New regulations for AirBnB hosts

Yesterday Mayor Ed Murray and Council member Tim Burgess announced a proposal to regulate short-term rentals such as those made possible through AirBnB and VRBO.

There is a delicate balance to be found here: on one hand, AirBnB has proven to be a great way for people with a spare bedroom, mother-in-law apartment, or backyard cottage to make some extra money. On the other hand, there have been increasing numbers of landlords foregoing long-term rentals for apartments in favor of renting them out on AirBnB for shorter stays — which removes inventory from the local housing market. And housing in Seattle is already in crisis and needs as many units as it can get.

There are a handful of side-issues here as well. One is creating a level playing field: the so-called “bed and breakfasts” that already exist have a regulatory scheme in place, while many AirBnB hosts operate “under the table” without paying B&O taxes, getting a business license, or meeting various housing and hotel code standards. And some bigger hotel operators worry about competition from AirBnB where once again the latter has the advantage of avoiding all the business and regulatory taxes, fees and paperwork that hotels need to follow (and that drive up their overhead costs).

Murray and Burgess have proposed to create four different regulatory categories, based upon two criteria: whether the property being rented out is the host’s primary residence, and how many nights per year the property is rented out for.

regulatory table

Under their proposal, if you rent a property out for short-term stays for a total of 90 days or less per year, nothing will change. This protects the group of people who are trying to make some extra money on the side but not run a full-fledged business. It’s worth noting, however, that under current laws an AirBnB host is required to have a business license and pay taxes, and that will continue to be true. According to AirBnB, 80% of their hosts rent out their properties for 90 days or less. (here’s my previous analysis of AirBnB’s economic impact report, and prior reporting on AirBnB fudging their numbers)

For the remaining 20%, their proposal prohibits short-term renting out a property that is not the host’s primary residence for more than 90 days per year. This is intended to prevent removing inventory from the long-term housing market. It also levels the playing field with hotel operators and requires that businesses operating like hotels must be in locations zoned for hotels and not hidden in residential neighborhoods.

And those wishing to rent out part or all of their primary residence, including a mother-in-law apartment or a backyard cottage, for more than 90 days a year will be required to obtain an additional “short term rental operator” license, and meet some additional regulatory standards including providing:

  • proof that the property is their primary residence;
  • proof of liability insurance covering the rental;
  • a local contact number of guests;
  • a signed declaration that the property meets housing codes;
  • a posting of basic safety information for guests in the property.

These rules level the playing field for existing B&B’s. In fact, Murray and Burgess propose lightening the regulatory burden on B&B’s to match the level placed on AirBnB rentals.

The proposal also includes some additional regulation on the online platform companies such as AirBnB and VRBO, mainly intended to aid enforcement of the regulations on hosts. Platform operators would be required to provide  information on Seattle’s short-term rental regulations to local hosts using their platform. They would also be required to provide quarterly reports to the City that include the names and addresses of Seattle hosts and the number of nights their properties were rented out on the platform over the last 12 months. The proposal does not require platform operators to provide any identifying information on consumers. Nevertheless, the platform companies aren’t happy with this part of the proposal, and are complaining that it will cause privacy violations.

The proposal hasn’t been turned into a draft ordinance yet, but Burgess expects that to happen in time to give it a first hearing in the June 15 meeting of his Affordable Housing, Neighborhoods and Finance Committee. Expect a lively public-comment session at that meeting, with local AirBnB hosts who are doing big business today to speak out against the regulation, and potentially representatives of AirBnB, VRBO and HomeAway to make the classic plea to “slow down and take the time to do this right.”

Of note: San Francisco is also looking at regulating short-term rentals, though their plan includes placing liability on the platform operators — which of course they vocally oppose.

Also of note: the HALA taskforce proposed taxing short-term rentals and using the proceeds to fund affordable long-term housing. The city doesn’t have taxing authority to do that, but the additional short-term license fee will provide some additional revenues — though those revenues will need to go toward enforcement and legally can’t be siphoned off to fund programs unrelated to the activity they license.

Last thought: the issues with Uber and Lyft drivers are very similar: ensuring safety, keeping them on a level playing field with taxi drivers, licensing them and making sure they pay taxes. I wonder if this will end up being the model for regulating them as well.  The one difference is that Uber sets the price that drivers can charge (leading to the need to unionize). AirBnB doesn’t do that.

A lengthy policy brief drafted by Murray and Burgess can be found here. The tl;dr version is here.