Regulate the Short-Term Rental Market Like Hotels

By James Kim

Peer-to-peer short-term rental services, such as Airbnb that offer hotel-like rental services at a fraction of the cost of a hotel have been at the forefront of debate as to their regulation.[1] Participants in these programs such as Airbnb can earn money by renting out empty rooms in their houses, apartments, condos, or similar assets to other consumers looking for a place to stay.[2] This benefit runs both ways as the renters receive considerable savings compared to traditional service providers like hotels in the same area.[3] Consumers that are travelling and are seeking a place to stay at their destination can search for services offered, compare costs, and determine the trustworthiness of the short-term rental provider through reviews by other consumers that stayed at that residence or rental property.[4]  Consumers have signaled its approval of peer-to-peer services, but many industry players such as the Hotel Industry have express dissatisfaction at the lack of regulation of these entities that makes the Hotel Industry unable to compete with the high number of regulations and inspections they have to abide by that the individual home owner does not in a peer-to-peer rental scenario.[5]

The D.C. Council are considering the Short-term Rental Regulation and Affordable Housing Protection Act of 2017 introduced by Council member Kenyan McDuffie that would put new restrictions on short-term rentals in the District. D.C.’s approach to regulating short-term rentals as a model that preserves the property rights of homeowners while still protecting society from illegal hotels and the other concerns associated with short-term rentals.[6]

Under terms of the legislation introduced to the Council’s Committee on Business and Economic every short-term host would be required to obtain and maintain the new business license, and Airbnb and other hosting platforms would be required to publish and verify each business license number.[7] An owner/host would be required to be present during the short-term rental stay, and one would not be allowed to rent more than one residential unit.[8] That unit must also be the host’s permanent resident in the District.[9] Further, a host would be allowed to offer a short-term rental as a vacation rental without being present, but for no more than 15 nights cumulatively in any calendar year.[10]

Hosts found in violation would face fines of $1,000 to $7,000, and Airbnb and other rental platforms would be liable for a civil penalty of $1,000 for each booking that violated the new restrictions.[11] This legislation comes amidst widespread concern that short-term rental abuse is contributing to rising rent in the District.[12]

D.C. residents have expressed their dissatisfaction with the lack of regulation of short-term rental sites such as Airbnb. The claim is that it is more lucrative for property owners to kick out low-rent tenants and conduct short-term rentals in Adams Morgan, Columbia Heights and other neighborhoods and when not regulated, sites like Airbnb are tools for gentrification.[13] Further, members of the Hotel and Hospitality industry within the District have expressed their dissatisfaction in that Airbnb enjoys unfair advantages, including voluntary reporting of how much tax it owes, while hosts do not have to comply with laws required of hotels.[14] This puts the hotel industry in an unfair position unable to compete with the high cost of business.

Although the bill still has a lot of shortfalls, the Short-term Rental Regulation and Affordable Housing Protection Act of 2017 is a step in the right direction in seeking to curtail many of the issues that come with the lack of regulation of the short-term rental market. Simply put, short-term rentals need to be regulated like hotels not only to keep the hotel industry competitive, but also to protect consumers who are trusting their livelihood by staying at these rental properties. Further, if entire groups of people are being disparately impacted by the lack of short-term rental regulation then this problem needs to be addressed.

[1] Steve Henn, What’s Mine Is Yours (for a Price) in the Sharing Economy, NPR (Nov. 13, 2013), http://www.npr.org/sections/alltechconsidered/2013/11/13/244860511/whats-mine-is-yours-for-a-price-in-the-sharing-economy.

[2] See All Eyes on the Sharing Economy, ECONOMIST (Mar. 9, 2013), http://www.economist.com/news/technology-quarterly/21572914-collaborative-consumption-technology-makes-it-easier-people-rent-items (characterizing companies like Airbnb and RelayRides as “matchmakers”).

[3] Id.

[4] See All Eyes on the Sharing Economy, supra note

[5] Kenneth Lovett, Airbnb slams NYC hotel industry’s ‘attempt to protect their ability to price gouge’ in new ad, Daily News New York (Aug. 3 2017), http://www.nydailynews.com/new-york/airbnb-hits-back-nyc-hotel-industry-smear-attack-article-1.3381027.

[6] Megan Cloherty, To protect affordable housing, DC bill aims to limit short-term rentals, WTOP (Aug. 3 2017) http://wtop.com/dc/2017/08/dc-bill-short-term-renters/.

[7] Abha Bhattarai, D.C. lawmaker to introduce new restrictions on Airbnb, other short-term rentals, Washington Post (Jan. 30 2017) https://www.washingtonpost.com/business/capitalbusiness/dc-lawmaker-to-introduce-new-restrictions-on-airbnb-other-short-term-rentals/2017/01/30/8110cd9e-e318-11e6-a453-19ec4b3d09ba_story.html?utm_term=.63427450f7c5.

[8] Jeff Clabaugh, DC to consider regulations for Airbnb-type rentals, WTOP (Feb. 1 2017) http://wtop.com/dc/2017/02/dc-consider-regulations-airbnb-type-rentals/.

[9] Id.

[10] Id.

[11] Id.

[12] See supra note 8.

[13] Aaron C. Davis, D.C. lawmakers get an earful on proposal to strictly regulate Airbnb, Washington Post (Apr. 26 2017) https://www.washingtonpost.com/local/dc-politics/dc-lawmakers-get-an-earful-on-proposal-to-strictly-regulate-airbnb/2017/04/26/594ef9c2-2a92-11e7-a616-d7c8a68c1a66_story.html?utm_term=.ded41fd959a4.

[14] Id.

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