Page 94 - AAGLA-APR 2022

Member Update
impacts of STRs on affordable housing. The affordability gap argument is now front and center in many cities across the U.S. One of the primary issues put forth is the “transient” nature of short-term renters, fractionally occupying housing that could be utilized by local workers.
But what actually happens when you ban STRs, as happened recently in Rancho Mirage, Calif., and change a shorter-term rental into a long-term rental? Will those newly available long-term rental homes be within financial reach for the average retail clerk, waitstaff, or lift line attendant? If not, these houses may be rented by larger groups of these workers. Will that add to the appeal of their neighborhood as envisioned by STR opponents, and is there a general understanding that home occupants in this category are also relatively transient? Many of these renters may work off hours and work multiple jobs, leading to regular traffic in and out of the house at all hours. Multiple renters often means multiple vehicles stacked or scattered in driveways, in front of neighboring homes or even parked on front lawns.
These impacts on a neighborhood are self-explanatory, and in line with the perceived or real impact of guests renting a home via Airbnb, Vrbo, Vacasa or other platform. This is to acknowledge that affordable housing is a real issue in many tourism-based communities, but limiting the lodging options for tourists, and prompting a negative impact on the local economy, is hardly the answer.
A recent, and surprising, Harvard Business Review study found that cities that curb STRs negatively affect development, while cities with a robust STR market are more likely to have upgraded housing development and faster growth. For example, municipalities could consider measures including a fee or tax for STRs earmarked specifically for creating affordable housing. Or, as was done in Crested Butte, CO, where city residents voted to increase the short-term rental tax to fund local housing initiatives. These are practical, actionable solutions that have the potential to positively address a specific issue and contribute to stabilizing the local economy over time.
Party Houses Grab Headlines
Far and away the top concern and complaint regarding STRs in established residential neighborhoods is the “party house” phenomenon, with unconcerned revelers staying in a home for a few nights and causing mayhem at all hours. Many news stories around STR issues either focus exclusively on or delve heavily into party house issues.
Individuals who own STRs don’t want their home to ever enter this category. It’s a net negative for business and equates with being a bad neighbor and bad actor. The STR platforms also have a big stake in curbing party houses. Late last year, Airbnb went to great lengths to short-stop bad behavior around New Year’s Eve with strict measures, including:
• Preventing guests with no Airbnb positive review history from making three-night reservations for an entire home (the platform has previously banned guests from booking just a single night).
• Implementing tighter restrictions on two-night reservations that it believed could result in disruptive events.
The bottom line is, recurrence of party house issues are bad for everyone’s business, and 2022 will see meaningful enforcement, more proactive vetting to restrict bookings by poorly-reviewed guests, and more technological advancements beyond Google Home, Next, Noise Aware, etc. to significantly minimize this phenomenon.
Communication and Compliance are Key to Future STR Success
Restricting STRs can have a significant impact on communities. The sudden reduction of tourists causes a ripple effect across local economies, reducing essential lodging tax revenue and impacting sales tax revenue. Yet municipalities continue to take abrupt action against STRs as a result of full-time resident complaints against noise and other behaviors that lack courtesy. Eventually, jurisdictions will need to analyze the financial impact STRs have on their overall budgets and local economy.
The coming “professionalization” of STR hosts and property managers is inevitable, and essential to forging a new era of rigorous compliance in popular and emerging vacation areas. A thorough analysis of short-term lodging skirmishes across the country points consistently to a lack of compliance by owners, managers, and certainly guests. Complaints to police departments and other authorities result in snap decisions by city councils that result in lost or reduced lodging tax revenues, and economic harm to businesses and local employees.
This year we’ll see more actions similar to Encinitas, Calif., which recently approved STR amendments to address concerns such as STR occupancy limits, neighborhood disruption, and parking and garbage issues. These and similar actions will portend coming solutions for what has to-date been an either/or proposition of “stay or go” for STRs. Keep an eye out for intelligent applications of technology to get out ahead of STR scofflaws (guests and hosts), ensure collection and remittance of lodging tax on all short-term properties, and provide local and regional analytics to help municipalities and other stakeholders craft an enduring STR economy that coexists successfully with full-time residents.
94 APRIL 2022 • WWW.AAGLA.ORG
Pam Knudsen is an executive at Avalara, and leads multi-tax teams including Lodging, Beverage Alcohol, Telecommunications and Sales and Use Taxes. She serves as a leading voice in vacation rental tax compliance and regulation, in addition to bringing in-depth experience across software/SaaS technology as well as ERP systems.