It’s a hot topic that’s been smoldering for a number of years and is finally being addressed in cities across the country. It’s one of those things that slowly sneaks up on you until it reaches the point where it demands your attention.
One could conclude, as the popularity of online short-term rental platforms such as Airbnb, VRBO, and HomeAway has grown, so have associated conflicts increased as well–with disgruntled neighbors objecting to vacation party houses, the hotel industry seeking a level playing field, and cities looking to reap lost tax revenues.
As Star Tribune regional reporter Pam Louwagie put the question in a December 2019 article, “At what point does a vacation rental become a commercial property–and get a higher tax bill?”
Seeking guidance, uncertain county assessors asked the state’s Department of Revenue, who willingly complied by issuing a memo this past year stating: classification depends on the property’s “primary use.” If the primary use is short-term rental, then it aligns with commercial classification.
As we are well aware, here in Cook County– and we certainly are not alone in this–our housing market is severely limited. Much of this, in my opinion, can be attributed to the rising popularity of short-term rental.
Homeowners, who in years past would consider long-term rental of their home, have elected to go with short-term rental as a financially more profitable option. Other residential homes that come up for sale are often snapped up by investors, those looking to take advantage of Grand Marais’ “America’s Coolest Small Town” tourist status.
As a result, the market has been weighed down by steep prices and limited starter home inventory. The chronic shortage of affordable housing has led to calls for reigning in these practices.
According to statistics compiled and reported in the 2017 Minnesota Housing Profile, Cook County has experienced a 64 percent increase in median home value from the year 2000 – 2015, while household income has struggled to keep pace at a meager 7 percent uptick over the same period. Income for families who own their homes is not rising nearly as quickly as home values, and ownership among young households has declined significantly since 2000.
Those who rent find themselves in an even more challenging predicament. While median rent has only increased 4 percent over the same fifteen-year period, the median renter’s income is down some 21 percent, making it increasingly difficult for renters to make ends meet.
The proliferation of residential properties for short-term rental also contributes to other potential adverse impacts on neighboring properties: traffic, parking, noise, trespass issues and absentee “landlords” who are not onsite to address concerns. These all mount up and create conflict within a community.
Having occasion to travel among the Hawaiian Islands, I became aware that Honolulu’s City Council passed a short-term rental bill that took effect in August of last year. Bill 89, which enacts strict penalties for non-compliance, prohibits new permits for whole-home rentals, called “transient vacation units,” but allows roughly seventeen hundred units on the island to be rented for short terms, as long as they’re in homes where the owner lives (called “bed-and-breakfast homes”).
Jennifer Sokolowsky, writes in a June 2019 article for the software company Avalara,”The law also requires short-term rental owners obtain a permit from the city and county of Honolulu and include the permit number on any advertisement. Listings without permit numbers are prohibited. Operators would also have to provide neighbors within 250 feet of a property a number that can be called 24 hours a day to receive complaints.”
“The ordinance also sets requirements for short-term rental platforms such as Airbnb and VRBO. Those platforms must take down listings that don’t include permit numbers, and report data on hosts monthly, including names, addresses, tax identification numbers, length of stays, and amount paid.”
As previously mentioned, “The new ordinance outlines strong penalties for running illegal short-term rentals. Fines start at $1,000 for an initial violation and escalate to $5,000 a day for ongoing noncompliance, and up to $10,000 per day. The law also allows the city to confiscate rental earnings.”
On the Big Island, new rules for short-term rentals have also gone into effect in Hawaii County. Under the ordinance, new short-term vacation rentals are barred in single-family residential and agricultural zones, and only allowed in hotel, resort, commercial, and multifamily commercial zones.
Under the new rules all vacation rentals must register with the county for a $500 fee and submit documents including:
Proof that all necessary building, electrical, and plumbing permits have been approved
Proof that taxes have been paid
Site and floor plans
Contact information for a “reachable person” available 24/7 in case of problems
It’s apparent, short-term rental continues to pose a conundrum across the country. It’s one of those things that slowly sneaks up on you until it reaches the point where it demands your attention.
Former Cook County Commissioner Garry Gamble is writing this ongoing column about the various ways government works, as well as other topics. At times the column is editorial in nature.
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