But what about non-tax aspects of short-term rentals? Local governments and residents are noting a variety of concerns, such as:
- It may crowd out the availability of long-term housing and raise prices.
- It may cause increased fire and police protection needs (for example, does that house renter know how to get out of the neighborhood in case of an emergency or even have a car)?
- If there is rent control, might a tenant be generating more rent than the owner is allowed to charge?
- Does the rental violate local laws on zoning, residential rentals, number of people in a property, etc.?
- It can change communities to have more renters and fewer long-term residents (the "whereas" clauses in the Santa Monica ordinance stress this).
- For tenants, are they even allowed to rent out their leased property? Similarly, many homeowner associations don't allow certain rentals.
The City and County of San Francisco had allowed short-term rentals, but is reconsidering. It looks like the main concern is the crowding out of long-term housing. The ease of renting property and making lots of money via Airbnb or similar web platform has led some people to either buy a property solely for the purpose of using it for short-term rentals, or to convert their property to full-time short-term rentals. One way to limit that activity is to place a limit on how many days during the year a property may be rented out for short-term use. For example, one of the proposals to be considered by the SF Board of Supervisors at its upcoming July 14 meeting calls for the following:
“to limit short-term rental of a residential unit to no more than 60 days per calendar year; require hosting platforms to verify that a residential unit is on the City Registry prior to listing, remove a listing once a residential unit has been rented for tourist or transient use for more than 60 days in a calendar year, and provide certain usage data to the Planning Department. …” (150295 - see link on the 7/14/15 agenda)
There is likely to be a ballot initiative in SF this year on the topic as well. If signatures are approved, it will limit hosted and unhosted rentals to 75 days per year total. Hosting platforms would be required to not list a property once the limit is reached for the year. The required registration with the city must include, for tenants, whether the property owner allows the tenant to sublet. The city would be required to post the approval notice on the property and alert owners and neighbors. [See summary here,and status of this initiative on short-term rentals here.]
But, there are other issues to consider as noted above. Also, cities likely need to hire a few more employees to handle administration including enforcement. Also, they should aim to be sure the TOT is simple to comply with. Finally, cities should consider changing their law to require the web platform to collect. It appears, that Airbnb wants cities to do this. That makes good business sense for them - it is likely easy for Airbnb to collect the tax as it already has the information on the rental rate and period. (See 2/13/15 article in Slate magazine, and Airbnb website about locations where it handles the TOT compliance.)
I plan to post more later on the rules about the federal income tax rules on rentals (I co-authored an article on this topic, with a helpful flowchart, back in 1990(!); it needs minimal updating).
*Airbnb issued a report in June 2015 on who rents out their residences in five cities, average age and income and the impact to their income - here.
What do you think about the economic benefits to homeowners and cities? Regulating short-term rentals, and anything else about this multi-faceted topic?