Third part of AirBnB regulation moves forward

The third and final piece of Seattle’s short-term rental regulation scheme passed out of committee this morning, though it still might see some changes before it is voted into law next Monday.

The first piece, passed a few weeks ago, imposed a per-night tax on short-term rental operators. The second piece, passed last week, included some fairly uncontroversial changes to the land-use code to allow for short-term rental uses in zones that otherwise wouldn’t allow them.

The third piece, debated in the Planning, Land Use and Zoning Committee this morning, creates the licensing and regulatory framework for short-term rental operators, including how many units a single operator can own.

Five Council members participated in this morning’s hearing deliberation over amendments: Committee chair Johnson, and Council members O’Brien, Herbold, Bagshaw and Mosqueda.

The Council members considered seven amendments to the regulatory ordinance, and spent much of the time debating three conflicting ones (3, 4, and 5). Those three deal with the issue of how to handle the existing short-term rental companies that own multiple units. The Council is divided on how to balance the policy aspects of these companies, some of whom own dozens of properties. The key issues include:

• Long-term housing. Renting out rooms in one’s primary residence, or the whole property when its primary resident is away, is not an issue. But there is concern that companies owning and managing large numbers of short-term rentals have already taken hundreds of units out of the long-term housing market at a time when there is a critical shortage of housing in the city and economic displacement is a reality. Council members are generally agreed that they would like to discourage further growth large-scale short-term rentals at the expense of long-term housing; they are less in agreement on whether to push harder to return short-term units to the long-term market by prohibiting current activity.
• Geographic exemptions. The bill as originally drafted would limit operators to two units: one’s primary residence and one additional property. But it exempted the downtown, South Lake Union, Uptown and Belltown areas from that restriction for existing operators of multiple units, under the view that those are commercial areas where many hotels already exist (and a short-term operator with multiple units is essentially a hotel). Council member Johnson would prefer to extend that “grandfather clause” city-wide to be fair to all existing, legal operators. Council members Bagshaw and O’Brien argued just the opposite: to restrict it to just a portion of downtown. Bagshaw is feeling the pressure from highrise condo residents in her Belltown district who are concerned with large numbers of short-term rentals in their building, raising safety issues and changing the feel of the building with more “transient” residents. O’Brien’s desire is simply to increase long-term housing stock.
• Jobs.  The committee meeting began with 45 minutes of public comment, including from many operators of multiple short-term units who spoke about the jobs their businesses create in Seattle for cleaners, unit managers, designers, and other workers who keep the units operable. Restricting short-term rentals threatens those jobs.
• Reducing the legal risk. Johnson pointed out that there is some debate over the amount of legal risk the city would be taking on by prohibiting a type of business that is currently legal.
• Revenues. By taxing short-term rentals, the Council is looking to generate revenues that it can use to offset some of the economic concerns raised by the short-term rental business. Council members have verbally promised that revenue stream to the city’s Equitable Development Initiative. Over the past two years as the regulatory scheme has evolved, operators begged the Council to tax them rather than regulate them — though it looks like in the end they are going to get both.

There are no easy answers here, partly because there’s a lack of good data — though no lack of strong opinions. Puget Sound Sage published a study last year raising concern over the rapid growth of short-term rentals. On the flip side, Sightline Institute has argued that the city should move slowly to regulate short-term rentals given what they say is sparse evidence that there is an actual problem.

The three conflicting amendments looked like this (detailed in this memo):

• Amendment 3, proposed by Johnson, would extend the geographic exemption for the “grandfather clause” to city-wide. Over the course of the debate, this evolved into “Amendment 3a,” which additionally changes the restriction for future operators from any two properties to one’s primary residence plus one additional units. 3a also eliminated the $75 charge for a short-term operator’s license, to address concerns that the tax imposed last week ($8/night for a room, $14/night for a whole unit) made short-term rental taxes more expensive than hotel taxes, when the goal was parity.
• Amendment 4, proposed by Herbold and O’Brien, which was a small tweak on the original bill (and was further clarified in Amendment 4a). It leaves the original geographic exemption intact, but those operators outside that area who were in business prior to September 30, 2017 would still be able to operate two units — and potentially three if they chose to add their primary residence in the future.
• Amendment 5, proposed by Bagshaw and O’Brien, which would pare the geographic exemption down to just a portion of downtown.

Amendment 3a was put forward but voted down — Johnson was the only “yes” vote.

Amendment 4a passed by a 3-2 vote, with Johnson and Bagshaw voting no because it would be harder to administer.

Amendment 5 was withdrawn by Bagshaw; since originally proposing it, she’s become aware that other condo buildings handle the issue by passing homeowner association rules restricting short-term rentals.  O’Brien, however, would like to consider it and may offer it again next Monday.

The one other significant amendment considered (Amendment 6) would add a $2/night license fee for platform operators (e.g. AirBnB and HomeAway), which would be calculated and paid quarterly. O’Brien intially offered the amendment, but withdrew it so that he could respectfully) steal the removal of the $75 operators license fee from Johnson’s failed Amendment 3a. Expect O’Brien to bring this forward again on Monday.

With Amendment 4a adopted (along with a couple of other minor amendments) the committee unanimously passed the bill out of committee. It will see final amendments and a vote next Monday afternoon at the Full Council meeting.