Solving the Problem of the Unchecked Rise of Short-Term Rentals

Best Best & Krieger LLP

The Internet has created innovative inroads into traditional vacation lodging. Websites like Airbnb, VRBO and Flipkey provide vacationers with affordable lodging in prime locations, furnished with all the comforts of a home. But, while short-term vacation rentals are a boon for travelers, they often create problems for municipalities.

The rise of short-term vacation rentals has eroded the affordable housing stock in many cities. Realizing there is more money to be made in short-term renting instead of long-term leasing, investors are now purchasing residential properties and repurposing them as short-term rentals. In some instances, investors have purchase entire apartment buildings to create Airbnb-style complexes. The increase in short-term rentals and corresponding decrease in housing stock has created a housing scarcity, driving up rent in some cities where short-term rentals are prevalent.

As neighbors are replaced with tourists, there is also an eroding effect on the residential character of neighborhoods. Rental owners and vacationers simply do not have the same investment in the neighborhoods that long-term residents do. Rental owners have little incentive to invest in improvements beyond what makes a property rentable. Likewise, renters have no incentive to care for the rentals as a vested property owner would or conduct themselves in a manner that long-term residents must to be a good neighbor. As a result, continually parked cars, loud music, and rampant littering from vacationers can be a constant source of frustration to the neighborhood. Indeed, in some cases, formerly peaceful neighborhoods have been converted to raucous vacation zones where inebriated guests and late-night parties become the norm. To add insult to injury, unlike hotels and motels, short-term rentals in most jurisdictions may not be paying transient occupancy taxes and other assessments that provide benefits to the community.

Short-term rentals also create other nuisance problems for neighborhoods. The potential for increased profits has led some owners to make unlawful modifications to their short-term rentals in an effort to create multi-family dwellings in violation of applicable building, housing and fire codes. The ability to acquire higher occupancy by illegally converting a garage to a bedroom or by adding unpermitted kitchens or whole stories becomes too great a temptation. These illegal conversions not only create potential health and safety concerns, but also exacerbate the unwanted touristic activities mentioned above, which further frustrates adjacent homeowners who did not sign up to live next to a quasi-hotel, motel or bed and breakfast.

Municipalities do have tools to combat the problems created by short-term rentals. Cities and counties should examine their local codes to make sure they provide the necessary provisions to regulate short-term vacation rentals and the problems they create. In some case, zoning codes, including traditional definitions for hotels and motels, will need to be modified to encompass this new model of vacation lodging. Likewise, local nuisance definitions and enforcement provisions will likely need to be expanded with short-term rentals in mind. Communities that wish to permit these rentals must consider how best to regulate them and must ensure that they are paying transient occupancy tax and other assessments. Some cities and counties may also have to enact new ordinances to identify, control and mitigate the use and location of short-term rentals with carefully tailored reporting, permitting, and enforcement procedures.

Where appropriate local ordinances are in place to control short-term rentals, but owners ignore the law, or simply treat the consequences of non-compliance as a cost of doing business, municipalities must be prepared to pursue enforcement. In such instances, nuisance abatement and receivership actions can be effective tools against recalcitrant owners.

Additional Resources

Watch “From Code Compliance to Fighting Fire-Traps: How to Deal with Dangerous Dwelling in Your City,” a three-part webinar series by BB&K available for free by clicking here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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