Political contests erupt as cities and hotel industry struggle to curb Airbnb

Austin Hong of San Diego has used Airbnb and similar companies for the past five years to rent out a second home for short stays. The income allows him and his husband to cover the mortgage while keeping the three-bedroom house available for family members who visit often.

So Hong fought back when the city council passed a law in July that would ban such short-term rentals. He collected signatures on petitions at food courts and social gatherings as part of a successful campaign to block the law from taking effect until it can be put to popular referendum, possibly in 2020.

“They say it’s regulation, but really it’s a ban that they passed,” said Hong, 34, who is creative director at a software company. “We absolutely want regulation. What we don’t want is a ban.”

The explosive growth of short-term rentals around the country has pushed local governments to rein in the practice, with help from the hotel industry, which wants to stifle a formidable competitor.

But the effort has spawned political contests that have highlighted the difficulty of managing a disruptive new industry. It has triggered a backlash in some jurisdictions from the short-term rental firms and property owners who don’t want to lose a lucrative enterprise.

In June, voters in Palm Springs, California, overwhelmingly approved a ballot measure overturning limits on short-term rentals. Some state governments, such as Tennessee and Arizona, have intervened to protect hosts when legislators thought cities were setting limits that went too far.

In Washington, the tug-of-war is scheduled to reach a climax Tuesday with a second District of Columbia Council vote expected to approve some of the toughest restrictions in the country. They would ban short-term rentals of a second home – a measure that has proved to be the single most divisive provision in debates across the country.

As in many other cities, the District of Columbia bill would allow property owners to rent out space in their primary residence when the host is present, and for a specified period – up to 90 days a year in Washington – when the host is absent.

These kinds of new restrictions – in scores of cities in the U.S. and hundreds worldwide – have barely slowed the rise in home-sharing. It is forecast to continue to expand rapidly and permanently transform the lodging and tourism business.

Short-term rentals have soared because hosts like the extra income and guests get alternatives, often at a lower price, to a hotel or motel. Matching the two has become much easier because bookings can be done online on Airbnb, HomeAway, VRBO and other sites.

The expansion aroused fear in the lodging industry, whose companies and unions have financed and promoted tight regulation of what they describe as “illegal hotels.” They have formed an alliance with citizens unhappy that short-term rentals are altering their neighborhoods” residential character, and affordable housing activists. They make claims, based on inconclusive data, that growth of short-term rentals is contributing significantly to housing shortages and rising rents.

“The real story over the last year or year and a half seems to be the hotel industry waking up to the fact that Airbnb poses a much bigger threat to their business than they originally imagined,” said Anu Sundararajan, a New York University business professor.

He noted that on the most recent New Year’s Eve, more than 3 million guests were staying in Airbnb rooms, or more than the total number staying in hotels owned by Marriott and Hilton combined.

The regulations have established a legal framework for the new industry, which in many cities was operating in violation of zoning laws or other ordinances. They also have allowed local governments to collect taxes on short-term rentals. Airbnb says about 60 percent of its U.S. hosts now pay such levies.

“We’re encouraged to see places like San Diego, Boston and New York moving forward with regulations holding Airbnb and their counterparts accountable for fostering illegal hotel activity, which is really affecting quality of neighborhoods and housing affordability across the country,” Troy Flanagan, vice president of the American Hotel and Lodging Association, said.

But the new regulations are barely slowing down the nascent industry. Global short-term rentals grew by 82 percent from 2012 to 2017, from 45.6 billion to 82.9 billion, according to a July report by Skift, a travel industry research firm. In the same period, hotel room sales increased 27 percent, from 404.2 billion to 512.3 billion.

By 2022, Skift forecast, short-term rentals sales will jump 60 percent from the 2017 level, to 132.5 billion rooms, while hotel room sales will rise by 34 percent to 686.9 billion.

It seems likely that short-term rentals would have grown even faster without the new regulations, but no figures are publicly available about how many listings were lost overall because of the new rules. In San Francisco, Airbnb reported in January that some of the tightest restrictions in the county had cost it nearly 5,000 listings.

Regulation can actually help encourage short-term rentals, according to the industry, because it legitimizes the activity and attracts interest. Also, it’s so difficult to enforce many regulations that home-sharing continues even if it’s technically illicit.

“The more heavy handed and draconian the regulations that cities try to impose, the more complicated it is for them to enforce,” Matthew Kiessling, vice president of the Travel Technology Association, said.

But cities accuse the short-term rental companies of making enforcement difficult by declining to share data about who is listing properties.

In Portland, a city audit in August found that nearly 80 percent of listed rentals were operating without the mandatory city permit. City officials complained their hands were tied because they lacked data.

“It’s still very challenging to have what I would call smart regulation, because it depends on data, and data is largely held by the companies, and the companies are largely not super-interested in sharing the data,” said Kellen Zale, a University of Houston law professor.

She and other analysts said the research is inconclusive about whether the short-term rental business is contributing to shortages of affordable housing.

“I’ve seen various studies, and they point in different directions,” Zale said. “We haven’t really got good evidence.”

Despite the bitter battle over regulation, some common ground exists. The short-term rental companies agree with the hotel industry that owners should be banned from having multiple listings. The hotel industry says it’s fine with what it calls “true” home-sharing, in which hosts rent space in their primary residence when they’re present.

The biggest challenge has been whether to allow short-term rentals of second homes. Seattle, Denver and Phoenix say “yes,” while San Francisco and New York have largely banned the practice.

The question resonates in San Diego, a seaside city with thousands of vacation homes that have been rented out on a short-term basis for generations.

Blaine Smith owns a company that manages 150 vacation homes.All but two or three of the properties are second homes, which could not be rented under the proposed law.

“As written, it would pretty much put us out of business,” Smith, 32, said. “We have such a rich history of tourism and vacation rentals. It’s just crazy what happened here.”