Fall 2019 NewsletterNews
A Cultural Movement in How We Travel and Municipalities That Need to Adapt

When Brian Chesky and Joe Gebbia decided to rent out an air mattress in their living room in October of 2007, there’s no way they realized they were starting a multi-billion dollar company and unlocking a new market share in the internet age. That company, Airbnb, has done exactly that, however. Though some preceded it and many have come after, there is no doubt that the online platform based in San Francisco has blown the top off the market and become as synonymous with “short-term rentals” as Google has with search engines.

 

And as is common with most things that have rapid, meteoric rises in success, there has been a trickle-down in difficulty in how to adapt. As people have become familiarized with the system, there have been a variety of models utilize this space: roommates looking for a little income to help with rent, empty-nesters looking to cash-in on excess room that needs to be filled, families who see a means to help afford a vacation home, and investors who see an unfulfilled niche in an evolving market. With these different approaches in utilizing this new platform, people have utilized their space – from single rooms to detached houses to duplexes to entire commercial buildings – to make some extra money. And as the world navigates these ideological and physical considerations, governments and stakeholders are presented with challenges in how to make this work equitably for each community.

It’s Not a Problem Until It’s a Problem

Short-term rentals are proving directly and indirectly responsible for many benefits in communities: economic contribution, hotel overflow, neighborhood reinvestment, “authentic” travel for modern tourists, among several more. But for every benefit we see, there’s a negative externality that rears its head as well.

 

Airbnb, VRBO, Homeaway, and others in this market space are undercutting the hotel industry by playing by a different set of rules: they do not have the same tax systems, infrastructure and safety requirements, planning involvement, or land costs. These have made it very hard for certain hotels to remain competitive in their core competencies and regulations are just now catching up to level it out.

 

Affordable housing is becoming a hot-button topic across the nation and the cost of homes is outpacing wage increases faster and faster. While neighborhood reinvestment is beneficial in many instances, buying up a community’s most affordable housing stock for commercial gain has raised not just the costs of the investor-owned homes, but the neighboring ones as well. In many instances, this has created an untenable market for new prospective home-buyers.

 

Possibly the negative externality that affects the most people is that tourists’ “authentic” travel is coming at the cost of neighborhood character and quality of life of the residents. Between loud parties and commercialization in historically single-family areas, many homeowners across the nation are asking their governments and elected officials why this is continuing to be allowed. So while the positives are clear, the indirect negative consequences are rearing their heads across the nation and individual municipalities are being forced into action.

So How Do Communities Get This Right?

Communities across both the region and nation are now struggling to come up with an equitable, robust policy to adapt to this evolution in short-term stay. Some communities, such as New York City and San Francisco, had such an overwhelming and rapid influx that they briefly decided to completely prohibit Airbnb in each respective city. In response, Airbnb sued both cities and unintentionally created a black market for short-term renters that would blow their code enforcement budget while not being offset by any new lodging tax. Conversely, cities in Europe and the Los Angeles metro have tried completely laissez-faire approaches where they collect taxes but do not enforce. These areas have seen the most protest and public outcry by far, leading officials to reconsider their strategy to make it fairer for the entire public.

 

Most successful communities have decided on something in between: permitted, with restrictions. There are many types of restrictions that make sense based on a community’s needs – days stayed, number of rooms rented, certain zones and neighborhoods, health, safety, etc. – and the most successful ones use some combination of them. Other larger cities, such as Denver, have started largely successful policies by creating simple, enforceable ordinances that try to both protect the rights of owners and the integrity of residential areas. By keeping permitting simple, the theory is a municipality makes it easy to get in compliance and just as easy to enforce. In Denver, the compliance rate is around 75%, while the national average is much closer to 20%, for example.

 

While our larger neighbors (Nashville, Louisville, Lexington, etc.) and other similar cities in the area have struggled to grasp these modern short-term rentals on the front end, slowly areas are getting closer to a fair policy. Bowling Green-Warren County is looking to expand on these successes and take a proactive approach to mitigate negative externalities on the front end.

An Equitable Ordinance

The City-County Planning Commission of Warren County has drafted proposed revisions to the zoning ordinance to adopt a few changes to its short-term rental policy. These changes primarily include:

 

  • Separation of bed and breakfast and short-term rental land use categories and regulations
  • Prohibition of short-term rentals in the following districts: RS1-A, B, C and D
    • Changes in those districts wouldn’t extend to bed and breakfasts; would still be eligible to apply for a conditional use permit if owner-occupied and owner is present on the property during times of occupancy
  • Requiring short-term rentals listed on an online platform to display license number in listing
  • Revision of procedure in permitting
  • Other minor specific use standard amendments for both bed and breakfasts and short-term rentals

 

With these revisions, CCPC thinks this creates the most equitable ordinance for every resident in the county. By restricting short-term rentals in RS-1 districts, the ordinance will help preserve the character and integrity of single-family areas across the county while leaving open plenty of investor opportunities should they so choose them. By separating short-term rental and bed and breakfast regulations, it will create a dual-system that will provide different opportunities to different properties based on which specific use standards work for the owners, community, and property itself. And by streamlining the permitting and enforcement process, the community should have regulations that are easy to comply with and easy to enforce. As communities grow and this market expands, short-term rentals will continue to play a role in the evolution of modern travel.

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