Policy Wonk: Airbnb spells housing trouble

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The so-called sharing economy has been with us for a long time: hotels, taxis, laundry centers, tool and equipment rentals, car rentals, and more.

For a price, buyers can obtain what they occasionally need. Providers are usually subject to reasonable regulations designed to insure the appropriate location of the provider, fairness, and user safety.

And the occasional use of a residence or a spare room, to provide shelter (for short, and sometimes longer, periods of time) to a friend, relative, or stranger, it has been with us since people started living in caves. These forms of sharing are not the problem. We need them; we’re more or less comfortable with them. They’re not going away.

Problems arise, however, when that which was done occasionally (provided by a few, for the benefit of a few) explodes in use with the aid of new communication tools. A brave new marketplace (hundreds, then thousands of providers,and a similar increase in users) all looking for economic advantage emerges almost overnight.

That’s where we are with Uber (the ride-sharing service) and with Airbnb (short-term housing). In Maine, the center of gravity of these phenomena are cities like Portland and Bangor.

But it’s not limited to urban settings; there are other places where lots of people want to be at certain times of the year; Sugarloaf, Bar Harbor, Camden, Ogunquit (and similar venues) would do well to monitor what’s happening.

The short- and long-term problems posed by the shared housing services are real. The providers of a room or a whole house are not licensed; their numbers are not limited; their premises are not inspected; the location of providers often does not comport with existing zoning laws. All of these regulatory measures need to be addressed.

Beyond these broad issues, who monitors and/or inspects whether the housing provided has modern fire-safety warning devices, safety doors, and sufficient exits? Whether fire extinguishers or sprinkler systems, parking, heating, and sanitary facilities are adequate and working? Who should pay for this monitoring? How? When?

These are not overblown potential risks. Six people died on Noyes Street in Portland two years ago because both the provider and the city failed to monitor the actual living conditions in leased premises.

In the longer run, the exploded desire of a relatively few residential property owners to capture the high profits of short-term rentals creates an over-supply of these units. This shrinks both the number of houses for sale and the number available for long-term rental. This drives up the purchase price of home ownership, and the price of rental housing for those who would live permanently in the city.

Portland is experiencing these realities in the extreme. At the same time hundreds of Airbnb units sit idle for large portions of the year, awaiting the next short-term rental opportunity.

In the aggregate there is an oversupply of housing units, but by conflating the short-term housing market with the long-term housing market, we have created profits for the relatively few providers of short-term housing, cost savings for visitors/renters of these units (they are cheaper than hotel costs), and steeply rising prices and costs for the larger number of people who live (or would live) in the city.

In sum, we have turned the housing market on its head. We have allowed the uncontrolled growth of Airbnb to create a shortage of permanent, affordable, owner-occupied and rental housing, which is the type of housing we need most.

The city is awakening to these realities, but we’re moving too slowly and too timidly.

Recent staff materials presented to the city’s Housing Committee provide a wealth of useful information, but a draft for regulating short-term rentals in Portland is a page and a quarter long, and none of its 18 points is more than a sentence long. There is no detail, few precise requirements, and no indication of how these requirements will be enforced.

More importantly, the draft seems to eliminate commercially owned housing from being used for short-term rentals, but allows such rentals in residential structures “owned by the host as their primary dwelling.” In my view, this will not get the job done.

The city needs to deal with all short-term rentals; short of prohibiting them altogether (as some cities have done), we should at least regulate the total number of such rental units in the city, and, through zoning, their location. We need more carefully delineated safety regulations protecting those who utilize such housing.

Finally, the city must recognize that housing policy is not designed to protect the windfall profits that short-term rentals create for a few property owners; nor is it the city’s duty to provide lower-cost accommodations for visitors to Portland.

Our housing policies should focus on existing and new permanent residents. These people are our present and our future, and they need to be able to buy or rent affordable housing.

Orlando Delogu of Portland is emeritus professor of law at the University of Maine School of Law and a longtime public policy consultant to federal, state, and local government agencies and officials. He can be reached at orlandodelogu@maine.rr.com.

  • soxnut007

    What a short-sighted and poorly-argued opinion piece. Portland most definitely has a housing shortage but this is because of a housing shortage. Banning or highly regulating Airbnb or other short-term rentals won’t solve that. Only increasing housing density and building more infrastructure will do that. Also, as someone who has used Airbnb to stay in Portland before when the cheapest room available was $450 a night for a bad hotel, I can tell you that I felt my rental here was cleaner and safer than that middling hotel I was looking at.

    The author mentions places like Sugarloaf, Bar Harbor and Camden as other locations where these short-term rentals exist. They exist because there is not enough hotel infrastructure in those areas. We can either have Airbnb and the like as an option or we could build more larger hotels. I don’t think any of us want the latter.

    With any new technology that challenges an entrenched business like the taxi cab companies or the hotels, we are going to see calls from those businesses’ lobbies to treat the new participants ‘fairly’, but why didn’t those businesses adapt to treat their customers fairly in the first place? Our first inclination should not be to ban or regulate these companies out of existence, it should be to support innovation while thinking of broad, growth-oriented ways to solve our problems rather than defaulting to restrictions.

  • EABeem

    We have music file sharing and citizen journalists, now we have citizen chauffeurs and citizen innkeepers. What next, citizen physicians? Orlando Delogu is 100% correct, Airbnb needs to be licensed, regulated, inspected and insured.

    • Rick M.

      “Citizen”? Most of us are legal citizens, sir, regardless of chosen vocation. It is clear you mean “licensed by a government agency”. Not surprising, given your ultra-liberal big-government open-border world view.

      People need to play an active role in their lives and decisions, not the government. The market can and will regulate itself.

      Orlando Delogo is 100% delusional and needs to hang it up…

      • EABeem

        Yes, I want to make sure any rooms rented to the public have been inspected. Not fair to the public to have unlicensed and potentially unsafe rooms to rent. Not fair to Maine’s substantial lodging industry to have yuppies and hipsters renting out their pads to tourists.That’s not a political stand, that’s common sense, something I realize is sorely lacking on the right these days.

        • Jimmy_John67

          Ed, legitimate question for you. Given your opinions on private party short term rentals, what are your thoughts on private party car sales? Cars are being sold by private citizens to other citizens with no inspection or oversight and potentially undisclosed safety issues which can result in injury and possibly death. In addition, private party sellers do no need to meet the same basic safety regulations that car dealerships must comply with creating a competitive disadvantage. Do you also support government regulation and oversight of private party car sales?

          • EABeem

            All automobiles on the road in Maine, whether sold through a dealer or private sale, must be inspected, registered and insured annually.

          • Jimmy_John67

            That’s fair. So you would favor a statewide set of regulations requiring annual safety inspections of short and long term housing rentals?

          • EABeem

            Not sure annual inspections would be realistic or necessary. I’m just in favor, in general, of making sure accommodations rented to the public are safe and the people renting them are responsible.

          • Jimmy_John67

            So if there was not an inspection process how would there be assurance Airbnb (or any rental for that matter) was safe? Smoke detectors fail, chimneys aren’t properly cleaned leading to fires, heating systems aren’t vented properly. Any of those things and more can occur in a rental unit or private home where a room is being rented putting people at risk. Under your suggestion, wouldn’t annual inspections be required to ensure basic safety standards were met?

            By the way, I’m not asking to be a pain. My firm does business with a number of hospitality groups and the impact of Airbnb has become a topic of discussion so it is interesting to hear people’s thoughts on it. Helps me gauge and predict potential strategies states/municipalities may roll out in response.

          • Chew H Bird

            No inspection they are registered as antique.

        • Chew H Bird

          AirBnB does not actually own the rental properties. The people renting space use AirBnB as a portal for people to find places to stay.

          What you are suggesting places undue burden on the people who most need the income. AirBnB is nothing more than a digital version of classified advertisements that offers a real time service for selection, communication and payment.

          Maine’s lodging industry will need to face the reality of a digital global marketplace regardless of whether or not the city decides to regulate their residents into poverty.

          People have rented rooms for centuries without regulation and now that the process is visible it needs to be regulated? Based on fear of what might happen?

          • EABeem

            Public safety is the main issue. Many municipalities already require a permit to rent rooms on a short-term basis. Cape Elizabeth, for example.

          • Chew H Bird

            Then why not simply have owners wishing to rent, through whatever service, file a certificate of insurance with the city? Most people have mortgage and have homeowner insurance already but they may need additional coverage of they rent a room. This covers the homeowner, the city can claim it makes people adhere to city policy, and if the insurance carrier wants an inspection they can demand it. The last thing we need is to hire more inspectors at everyone’s expense.

          • EABeem

            Sounds reasonable. I am not claiming to be an expert on the subject. I am just seconding Orlando’s point that there needs to be some oversight.

    • farmertom2

      Jeepers, EAB– you’ve ruined our perfect bromance– I have never disagreed with you before. AirBnB is simply a better way to make a market in short term housing than an index card on a grocery store bulletin board. The feedback mechanism (similar to that of eBay and Amazon) should be more than sufficient, not to say more efficient, than licensing, regulating, and inspecting, which add cost to the endeavor without adding value. We have used ABB many times and have never had a problem. Which is true of the vast majority of users. There will always be problems with any large endeavor. Cars, which are heavily regulated, nonetheless get recalled–by the millions– on a regular basis, to correct flaws, sometimes quite hazardous. Will there be a few bad apples in the house sharing economy? Sure– but the odds are any individual experience will be seamless.

      • EABeem

        Not a big deal with me. I just think Orlando is right, that this black market in lodging should be regulated in some way. You must be aware that Airbnb is illegal in some places and regulated in others, primarily for the reasons I cited — public safety, unfair competition. I can also imagine neighbors might not always be happy with a constant parade of strangers next door.

        • farmertom2

          “black market?” Pretty harsh terminology…. I don’t see it as all that different from eBay, or the ride boards that we used to use in college or ads posted on bulletin boards in grocery stores and such. It’s not like people are selling plutonium or heroin. In anything– eBay, Craigslist, etc etc etc, there are going to be problems. That’s because we are a nation of about 310,000,000 people. The question is are the problems widespread or very bad? If the problems are few or minor, then you shrug it off. If they are serious or many, then you can take a look at adding regulations– to correct a problem, not to forestall an imagined or imaginary problem, say voter fraud.

          • EABeem

            That’s what they called it in Philadelphia when the city council voted 15-0 last year to impose an 8.5% hotel tax on short-term rentals. Here, let Airbnb explain:
            Short-term Rental Ordinance. In July 2015, an amendment to the Philadelphia Code went into effect permitting short-term rentals in any dwelling unit provided that the operator of the short-term rental complies with certain conditions. These conditions include obtaining a permit if the listing is rented for more than 90 days a year. Please review Section 14-604 of the Code for more information.
            •Zoning and Planning Code. Title 14 of the Philadelphia Code governs most land use in Philadelphia. You should consult this to see if your listing is consistent with any zoning requirements or use definitions. Important terms include “bed and breakfast,” “booking agent,” “dwelling unit,” “group housing,” “household living,” “limited lodging,” and “visitor accommodations.”
            •Hotel Taxes. Hosts renting any form of overnight temporary lodging in Philadelphia are required to collect certain hotel taxes from guests. Airbnb collects and remits hotel taxes in Philadelphia; more information about that process is available here.
            •Business Registration and Tax. Section 14-604 of the Code does not contain any specific provisions requiring operators of short-term rentals to obtain a separate commercial activity license for short-term rental activity. Other provisions of the Code require certain businesses in Philadelphia to get a commercial activity license from the Department of Licenses and Inspections, and pay a business tax. The City summarizes the process for obtaining this license here. Please review Chapters 19-2600 and 19-3800 of the Philadelphia Code to see if your listing requires registration and/or payment of business taxes. More information is available on the Department of Revenue’s website here.
            •Housing Rental License. Chapter 9-3900 of the Philadelphia Code provides that any unit rented for overnight stay must have a valid rental license. The provision also contains an exception for owners operating a short-term rental unit out of their primary home. Other operators of short-term rental units may be required to obtain a rental license if the unit does not already have a valid rental license. The application process may include a review or inspection to make sure the unit complies with zoning regulations.
            •Building and Housing Standards. Philadelphia has rules and regulations specifying minimum construction, design, and maintenance standards for buildings, including regulations on habitability, health, and safety. Certain regulations applicable to residential and non-residential uses may be relevant to your listing. Please see Title 4 of the Philadelphia Code. In addition, short-term rentals units must comply with certain requirements set forth in Section 14-604 of the Code.
            •Other Rules. It is also important to understand and follow other contracts or rules, such as leases, condo board or co-op rules, HOA rules, or rules established by tenant organizations. Please read your lease agreement and check with your landlord if applicable.

  • Chew H Bird

    Wow… There is so much “fail” in this piece I don’t even know where to start…

    First, if “everyone” (massive generalization), was doing well (economically), this wouldn’t even be an issue because on a few would bother to rent out a room or their home to someone on the internet…

    The massive “crap load” of regulations being imposed by local, state, and federal government is now reaching into the pockets of people simply trying to improve their economic condition through what some may call “side work” which in this case involves renting living space to (generally) short term occupants.

    I guess government needs to find a way to charge people, either by requiring licenses, inspections, certifications, compliance, or whatever else can be thought of to burden folks who are just trying to put a few finds away for their kids education, maybe a brighter holiday season, or maybe they are just trying to pay their already exorbitant property taxes, (and clearing city sidewalks for free in the winter to avoid a fine).

    Wow… I am appalled and dismayed at seeking to regulate this type of activity. Actually, it isn’t the activity itself that gets the controlling personalities interested, but the scent of fees and power of regulation on the false promise of security for the people that are engaged in the activity.

    All anyone should do is check with their insurance company, agree not to bother their neighbors, and actively vote out of office anyone wanting to regulate these short term rentals for the betterment of the city coffers and the detriment of the citizens who pay taxes.

  • farmertom2

    “The short- and long-term problems posed by the shared housing services
    are real. The providers of a room or a whole house are not licensed;
    their numbers are not limited; their premises are not inspected; the
    location of providers often does not comport with existing zoning laws.”
    None of these are actually problems.

  • Steven Unger

    Cities should encourage and support airbnb host-resident “private room” rentals where the host occupies the same housing unit as the guest. These rentals do all the good things airbnb talks about. However, airbnb host-absent “entire place” rentals are really just vacation rentals which have been heavily regulated in resort areas for decades. airbnb “entire place” rentals affect some neighborhoods and zip codes greatly and others not at all, so impact on housing needs to be measured by zip code or neighborhood. airbnb host-absent “entire place” rentals when offered on an ongoing basis by definition convert long-term housing units to short-term rentals for tourists.
    To learn more check: http://www.TheAirbnbAnalyst.com