Part 1 of a two-part series on short-term rental accommodations. (Originally published in the May issue of the NH BarNews.)
Air . . . c&d? Yes, cease and desist. That is what Barbara Jenny and Matthew Beebe were told by the city of Portsmouth in August of 2017 relative to using a second home (advertised as “Lilac House”) as a short-term rental through Airbnb. Rockingham Superior Court (Schulman, J.) agreed with the city in a decision noticed June 22, 2018. The couple’s NH Supreme Court appeal (Case No.: 2018-0491), which has been at least partially funded by a GoFundMe campaign, was accepted on September 21, 2018. Briefs have now been filed by both sides. As of the date this issue went to press, Oral Argument had not yet been scheduled.
The legal dispute over the use of “Lilac House” may be the first short-term rental case of its kind to be heard by our Supreme Court here in New Hampshire, but it is representative of an increasing area of legal activity taking place not only across the country, but around the world.
By way of brief background, Airbnb — originally dubbed Air Bed and Breakfast because the founders’ first guests actually slept on air mattresses — officially launched in August of 2008. Although HomeAway.com, VRBO.com, Couchsurfing.com, BedandBreakfast.com, and even Craigslist all existed before Airbnb, it seems clear that Airbnb is the leading home-sharing service today, with over 6 million accommodations in 191 countries and worth about $30 billion.
Airbnb CEO Brian Chesky had previously stated that Airbnb would be ready to go public this year, but it appears that the IPO is likely to be pushed into 2020.
Regardless of whether the general public will be able to own a piece of Airbnb in 2019, it is clear that home-sharing rental services are big business today. According to a Pew Research Center survey, 11 percent of American adults have spent a night in a private residence booked on a home-sharing website (although, according to the same survey, 53 percent of Americans had never heard of the home-sharing concept). According to a separate Pew survey, approximately 1 percent of Americans have used a home-sharing site to rent out their property.
Here in New Hampshire, according to a dialogue on NHPR’s The Exchange, Granite Staters logged 113,000 short-term rental arrivals and collected $15.3 million in rent last summer alone. In case you are curious about short-term rental numbers and statistics, the website www.airdna.co (no “m”) tracks short-term rental industry data.
So everything is all delightful destinations, surplus income, and lodging loveliness in the digisphere of short-term rentals, right? Well, sure, according to supporters. Supporters maintain that services like Airbnb allow travelers to rent more affordable (and unique) lodging, to have more organic travel experiences, and also allow property owners to make extra income and/or earn enough to afford to pay their own mortgages or to pay high property taxes. There is also the argument that property owners’ private property rights should not be infringed upon by government regulation.
Not so fast, contend opponents. One thing that is clear is that not everybody supports the short-term rental concept. Opponents accuse the short-term rental movement of inflating housing prices and reducing the supply of available housing (referred to as “a big crisis in affordable housing” in the same dialogue on The Exchange referenced above), and harming neighborhoods, such as by eradicating neighborhood identities and causing overcrowding.
Additionally, the traditional lodging industry has argued that short-term rentals do not operate on an equal footing, in that they don’t have the same oversight and regulation as the traditional lodging industry. For this same reason, it has been argued that home-sharing is less safe than traditional short-term lodging. It is certainly not hard to find sensational short-term rental horror stories (hidden cameras, kidnapping, rape, death as a result of unsafe conditions, and even murder).
The extreme of the endangered neighborhood identity argument can be illustrated by Paris, France, Airbnb’s largest market. The argument could go something like this: Paris is only Paris because Parisians reside there and make the city what it is. If too many locals are supplanted by short-term renters, then Paris will lose the charm that has earned it the occasional nickname, the “City of Love.” While such a slippery slope argument may not hold up as a winning legal argument; Sedona, AZ (which will be briefly discussed next month) presents at least one compelling case study; and, in any event, les autorités constituées en Paris have become concerned enough to take increasing measures to regulate home-sharing. For example, Parisian hosts must register with the city and can only rent out their homes for a maximum of 120 nights a year.
Similarly, hosts in Amsterdam are now limited to 30 nights a year. A more extreme example is Japan, where the government obliged Airbnb to cancel reservations of unregistered hosts by June 15, 2018. As a result, Airbnb removed approximately 80 percent of its Japanese listings overnight.
Regulation is now occurring at all levels: various homeowners’ associations, municipalities, states, condominium associations, etc. are all instituting regulations and restrictions that limit short-term rentals in various ways or ban them altogether.
At the state level, not all legislation restricts short-term rentals. Some states, including Arizona, Florida, Idaho, Indiana, Tennessee, and Wisconsin, have limited municipalities from regulating short-term rentals by enacting legislation that prohibits short-term rental bans.
In contrast, many states leave the decision-making to local municipalities. The regulations include zoning restrictions and regulations, registration requirements, and complete bans.
In 2010, New York banned the renting out of non-owner-occupied apartments for fewer than 30 days and enacted legislation that prohibits any advertising of these units as short-term rentals. New York City also banned short-term rentals in many cases.
However, Airbnb and HomeAway.com have recently obtained a legal victory for hosting companies. Airbnb and HomeAway.com (both of which have sued New York City) obtained a preliminary injunction that has at least temporarily stopped a New York City regulation
mandating that hosting companies provide the city’s Office of Special Enforcement with information including addresses for their listings, full names of hosts, primary addresses, and whether hosts are renting out their entire home or just rooms. The 52-page decision by U.S.
District Judge Paul Engelmayer was issued January 3, 2019. The regulation would have subjected companies to fines up to $1,500 for each undisclosed listing. The preliminary injunction applies to both Airbnb’s and HomeAway’s cases.
Short-term renters attained another legal victory in Texas. The victory was a unanimous decision by the Texas Supreme Court last May which ruled in favor of a property owner who had been told by his homeowners’ association that a deed restriction prevented him from renting out his home on a short-term basis. The deed restriction mandated that the home be used “solely for residential purposes.” As such, part of the property owner’s argument was that short-term rentals did, in fact, constitute “residential purposes”; so it is unclear how the decision might impact other short-term rental regulations and restrictions in Texas, or elsewhere.
Speaking of regulations and restrictions, next month’s article will discuss New England short-term rental legislation, and also Airbnb’s strategies to preserve the viability and profitability of its business model. Stay tuned.
