The short-term vacation rental debate should be carefully considered by everyone involved.
With teasers like “Italian Villa Near Wineries,” “Garden Retreat in Sonoma with Pool” and “Magical Beachfront Getaway,” is it any wonder an increasing number of people who visit the North Bay are choosing a short-term vacation rental versus staying in a hotel? Online companies like Airbnb.com, VRBO.com, and Flipkey.com offer more than 1.2 million, 1 million and 300,000 rooms and homes around the world, respectively—and those numbers are growing fast. Homeaway.com, another online vacation rental company, had more than 1 million listings at the end of 2014—17 percent more than it had in 2013.
Clearly, the numbers show an overwhelming attraction to the concept by both hosts and guests. But the growth in online vacation rentals has also created some growing pains, as concerns have surfaced about unfair competition with hotels, the loss of housing, and residential neighborhoods being taken over by short-term rentals.
Many reasons have been cited for the increase in private home and room rentals, but one of the most likely causes is simply the ease with which these online companies have made the whole process—both for hosts and visitors. The idea of renting out a room in your home, or a whole property, is nothing new. But technology has opened up the concept, literally, to the world.
The Internet has made the practice quicker and easier than ever before, allowing anybody to bring the world to their doorstep.
“In the past, there just wasn’t a way for someone to say, ‘I have a room here. Hey world: Come and rent it for a week!’” quips Liebster. “At best, they might post their summer home in some publications as being available to rent; that was normal practice. What’s new now is the idea that you can reach the entire planet.”
The appeal, for many, goes beyond the cost effectiveness of this mode of travel to the personal connections that take place along the way. Hosts often recommend local attractions, eating establishments and events. It’s allowed guests to “live like a native,” even if for a short time, in their city of choice.
“We’re getting back to a more traditional model,” says “Andi,” an Airbnb host who occasionally rents out her San Rafael home. “There was a long period of time in American history where people would take in boarders to subsidize their income, or they’d take things into their own hands in regards to their property and how to share it. That kind of thing happened all the time. Then hotels came along and brought us to where we are now. Don’t get me wrong, I love a great hotel experience! But [these online sites] are bringing us back to a simpler time with those personal connections—by way of a very elaborate, technical algorithm, ironically.”
As the idea of short-term homesharing as a legitimate vacation option has spread, so has people’s realization that they can use their home—for most people, their largest expense—to supplement their income (and, for many, to make ends meet). For others, it’s been a natural transition from what they were already doing with extra space or properties they owned and loaned out to visiting family and friends.
“We have a cabin in the backyard that we call our guest house, and our friends have been staying there for 15 years,” says “Jean,” who started renting out her Sonoma County cottage a few months ago during times when her family and friends weren’t using it themselves. “Most of the time it’s vacant, but it’s served a lot of purposes over time. We have people in and out all the time, so when I heard about Airbnb, I thought, ‘Gosh, people would actually pay me to stay here when it’s already pretty much set up?’ We decided to try listing it on the site.”
Growing pains
Vacation rental sites mean people are able to make money with their home, which they then spend in their communities (strengthening the economy overall). And more tourists are flocking to the North Bay due to the additional accommodations now available (and spending more money in the communities they visit). So what’s the problem? Why all the talk of needing additional regulation? Is this just another case of “big government” trying to capitalize or a few disgruntled neighbors getting irritated by tourists partying on their formerly quiet street? Yes and no.
While it’s true that many neighbors have complained about their neighborhoods ceasing to have the sense of community they once had, and local municipalities have begun to realize there’s a possibly large, untapped revenue stream in uncollected TOT (tenant occupancy taxes, which are paid by visitors based on nights stayed in a hotel, inn, tourist home or house, motel or other lodging), there’s actually more to it than that. A real area of concern, raised by all three North Bay counties, is the fact that the housing vacancy rate here is very low, hovering between 1 and 2 percent. The fear—perhaps the reality—is that the proliferation of short-term vacation rentals is diminishing the already small pool of possible long-term rentals for community members who want to live and work here.
This is especially true of those vacation units that are rented as a whole house (versus a single room in an already occupied home). But it’s easy to be swayed. While it may be more work to continually advertise one’s rental, communicate with guests, and clean the home every few days, the return is much higher when using a home as a short-term rental. By one estimate, the gross can be twice as high as a more traditional tenancy.
This profitability has led to another significant issue: the loss of entire neighborhoods in some areas.
“Some areas in [Sonoma County] were essentially developed for use as vacation homes, such as Sea Ranch and some areas of the Russian River,” says Tennis Wick, director of the Sonoma County Permit and Resource Management Department. “There’s an increased level of acceptance [of online vacation rentals] in those areas. But in others, it’s a real problem.”
Wick goes on to explain that, when areas that were originally zoned for single family residential homes become primarily short-term vacation rentals, it undermines county zoning ordinances. And that’s unfair to residents.
“It’s like rezoning most of the Bolinas homes to hotels. Some people have to live next to that without a choice,” says Mark Hug, a resident of Bolinas and advocate for regulation surrounding this issue. He’s witnessed the changing landscape of his community, such as school enrollment dropping by half. “It doesn’t need to be negative, but it needs to be regulated in some way. If we don’t do something, people will keep buying up homes in beautiful areas and, in 10 years, no more communities will be left.”
Solutions in the works
Most jurisdictions have not yet addressed the issue with specific ordinances or regulations, other than needing a basic permit (to operate the short-term vacation rental out of a home). The city of Napa, however, has been progressive, establishing municipal codes that include an ordinance specifically for short-term vacation rentals back in 2009. At the time, the city council created an ordinance that allowed homeowners to apply for vacation rental permits, with the idea that, as those homes got sold over time, the permits would not be transferable to the new owners and those vacation rentals would eventually cease to exist.
In 2009, out of about 75 applications, 44 homes were approved for permits. Today, there are 41 permitted vacation rentals left in the city of Napa. As part of the permit process and rules, these vacation rentals need to adhere to specific house rules, observe quiet hours restrictions, pay for annual inspections, mail a notice of intent to adjacent property owners, pay for annual licenses and submit TOT taxes to the city.
But even a brief search for vacation rentals in Napa makes it quite clear that the vast majority of those offered aren’t permitted, which actually makes things more difficult for those that are.
“I’m seeing a decrease [in renters of my home] because we have so many illegal rentals in the city of Napa,” says Juliana Inman, one of the licensed vacation rental homeowners. “Those of us charging 12 percent hotel tax are at a competitive disadvantage, because none of those [unlicensed] people charge any taxes. And it’s affecting bed and breakfast inns, because they have to charge a 14 percent hotel tax. We also pay annual license and inspection fees and do annual mailed notices to everyone within 500 feet of the home.”
On the bright side, there have been very few complaints to the city about those vacation rentals that are permitted.
As the number of unpermitted short-term vacation rentals has increased exponentially, the city of Napa has been steadily working on amending the current ordinance. There will be three primary changes. The first will establish a definition and criteria for what it’s calling “hosted accommodations,” in which a property owner lives in the home and rents out a room or two.
The proposed ordinance will expand to allow up to 60 of those permits. Second, it will change to allow the existing 41 permits to be transferred. Should one of those property owners decide to sell their permitted home, the permit will conditionally transfer; however, the new property owner will be required to file a form acknowledging acceptance of the rules and conditions associated with the property’s vacation rental permit.
Last, the new ordinance will increase enforcement provisions and allow for proactive enforcement measures.
“The current ordinance falls back on the enforcement requirements in the municipal code, which, in this case, is $100 for the first violation, $200 for the second violation and $500 for the third and any subsequent violations,” says Walker. “When you’re looking at folks who are renting rooms or homes for as much as $500 or $600 per night, a $100 first offense isn’t much of a deterrent. This new ordinance proposal will include some increased fines across the board and will also include more specific criteria for our code enforcement folks to look for when investigating violations.”
Paying their fair share
In Marin County, all short-term rentals must comply with the county’s TOT and business license requirements, although there currently isn’t a cap on how many licenses can be issued. Those that qualify as a “room rental” (renting out a room in an otherwise residential dwelling) are a permitted use in single-family residential districts. However, it seems the county is now realizing the need to implement additional requirements to regulate short-term rentals, especially through the Local Coastal Program (a planning document that identifies the location, type, densities and other ground rules for future development in the coastal zone).
“In the course of [the Local Coastal Program workshops], we were using data on units paying TOT provided by our finance department, and we noticed through data we were compiling from online and other sources that a sizable number of vacation rentals weren’t registered as paying the TOT,” says Liebster.
“We shared our information with the director of the department of finance, and he initiated a program to remind operators of their obligation. I understand there was a significant increase in compliance—and, consequently, an increase in revenue.”
The call for regulation of short-term vacation rentals has even reached state government in the form of Senate Bill SB593, introduced by California Senator Mike McGuire, whose district includes all of Marin, Mendocino, Lake, Humboldt, Trinity and Del Norte counties; in Sonoma County, it takes in Santa Rosa, Sebastopol, Windsor, Healdsburg, Geyserville and Cloverdale.
The bill would require electronic "hosting platforms" (such as Airbnb, VRBO and the like) to regularly report the addresses of, nights of use at and revenues obtained by California residences leased through the platforms. It would also prohibit the hosting platform from offering properties if the practice is prohibited by local law and would require the platform to collect and remit any applicable TOT if requested by the local government. Currently, while hosting platforms encourage their hosts to look into and abide by the laws of their local jurisdictions, compliance has largely been on an honor system.
According to SB593, “the author believes that online vacation rental businesses, described as ‘hosting platforms’ in the bill and exemplified by Airbnb and VRBO, force cities to bear the costs and burdens of their operation. Increased and undisclosed tourist traffic alters neighborhood character, creating additional demands on public safety. The author contends that the hosting platforms frequently ignore local government prohibitions on the renting of residences for less than 30 days and fail to collect and remit applicable transient occupancy taxes. Moreover, the increase in short-term vacation rentals reduces the availability of already scarce affordable housing.”
After concerns were raised by Consumer Watchdog regarding the invasion of privacy of consumers using home sharing websites and the fear that SB593 would essentially provide a “blank search warrant” to cities, the bill was tabled for the rest of this year and will most likely resurface next year with amendments.
Creating win-win solutions
So the question of what can be done remains. Clearly, the homesharing concept works better in some areas than others, and perhaps looking at where it’s operated successfully can give some clues as to an agreeable solution.
One successful situation involves homeowners who rent out their home occasionally to help make ends meet. They aren’t contributing to the housing crisis in any way, as they’re returning to their home at the end of the guests’ stay. They also have a vested interest in renting to smaller groups of individuals or families, who are less likely to party and trash the place.
“When rents spiked mercilessly within a short period of time [in Southern California], a lot of my peers started dealing with that by doing part-time Airbnb rentals of their homes,” explains Andi. “It seemed like a really great way to hold onto your home and subsidize your income as necessary. A friend of mine would stay with friends regularly on the weekend to free up her home in an area where there was a high demand for vacation rentals, not a lot of inventory, and in a place where residential rates were going up.
“In my view, that’s probably the best use of Airbnb or anything like it—affording residents the capacity to stay where they live. I know this is also happening to some degree in West Marin, where there’s also a high demand for vacation rentals but no hotels.”
Anecdotally, it seems there are a lot less problems with vacation rentals that are either on the host’s property or with the host living closely nearby. When the host is not in the area, people tend to have more of a “hotel mentality” and don’t treat the home as they would their own.
“One issue people aren’t really paying enough attention to is that 99.9 percent of the problems arise when there’s nobody onsite, either the owner or a manager,” says “Jean,” who rents out a permitted cottage on her Glen Ellen property and is literally surrounded by other permitted—and non-permitted—short-term vacation rentals in her neighborhood. “People who come and stay in my backyard have no intention whatsoever of causing a problem, because they know I’ll see it, smell it and hear it—and the sherriff will be here quickly. It’s not a workable situation to have a party when the owner is onsite. I think it makes all the difference in the world.”
Another benefit to living onsite (or close by) is that hosts, most likely, know their neighbors. That relationship and communication can be key to making the situation work for everyone involved.
“I think it’s really important that the neighbors have instant communication with the owner, because it’s to the owner’s benefit,” says Jean. “You want someone telling you, ‘Hey, there are 13 cars here and they’re having a bonfire on your lawn.’ I think there should be a rule that the neighbors have your immediate emergency number; that would be fair. If neighbors can’t reach anybody, they feel really frustrated.”
Another regulation some cities have implemented to help minimize problems is to limit the number of guests per home, based on the number of bedrooms. While the city of Napa, for example, takes these on a case-by-case basis, its general rule of thumb is to restrict overnight guests to two people per bedroom, one car per bedroom, and allow additional guests during the day to accomodate visits from family and friends. Cities could also limit the number of permits issued per neighborhood to keep the ratio of short-term rentals to long-term residents in balance.
The old adage “treat others like you want to be treated” certainly rings true in the vacation rental regulation debate. Homeowners feel it’s their right to use their home as they wish, and residents want to hold onto their neighborhoods and maintain a sense of community. As home-sharing websites continue to gain in popularity, it will take some creative thinking and magnanimous actions on all sides of the table—the websites, community leaders and policy makers, and the rental hosts and guests themselves—to create a win/win solution for everyone involved.
Airbnb: Growing a Movement, Conscientiously
San Francisco-based Airbnb.com, which started in 2008 and has quickly become one of the biggest travel buzz words over the past several years, today boasts more than 1.2 million listings in more than 190 countries around the world. The company prides itself on helping working and middle-class residents turn what’s typically one of their greatest expenses into a tool to help make ends meet through its home-sharing model. While, certainly, some hosts buy homes for the sole purpose of renting them out on a short-term basis, the vast majority of Airbnb hosts (an average of 82 percent) are simply renting the home in which they live. Often the money that these homeowners earn on the side can mean the difference in making the mortgage or rent.
According to a company spokesperson, “From its inception in 2008, the goal of Airbnb was to provide people with a unique travel experience. It has let people use something that’s been around for a while [home-sharing] to earn extra income and for people who are traveling to have a unique travel experience.”
That said, the company obviously recognizes the need for regulation to meet the needs of all involved, including those who would like to host, their neighbors and government leaders.
“Airbnb is a platform that’s been built on the premise of trust. It’s a big thing to open up your home or to stay in someone’s home,” the spokesperson continues. “Our goal is to provide an experience for people that’s positive and feels very comfortable. That’s why we have resources in place, such as a team of people who work with hosts; a 24-hour hotline that hosts, guests or neighbors can call; and a large trust and safety team. As part of our terms, hosts need to declare that they are complying with local law. We also have a responsible hosting page that goes into specifics in certain areas and helps with guidance.”
In Philadelphia, city leaders recently worked with Airbnb to enact legislation specifically enabling people to share their homes with certain caveats, such as only doing so up to 90 days per year before applying for a permit (with a permit, it’s legal to host for up to 1,280 days). With smart regulation, citizens can make ends meet, the city receives much needed TOT revenue, and the local economy gets a boost as well.
According to the company’s global impact study, 74 percent of Airbnb properties are located outside the city’s main hotel districts, and the typical Airbnb guest stays 2.1 times as long as typical visitors. Furthermore, 42 percent of guest spending is in the neighborhoods where they stay.
While Airbnb is committed to working with policy makers on further regulation and creating agreeable solutions, it’s nevertheless relieved to have SB 593 tabled for the immediate future due to privacy concerns.
“We’re glad that the California State Legislature decided not to move forward with burdensome restrictions after hearing the outpouring of concerns from tens of thousands of Airbnb guests and hosts,” says the company spokesperson.
“We’re committed to working with legislators to create regulation that is clear, fair and carefully addresses online privacy concerns. Airbnb is focused on making neighborhoods better places to live and visit, and part of that includes working with lawmakers to reach solutions that let us pay our fair share while enabling people to share their homes.”
