Short Term Rentals and the Sharing Economy

Single family housing that used for short-term vacation rentals through web services such as Airbnb or VRBO have gotten negative attention here in San Diego of late.  Even though the complainants point to specific behaviors they dislike, the underlying tone of the discussion is that they don't like the sort of people who come America's Finest City to vacation.  I am probably not going to persuade those folks, because their argument is rooted in emotionalism to which they will not admit.  For the rest of us who realize that sometimes real problems arise from short term rentals, I think we need to propose a light regulatory touch that purges the worst abuses.  Technology, primarily the internet, is lowering the cost of bringing underutilized assets to market, whether its vehicles, homes or spare CPU cycles on our computers; these assets can return rents to the owners.  Unfortunately, we have a tax and regulatory environment that doesn't address the mixed use of assets very well.

I have engaged with a number of people on this issue and the key complaints can be boiled down to bad behavior by the renters, to include late night loud parties, not cleaning up trash and boorish behavior.  The answer is to hold the owners accountable, who can the hold the guests accountable.  Just as owners are rated on airbnb, so are guests.  Guests whose behavior threatens owners with loss of income will give guests bad reviews which in turn create a disincentive for the bad behavior.  For serious violations one might have to call the police, but that is always true.  In the past three years, I have had the police in my neighborhood in force on two different occasions that had nothing to do with short term rentals; there aren't any guarantees in life.

Consider this scenario. Two sets of parents from Fresno have students attending San Diego State. They want to visit their kids over a long weekend, enjoying a bit of San Diego, and also bringing a bit of home to their kids. By sharing a home, they keep down expenses, it costs less than renting three hotel rooms. They can also make their stay cheaper by buying groceries instead of going to restaurants and cooking them in the furnished house. They can relax more freely in the home atmosphere provided by the short term rental.

A policy of restricting short term rentals denies them this opportunity. Do we think that only the well off should visit our city? Wouldn't we want to welcome these fine folks to our city? This is why I would like to see a light and even-handed regulation of short-term rentals. It can be a source of joy for so many guests in our city.

Consider this too, people are having a hard time making ends meet.  Renting out their home helps.  "Elise Howell, who lives off a small pension and about $11,000 a year from substitute teaching, says she depends heavily on the money she makes from renting out a room in her two-bedroom Hillcrest condo for up to $79 a night."

In a 2007 analysis of the issue, the City Attorney stated that current regulations do not prohibit short term rentals.  However, the San Diego Vacation Rentals Manager's Alliance notes that owners who rent out room short term must collect the Total Occupancy Tax of 10.5%.  This is the position of the City Treasurer's office as reported in the U-T.

If the city is going to regulate short term rentals, I look forward to minimal regulations that allow neighbors to identify abusers, but allow owners to use their property as they see fit.  We should set a level playing field and welcome the additional visitors to America's Finest City.

Council Member Lorie Zapf (CD-2) recently posted proposed regulations that looked reasonable to me.  The key points were:

 Define the term “Short-term Vacation Rental” in the Municipal Code.
 Require a renewable permit for the operation of any short-term vacation rental city-wide.
 Determine permit fees that are cost recoverable and will be used towards the management and enforcement of the permit.
 Require a posted 24/7 contact with a name and phone number on the property as part of the permit.
 Enforcement process that includes fines and revocation of permit for repeat violators.
 Identify additional funding for the Community-Assisted Party Program (CAPP) to respond to citizen complaints.
 Require TOT collection and payment from short-term vacation rental hosts per Municipal Code. 

While this might lead to possible abuse by disgruntled neighbors, these proposals seem reasonable to solving the supposed problems of short term rentals.

Short Term Rental Issue in San Diego

There is a petition on change.org asking the mayor and the city Council to ban short-term rentals in the city of San Diego. I'm not going to link to the petition because I don't want you to sign it. A total ban would be ridiculous and an invitation for people to just flaunt the law. However, there are some issues that ought to be dealt with regarding short-term rentals.  Some negative comments about short term rentals from my neighbors on Next Door.

• The vacation rental on our street is basically a hotel. New people, often for only two or three days. Lots of parties lots of noise. Sometimes they book it for a wedding.if it was the neighbor getting married, nobody would object to them having a wedding at their house.
• It makes me upset and ruins my quality of life by having a "hotel" on my street in my quiet residential neighborhood. It is not safe for my child and threatens my well being. Especially when I am verbally assaulted by a transient occupant who thinks it's ok to party until 2:30 in the morning.
• I know that some vacation rental owners do NOT pay TOT [10% tax levied only on short-term rentals], which one must remit voluntarily. Most of these owners do tend to rent for longer terms [& thus do not have to pay TOT], but 2- & 3-week rentals are common, as in the beach areas, so those who do not pay TOT on their short-term rentals are cheating the city.
• As long as the city is receiving TOT from a vacation rental, there is no reason for them to care if it is a full time mini hotel or not. Houses in residential neighborhoods should not be turned into full time mini hotels, that is why we have hotels in the first place.

Other cities have taken some steps to regulate short-term rentals.  Portland's approach, however, seems a little heavy handed.

Portland will start issuing permits for its first legal short-term rental operations in private homes as soon as September.
The Portland City Council on Wednesday gave its OK for Portlanders to rent out one or two bedrooms in their home over-the-counter, $180 permit after an inspection and notifying neighbors.

$180 permit? Why?  This will only encourage people to evade the system and reduce the extra tax revenue that Portland could receive.  Further, there is no need for an inspection. This market is very much self regulating, with renters providing feedback on the quality of their stay.

A better approach for San Diego would be very light touch regulation. Owners who want to do a short-term rental, should pay a very low fee, maybe $10, so that the city is aware of their activity. They should also pay the same transient occupancy tax (TOT) that hotels do. If owners don't control their rental properties their permits could be revoked.

Exit question: If I rent out my home on airbnb.com do I get to vote on the use of the TMD tax? Would I have standing to sue that it violates Prop 26?