The Sharing Economy Part 1: Housing

May 18, 2016
Tagged:

summer

by Summer Frederick

Associate, Clarion Associates

 

Thanks to companies such as VRBO and AirBnB, now days it seems everyone is familiar with the housing sharing economy. Finding and renting a room, or an entire house for a short period of time is as easy as opening your computer and picking from a long list of available opportunities. As the market for such short term rentals has increased and become commonplace, it is becoming necessary for communities to address numerous accompanying issues on a comprehensive level, including:

  • community members’ safety,
  • loss of community’s revenue,
  • the reduction of available housing stock,
  • the affordability of housing,
  • general nuisances, and
  • potential negative impacts on neighborhood character.

General safety is one of the most voiced concerns related to short term rentals. These are primarily related to owner’s lack of insurance coverage for short term rental uses, as well as general safety concerns that stem from high turnover of unknown individuals in a neighborhood.

Because a house is typically taxed at a property tax rate and not subject to sales or use tax, communities see short term rentals as a loss of revenue that would have been collected if the guests had stayed in a local hotel.

Some communities are seeing investors purchase multiple single-family houses, or blocks of multifamily units for the express purpose of operating them as short term rentals. This business model reduces the number of available housing units for traditional long term rental or homeownership, potentially increasing the cost of the remaining available housing stock.

Nuisance concerns are usually related to increased traffic on residential streets, increased on-street parking in neighborhoods, and the potential for additional trash and noise generated by short term rental guests.

In more traditional single-family neighborhoods where commercial uses were not originally anticipated, issues related to potential changes in neighborhood character brought about by the introduction of short term rentals are a concern.

There is a wealth of examples of how communities are dealing with these issues, ranging from requiring owners to submit structural plans and maintenance schedules with fire marshals to ensure physical safety to requiring adequate off-street parking spaces so on-street parking is preserved. In order to regulate the number of short term rentals in an area, some communities require an owner to acquire a permit in order to operate a short term rental and allow only one permit per property owner. In other communities short term rentals are subject to a variety of taxes, such as hotel tax, business tax, and specific lodging taxes.

When considering how to address short term rentals, it is important to determine a community’s specific concerns. In some communities on-street parking is a primary concern. Elsewhere, loss of revenue is the number one concern for a community. Still other communities hold the availability of affordable housing stock as a high priority. Once concerns have been identified and prioritized, all solutions should be examined in order to decide what mix of regulations and requirements might work best.

Finally, for a community to successfully address the issue of short term rentals through requirements and regulations the available capacity for enforcement must be closely considered. Requiring short term rental owner register with a community requires the staff capacity to create and administer such a registration system. Requiring a specific short term rental permit necessitates a specific submissions, review, and approval process. The most robust and well-thought out regulations will only be as successful as a community’s ability to administer them.

The list of resources that provide information related to short term rentals is long. We encourage communities to directly connect with others to learn more about successful approaches to addressing short term rentals.

Check out these resources for additional information on shared housing:

This article is the first of a three-part Sharing Economy blog post series that originated from the Clarion Associates Sharing Economy webinar, which can be viewed here on our YouTube channel.

Photo Source: http://blog.airbnb.com/wp-content/uploads/2015/01/sundance2015_parkcity_derballa_23jan2015_00655.jpg?bce17c