Agenda Packet 9-23-19 Work Session

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It may be worse in Portland (who ironically, reached an early agreement with Airbnb), partly because the permit is so expensive ($178 to rent one or two bedrooms, up to $5,000 for three to five) and the rules so stringent, partly because the city has not been able to obtain the rental companies’ data. That most hosts do pay the taxes on their earnings implies they are not scofflaws and that an adjustment of the ordinance would turn them “legal.” It is difficult to tell if harm is being done, despite a Willamette Week article speculating that if the illegal Airbnb rentals disappeared, “as many as 1,718 homes could be made available to Portland residents instead of tourists.” (They don’t bother to add up the total days into a figure for full-time rentals.) Hosts without permits in Petaluma, CA also voiced concerns about the bureaucratic process inflicted on them, and considered the fees in addition to high property taxes to be somewhat of an insult added to injury. New Orleans’ French Quarter, likely a ground zero for STRs even before Internet-based platforms, has seldom enforced its ban on rentals under 60 days, and given the enduring nature of the practice in that city, coming to an arrangement that allows collection of revenue may be a nod to reality. Nevertheless the same battle as in other cities is being replayed, with a ban on STRs in the French Quarter and a temporary ban on issuing of licenses for whole-home rentals as of late 2018. The three instances in which cities can collect fees from STR hosts have been handled very differently even among large cities, as a chart in a Hurdlr article compares New York City, Los Angeles, San Francisco, Chicago and Austin. Three of the cities don’t even charge for a business license. Several have taxes that seem nominal compared to the 14% Transient Occupancy Tax charged in Los Angeles and San Francisco, yet San Francisco may be one of the compliant locations due to better relations between Airbnb and that city. The Oakland report above notes that STR businesses in that city had not been subject to the TOT until the city signed an agreement for Airbnb to collect the tax (the Community Compact). Even with that in place, they find what Airbnb is turning over is not the full amount. The Stulberg article mentions a possible pressure point, at least for properties fully given over to STRs: If a property is a de facto hotel it can be designated “commercial.” A balance may have to be struck between what can be realistically collected with the costs of monitoring compliance by hosts—which leads to another example of sharing economy entrepreneurship: Vendors who will monitor STR compliance for cities. Eugene and various other Oregon cities have availed themselves of this service, according to an August 2018 news story. Given that keeping STRs, and Airbnb, out altogether is a tall order, some cities have opted for measures to limit their impact. One means is to sequester them by restricting licenses to certain sections of town; the other somewhat opposite approach is to limit their density, thus dispersing them. At least a couple of communities in Oregon (see below) have gone these different routes. The Internet-based STR business model is so new that cities’ code responses have had to start from scratch, with first-try ordinances often being modified. Based on the above examples and others, the most effective legislative approach may be to require a reasonably priced license, have streamlined processes that don’t overly inconvenience the hosts, and have monitoring that doesn’t overstrain local government resources but which assures collection of taxes. Because crafting effective legislation can take several tries spread over months or years, the process should begin soon in order to take advantage of opportunities in the near future. A tale of two cities: The regulatory battle to incorporate short-term residential rentals into modern law. Dana Palombo. American University Business Law Review. 4/2, 2015. September 23, 2019, Work Session – Item 3