Regulating AirBnB and short-term rentals

AirBnB and other web-based services provide a platform for hosts to offer short-term rentals to strangers for a fee. While some argue that the success of AirBnB and the rise of web-based markets are examples of capitalism at its best, the problem is that AirBnB and similar web services don’t always play by the rules and can harm communities if they are not appropriately regulated.

Companies like AirBnB argue that tourists who stay in short-term rentals contribute significantly to the local economy, but these tourists might have otherwise stayed in a bed and breakfast, whose livelihoods are then jeopardized.Critics of AirBnB charge that the company does not pay its fair dues in sales and occupancy taxes, unfairly competes with hotels and B&Bs that pay taxes and are heavily regulated and takes units out of the housing stock, thereby exacerbating affordable housing problems.

While hotels and B&Bs must have an employee on site 24 hours a day, abide by city ordinances such as those related to parking and follow strict health and safety standards, AirBnB rentals often do not.

Not playing by the rules allows AirBnB to keep costs down and charge renters a lower rate than hotels and B&Bs. AirBnB and rental hosts share the profits while communities must deal with the consequences, such as added traffic, noise, trash and a parade of strangers going in and out of the neighborhood.

Many cities around the country and in North Carolina are grappling with how to best address the rising number of short-term rentals in their boundaries. Based on my research on short-term rentals in Asheville, I believe that it is imperative that cities regulate AirBnB as they do other lodging businesses.

To reduce negative effects on residential neighborhoods, cities could:

▪ Step up enforcement of existing regulations, such as penalizing short-term-rental owners in residential zones.

▪  Create an ordinance that differentiates short-term rentals as a different type of land use (e.g. commercial) and then create an overlay district designating areas of the city where STRs may not be located, such as residential neighborhoods.

▪  Charge a one-time registration or permit fee to STR owners in locations where the STR is a permissible land use.

To level the playing field between B&Bs, hotels and AirBnB, cities could:

▪  Enact a registration fee and a yearly registration renewal fee for each STR, which will cover the cost of registration administration, inspections and enforcement of regulations.

▪  Develop health and safety standards for STRs that are similar to B&Bs and hotels.

▪  Require that STRs have appropriate liability insurance.

▪  Work with state and county government to ensure that appropriate taxes (sales and occupancy) are collected.

To reduce the impact on affordable rental housing, cities could set a cap on the number of STRs in each residential neighborhood and designate multi-family units used as STRs as a unique land use and regulate them more heavily to discourage conversion of long-term rentals or owner-occupied units to short-term rentals.

One major benefit of separately permitting, tracking and regulating STRs is that data on where they are located and changes in the supply and demand can assist city and state policymakers in tracking the impact on neighborhoods and housing prices and in crafting sound, evidence-based policies. Currently, simple questions such as how many short-term rentals are in each neighborhood cannot be answered.

AirBnB is only one of many online rental web services, and this market continues to grow. I urge local and state government entities to consider regulating and tracking short-term rentals in order to address the negative neighborhood consequences, level the playing field for other lodging businesses, mitigate the effects on affordable housing and collect relevant data that will allow for informed and appropriate regulations in the future.

This story was originally published April 15, 2015 at 4:27 PM with the headline "Regulating AirBnB and short-term rentals."