami, where residents are battling the spread of homesharing. Earlier this year, a judge overturned an injunction that blocked enforcement of a short-term rental ban in single-family neighborhoods in Miami, including the Roads.

Neighborly nuances

The Roads, a suburban neighborhood just outside downtown Miami, is just one of many battlegrounds where the fight has centered on the latter point.

Katie Gant, president of the Miami-Roads Neighborhood Civic Association, said, “Our neighborhood is the first single-family neighborhood before you get to the downtown core, and because of that, we’ve had a lot of issues with Airbnb. I’ve got a four-bedroom house near me that an investor rents out, with each bedroom listed separately. At one point, they also had a listing to rent out the driveway for RV parking. And then, a couple houses down, there’s a big home that’s rented out for bachelor parties, sometimes with DJs outside by the pool. It doesn’t make me, with my kids, feel safe.”

While jurisdictions like South Beach have managed to deploy fairly concrete regulation and enforcement measures over the past year, the Roads has remained in limbo due to a 2017 court injunction that blocked enforcement of a short-term rental ban in single-family neighborhoods in Miami. Earlier this year, however, a judge overturned that injunction, leaving the door open for potential crackdown efforts.

Still, as much as Gant and other residents of the Roads welcome some form of regulation, she acknowledges the need for nuance and compromise when it comes to enacting measures that work for the majority of residents.

“The feelings are mixed,” Gant said. “We travel all the time, and we stay at Airbnbs. Many of the young families in our neighborhood do the same. I use Airbnb. I love Airbnb. But there needs to be a balance.”
Not surprisingly, Airbnb takes issue with some of the criticisms that have influenced recent legislation as well as claims that the company is uncooperative on the regulatory front.

"We travel all the time, and we stay at Airbnbs. I use Airbnb. I love Airbnb. But there needs to be a balance.”
– Katie Gant, Miami-Roads Neighborhood Civic Association

“Any city that is willing to construct rules that make it possible for homesharing to flourish, grow and exist in that community, we generally see that as a step in the right direction,” said Airbnb head of public affairs Christopher Nulty.

He added that Airbnb’s business is far less reliant on gateway cities like New York, London and Paris than it once was.

“Obviously, there are exceptions to that, where rules are overly restrictive,” Nulty said. “But for the most part, cities deciding to regulate is a good thing.”

Nulty pointed to San Francisco, where Airbnb and the city have established a short-term rental registration system, as an example of a market where regulations have been relatively equitable. He also cited fair and progressive approaches being taken in Philadelphia, Tennessee, Arizona and San Jose, Calif.

“Every city is different,” Nulty said. “What works in one city might not work in another. Our focus has always been on working with communities to create rules that are very much tailored to what makes sense for them.”

“What works in one city might not work in another. Our focus has always been on working with communities to create rules that are very much tailored to what makes sense for them.”
– Christopher Nulty, Airbnb

David Jacoby, president and co-founder of the vacation-rental tech startup Hostfully, is an Airbnb Superhost and a board member of the city’s Home Sharers Democratic Club. He agreed that the measures in San Francisco have by and large been successful. San Francisco hosts can list a short-term rental only if it’s also their primary residence, where they must reside a minimum of 275 days out of the year. They must also register their property with the city.

“San Francisco was one of the first cities that really thought about putting in some fair regulation,” Jacoby said. “And I think what’s happened here is a pretty good compromise. It’s not a huge win for anyone, but it’s kind of fair all around.”

Jacoby added, however, that after the registration requirement went into effect just over a year ago, the number of short-term rentals available in the city plummeted, with “around half” the San Francisco listings on Airbnb disappearing virtually overnight.

“Everyone’s been saying, ‘We need to focus on affordable housing here in San Francisco. We need to put these restrictions in place,’” he said. “Well, all these restrictions have been put in place, but where is the decrease in housing costs here in San Francisco? It hasn’t moved the needle.”

"All these restrictions have been put in place, but where is the decrease in housing costs here in San Francisco?"
—David Jacoby, Hostfully

Airbnb’s Nulty similarly shot down the idea that Airbnb is to blame for the city’s affordability crisis.

“The hotel industry has invested tens of millions of dollars propping up studies and putting academics on their payroll,” he said. “The studies ignore some very important things, one of which is that in many cities, there are all sorts of rules preventing smart development.

You don’t have to look further than San Francisco to understand just what bad housing policy does to rent prices. Meanwhile, we’ve heard from tens of thousands of hosts who have told us that their ability to rent out their home is what is making it possible for them to stay in their home.”

Despite expressing optimism over the future of short-term rentals, Airbnb still appears to be hedging its bets. The company has diversified its listings over the past year, ramping up inventory of boutique hotels on its platform and acquiring the hotel booking app HotelTonight this past March.

A Niido Powered by Airbnb apartment-hotel complex in Orlando.

A Niido Powered by Airbnb apartment-hotel complex in Orlando.

A Niido Powered by Airbnb apartment-hotel complex in Orlando.

After experimenting with real estate developer partnerships via its Niido Powered by Airbnb apartment buildings, Airbnb announced in April that it would also be launching an apartment-hotel hybrid accommodation in midtown Manhattan designed to combine “the features of a luxury hotel with all the comforts of a home.” Notably, that project’s inaugural units will be housed in 10 floors of a commercial building, rather than residences.

According to Makarand Mody, assistant professor of hospitality marketing at Boston University’s School of Hospitality Administration, all three moves are “likely Airbnb’s response to the fact that they’re reaching some saturation in terms of being able to bring inventory online quickly.”

Meanwhile, with the short-term rental industry’s legislative shake-up showing no sign of abating any time soon, McGill University’s Wachsmuth said he views Airbnb as being in a rather precarious position.

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