Watch Out!: Short-term Rentals

October 25, 2016

AirBnB, VRBO, HomeAway, and other internet platforms allow people to rent out their properties for short-term stays.  Owners like the boost in income while neighbors, home owner associations, and localities worry about the under-regulated influx of strangers.  So, are these short-term rentals a good thing?
Positive Aspects of Short-term Rentals
Property owners like short-term rentals explain that short-term rentals provide extra income, they allow the owner to meet new people, they enable the owner to learn new business skills, and the internet medium through which these rentals rely enables owners to connect with a large audience of renters.
Would-be renters like short-term rentals because they can be cheaper than nearby hotels, they add variety to a trip, they enable renters to find rooms where no hotel rooms are available (like Chicago this year during the World Series, Go Cubs Go!), and, after all, its all the rage on the inter-web these days.
Negative Aspects of Short-term Rentals
One complaint of short-term rentals, especially in condominium buildings is that “neighborhood residents find strangers in their midst uncomfortable” and that when they come home they do not know if “[they]’ve got a trick, a poker game or a cocaine deal going on next door.”
Other complaints include misleading ads and property descriptions, slow online reservation systems, some hosts are not so wonderful, the rental space may lack security, reviews can mislead would-be renters, and hotel amenities may be absent.
Local governments are concerned that short-term rentals, secured over the internet, allow property owners to bypass the taxation that normal hotels pay.  States and cities also worry that short-term rental locations lack the security enjoyed at traditional hotels because it is difficult for renters to determine how safe the local area is.
How Localities are Handling Short-term Rentals
States and municipalities have responded in a myriad of ways.  New York City banned short-term rentals on AirBnB entirely.  Austin stopped licensing anyone who wants to rent their property for less than 30 days.  Chicago responded by increasing taxes on short-term rentals to 21%.
San Francisco passed an ordinance that requires residents listing their property on AirBnB to register their property with the city and county.
How the Sites have Responded
“It’s not every day that a major tech company sues its hometown. But that’s exactly what just happened . . . Airbnb sued the city and county of San Francisco over” the registration law it passed.  AirBnB does resists the restrictions that have been emplaced by cities and states interested in regulating its business.

The varied approaches cities have taken to govern short-term rentals makes “legal restrictions on short-term rentals . . . confusing”and lacking in uniformity.

To make matters worse, websites like AirBnB “provide little help to prospective hosts to understand or comply with” new laws.  They have, however, taken steps to protect themselves by filing lawsuits.
While the explosion of short-term rentals provide renters with flexibility and property owners with income, both sides need to take steps to protect themselves.  Localities will likely continue to regain control of the industry, but they may not be able to keep pace with rapid changes in technology that enable the short-term rental market.  Furthermore, it is not likely AirBnB and other sites will feel inspired to provide greater assistance.