Understanding the revised AirBnB regulation bill

After several quiet months, Council member Tim Burgess’s attempt to regulate short-term rentals listed through AirBnB, VRBO, HomeAway and other services is back. There are a handful of revisions to the plan, and this time there’s real legislation to be introduced into the Council’s legislative process.

There are a few concerns that Burgess is trying to address with the legislation. First, there is the concern that short-term rentals are taking inventory out of the long-term housing market at a time when housing is scarce and very expensive. Second, there are individuals and companies managing multiple units through AirBnB listings, effectively running a hotel while skirting around all the health codes, regulations and taxes that hotels must deal with. Third, those “AirBnB hotels” are usually in single-family home neighborhoods, in conflict with the intended uses of those zones. A recent study lent credence to the belief that the issues arising from businesses operating multiple short-term rentals are increasing.

Last year, Burgess went through two rounds of shopping around proposals for regulations to address those concerns. In the first round, he heard feedback that many local residents were using AirBnB as originally envisioned: to rent out an extra room in their house from time to time, or their whole house when they were travelling, to supplement their regular income and help make ends meet. For the second round last July, he adjusted the plan to exempt primary residences, but he still received pushback from individuals who were renting out a second home that is sometimes used by family members and/or is intended to be a retirement home at someone point in the future (his proposal would only allow this for people already doing it, and only for then next few years). He also heard complaints from the operators of companies that manage multiple units through AirBnB and other services.

Things have been quiet for several months, but behind the scenes Burgess and his staff have been trying to negotiate compromises on some of the points of his legislation. In March a revised proposal was submitted for SEPA review, and last week the city’s Department of Construction and Inspections issued a “Determination of Nonsignificance,” essentially a green light to go forward. This week the bill is formally introduced into the Council’s legislative process and Burgess will shepherd it through his Affordable Housing, Neighborhoods and Finance Committee.

The new proposal pares back the rules even further to focus squarely on prohibiting the practice of managing multiple (more than 2) short-term rental properties in single-family residence zones, i.e the “AirBnB hotels.” It allows anyone to rent out their primary residence and a second property for an unlimited number of days per year. All rental operators must acquire a short-term rental operator’s license.

A short-term rental operator’s license will cost between $50 and $100 (the exact amount will be determined based on the estimated cost of administering and enforcing the regulatory regime). The license will require operators to:

  • post the license number in every listing for the property;
  • Post a set of information inside the property, including emergency contact information, contact information for the operator, a floor plan with fire exits, how to file complaints with the City of Seattle, and occupancy limits;
  • comply with the Housing and Building Maintenance Code for rental properties;
  • ensure that every property has working smoke and carbon monoxide detectors;
  • maintain liability insurance of at least $1 million, or list it through a platform that provides at least that much coverage.

In addition, “platform operators” such as AirBnB will need to obtain a platform operator’s license in order to list short-term rentals in Seattle. That license will cost between $2 and $7 per night a unit is booked, paid quarterly. Platform operators will be required to:

  • provide booking services only for rental operators who have a valid operator’s license;
  • provide quarterly reports to the city with the total number of rental properties listed on the site during the period, and the number of nights that each listing was rented through its site.
  • inform all of the rental operators who list with it that they are responsible for paying al applicable taxes (unless the platform pays the taxes for them), and provide each rental operator with a copy of the local regulations for short-term rentals;
  • permit SDCI to review required records.

In the previous iterations of the proposal there was debate about whether it’s reasonable to expect the platform operators to comply with handing over to the city information about their business, but in the end they decided that any reasonably effective enforcement regime would require platform operators’ participation.

There some other interesting details in the text of the two bills that make up this legislation (one modifies the land use code, and the other is the licensing provisions). First, it removes the distinction between a “bed and breakfast” and an “short-term rental” in the land use code, uniting them under a single set of regulations but with a “grandfather clause” for any bed and breakfast operations in existence before May 1, 2016

There is also a second “grandfather clause,” for operators of multiple (i.e. more than two) units located in the Downtown, Uptown, and South Lake Union Urban Centers that were offered for short-term rental prior to when the new regulations are enacted. Once providing proof to SDCI of prior operation, they can continue to list those units for short-term rentals, though they must comply with all the other new regulations including the rental operator license.

The regulation will be administered and enforced by SDCI, though there are no provisions for hiring additional staff to do so. An operator who violates the rules will be fined $150 for the first offense and $500 for each subsequent offense. Additionally, the city has the option to  charge repeat offenders with a criminal misdemeanor, at the discretion of the Director of SDCI. Rental platform operators found to be in violation of the rules will be charged a penalty of $500 per day for each of the first ten days, and then $1000 per day after that until in compliance.

A spokesperson for Burgess’s office told me that they will see what comments are posted during the SEPA public comment period, then update the working draft currently posted. They plan to formally introducing after the SEPA appeal period concludes on May 15th. In the meantime, they have set up a web site with information on the proposed regulations, including a policy paper and a one-page summary of the proposed regulations.