Cities and state are struggling to regulate Airbnb

Cities and towns across the United States are struggling to regulate the short-term rental market dominated by services Airbnb and VRBO (Vacation Rental by Owner). In the process, many places that want to style themselves as tech friendly innovation centers risk reverting to old style political gamesmanship that hurts business, consumers and residents alike.

Cities and towns sought to regulate ride-sharing services like Uber and Lyft by too often taking up with taxicab commissions. In the end, the state legislature overrode those local concerns to make sure consumers had more choice. The same story may play out for short-term rentals, with local bans overridden by state action.

{mosads}Let’s take Missouri as an example of opportunities and obstacles that face the new sharing economy. Missouri is home to the urban St. Louis and Kansas City markets and the older communities surrounding them. Several have banned short-term rentals outright.

Opposition to short-term rentals seems to come from homeowners fearful of increases in crime or to changes in the character of their communities. While maintaining some unspoken neighborhood identity seems an overly broad justification for regulation, Short-term rentals may actually benefit the areas where they operate.

As Jamila Jefferson-Jones of the University of Missouri-Kansas City School of Law notes, “housing exchanges may instead aid in achieving these aims” of “preservation of property values and neighborhood characters.”

They do so by permitting homeowners to earn an income that can be used to offset mortgage and maintenance costs. This benefits not only the owners in question, but also the communities around them.

If neighbors are worried about code violations from short-term rentals such as parking and noise, most cities have plenty of ordinances to address such concerns, but there appear to be few actual problems. In its drive to regulate short-term rentals, representatives of Kansas City’s Planning and Development Department claimed that they received hundreds of complaints about short-term rentals. But a public records request uncovered only 68 complaints going back to 2014. Fifty-four of them simply noted that the location is being used for Airbnb or a STR, as opposed to specific complaints about noise or traffic.

As for crime, there is no research linking increases in short-term rental properties with increases in crime. In fact, research suggests that housing values increase for the whole neighborhood when STRs flourish. This makes sense. Owners who earn an income from their property have every incentive to maintain it and keep it attractive, and the income from the rentals allows them to do so. Moreover, short-term rental bring visitors and commerce that might otherwise stay in high-rise hotels.

Missouri is also home to vibrant vacation destinations such as the Lake of the Ozarks and Branson, where short-term rentals are embraced and only nominally regulated if at all. In 2017, STR advocates from these markets supported state legislation that would have pre-empted localities from imposing fees or prohibiting STRs outright, while permitting those subdivisions to impose “reasonable regulation” to “protect the public’s health and safety.” It may have been those undefined regulatory allowances that killed that bill, as supporters abandoned the effort at the end. No similar legislation has been introduced yet for 2018.

Yet there is every reason to expect more legislation on short-term rentals; the hotel industry sees short-term rentals such as Airbnb as a mortal threat. According to The New York Times, the American Hotel and Lodging Association trade group has launched a, “multipronged, national campaign approach at the local, state and federal level.” One document shows that group seeks to work with “a broad coalition of affordable housing advocates, community groups, neighborhood associations, labor, and other progressive entities.”

Perhaps the biggest obstacle to an outright short-term rental ban is the Constitution itself. Jefferson-Jones argues notes an outright ban amounts to an unconstitutional restriction on an individual’s property rights.

Because the technology and growth of short-term rentals is so new, few if any legal challenges have made it through the process to set precedents. Cities may be able to regulate the industry, but they may not be able to stamp it out entirely. Nor should they want to. A recent announcement by Airbnb to collect and remit state and local taxes on behalf of their customers said that these revenues should amount to $1.1 million annually.

Short-term rentals and other aspects of the sharing economy are examples of technology-enabled innovation that have been good for consumer choice. It will be bad for everyone if cities and states thwart those strong ideas through the blunt force of regulation.

Patrick Tuohey is director of Municipal Policy at the Show-Me Institute