AIRBNB, VRBO, and Other Short-Term Rentals (STRs) Uses Continue to Escalate Causing Cities, Counties and HOAs to Make Regulations or Outright Restrictions Before We Lose Our Neighborhoods
Transitory residencies, also known as STRs are expanding and growing everywhere we look. Internet based services like AIRBNB, VRBO, help owners rent out their properties on a short-term basis for a small percentage fee. Many owners, especially those on fixed income budgets see this as an opportunity to have an additional income stream save for the personal privacy issue they must grapple with. Moreover, with the current housing shortage in the San Francisco Bay Area most local jurisdictions welcome any additional avenue of increased housing including STRs and accessory dwelling units ADUs, notwithstanding the potential frictions caused by them within the neighborhood they reside in.
Local jurisdictions including cities, counties and home owner associations (HOAs) have legitimate reasons and interests in protecting the long-term residential character of existing (R-1 thru R-X) neighborhoods. Cities, counties have realized that short-term occupancies, including booking rooms online, vacation rentals, boarding houses renting month-to-month, sober-living homes, and residential care facilities do not necessarily provide the consistency or neighborhood cohesiveness afforded by long-term residential properties. These short-term residencies do not participate and/or contribute to the fabric or culture of the community. For example, these residents don’t coach little league, or go to Home and School Club meetings, perform neighborhood projects, or much less vote.
Cities and counties have authority under the broad police power endowed to them by state constitutions, statutes, and ultimately by the U.S. Constitution’s 10th Amendment. Unless a state legislature outright prohibits a city or county from restricting STRs we will continue to see more and more STRs with restrictions imposed to balance the necessity of housing with the concomitant tampering of outraged neighbors, i.e., NIMBY contingent (not in my back yard).
Here are typical methods of restrictions; 1) outright prohibitions; 2) quantitative restrictions – limiting number of units; 3) concentration restrictions; 4) operational restrictions like room counts, square footage, off-street parking; 5) rental-period restrictions, i.e., 30-day minimum rentals; 6) owner-occupancy restrictions; 7) permitting restrictions like a special use permit; and 8) home occupancy restrictions, after all STRs are home-based businesses.
Restrictions are most often upheld as the court in Ewing v. City of Carmel-By-The-Sea (6th Dist. 1991) 234 Cal.App.3d 1579 stated:
“[W]hether or not transient rentals have the other “unmitigable adverse impacts” cited by the council, such rentals undoubtedly affect the essential character of a neighborhood and the stability of a community. Short-term tenants have little interest in the public agencies or the welfare of the citizenry. They do not participate in local government, coach little league [or soccer], or join the hospital guild. They do not lead a scout troop, volunteer at the library, or keep an eye on the elderly neighbor. Literally, they are hear today and gone tomorrow – without engaging in the sort of activities that weld and strengthen a community.”
Cities and counties that allow STRs collect hotel taxes on the revenue streams that are detected, notwithstanding the fact that a majority of these rentals are not financially regulated – they are more or less self-regulated. Home based business taxes, permits, business license taxes, and/or transient occupancy taxes are all fair game for jurisdictions to go after however many clandestine owners stay in the shadows.
The Balancing Act Necessary for Cities and Counties to Perform Regarding STRs is Constantly Changing
As STRs continue to proliferate local jurisdictions have to decide how to tread on owner’s rights to rent their properties with the effects on the neighborhood character caused by allowing them. A complete ban is simple, but causes a loss of potential revenue for the city and the owners – as many owners violate restrictions anyway. A jurisdiction without restrictions leads to a stampede of STRs which affects the neighborhood and caused frictions amongst the neighbors and the city council. A well-crafted and well-supported STR ordinance that is applied equitably should survive any type of judicial scrutiny, however certain exceptions to accommodate federal fair-housing and/or disability laws must be adhered to.
Property Management is Not for Everyone
Owners interested in using their properties as STRs to provide additional income have to balance their needs with the affect of their STR on their surrounding neighbors, and neighborhood. Property management, whether short-term or long-term is not for everyone, and the STR world provides additional issues not found in typical property management activities which many owners do not want to deal with – including having their neighbors upset with them due to their STR.
David currently is the broker/owner of Silicon Valley Property Management Group (SVPMG) which manages 150+ client properties on the San Francisco Peninsula.Trust, transparency, and performance guarantees are the foundation of SVPMG. David challenges anyone to find a PM company that offers services similar to the extensive education, customer service, and performance guarantees provided by SVPMG.
David also provides consulting for his clients on property development feasibility, construction, and complex real estate transactions.
David has authored a published law review article, two real estate books, and over 120 real estate blog articles.
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