Issues to Watch

Home Sharing Regulations Coming Soon to a City Near You: The Recent Evolution of Local Short-Term Rental Regulations


*Elizabeth Strunk

Home sharing has existed in many forms for centuries.  Jamila Jefferson-Jones, Airbnb and the Housing Segment of the Modern “Sharing Economy”: Are Short-Term Rental Restrictions an Unconstitutional Taking?, 42 Hastings Const. L.Q. 557, 561 (2015).  The premise of home sharing has always been “lodging purchased on a time- or space-limited basis . . . .”  Id.  Originally, short-term rentals existed as inns and boarding houses, but recently a home sharing economy has emerged through online platforms.  Id.; Kellen Zale, When Everything Is Small: The Regulatory Challenge of Scale in the Sharing Economy, 53 San Diego L. Rev. 949, 952 (2016).  Globally, short-term rentals have grown from 2012 to 2017 despite efforts to regulate the practice.  Robert McCartney, Political Contests Erupt as Critics and Hotel Industry Struggle to Curb Airbnb, Wash. Post (Oct. 15, 2018), https://www.washingtonpost.com/local/dc-politics/political-contests-erupt-as-cities-and-hotel-industry-struggle-to-curb-airbnb/2018/10/15/7819efdc-ce34-11e8-a3e6-44daa3d35ede_story.html.  In fact, home-sharing is forecasted to continue expanding and permanently change the lodging industry.  Id.

The sharing economy created by online platforms has divided hosts, neighborhood residents, and local legislators.  Zale, supra, at 953–54.  “The short-term rentals platform has been blamed for unruly tourists, rising house and rent prices, as well as a weakening of the local community fabric.”  Scott Shatford, Airbnb Regulation: How Is Legislation Impacting the Growth of Short-Term Rentals?, AirDNA Blog (Apr. 10, 2017), http://blog.airdna.co/effects-airbnb-regulation/.  Airbnb has allowed small-scale activities to expand by encouraging the efficient and sustainable use of resources to create economic activity.  Zale, supra, at 954.

Normally, small businesses are not stringently regulated because they are seen as low-impact, and the government wants to incentivize entrepreneurial activities.  Id. at 953. This being said, the cumulative impacts of a sharing economy could have significant negative consequences like “discrimination against protected classes to increased burdens on public services and infrastructure.”  Id. at 954.  Further, short-term rentals do not have regulations requiring standards for public health and safety.  Elaine S. Povich, Why Most States Are Struggling to Regulate Airbnb, Pew Charitable Trs. (May 7, 2018), https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2018/05/07/why-most-states-are-struggling-to-regulate-airbnb; c.f.  Romina Boccia, Maryland Bill Seeks to Drive Out Airbnb, Other Hotel Competition, Daily Signal (Mar. 21, 2018), https://www.dailysignal.com/2018/03/21/maryland-bill-seeks-drive-airbnb-hotel-competition/ (acknowledging Arizona’s 2015 health and safety regulations for short-term rentals).  These regulatory gaps have the potential to “undermine important public policies, such as civil rights and consumer protection.”  Zale, supra, at 955.

A common consensus among the hotel industry is that traditional home sharing is not opposed.  Povich, supra; McCartney, supra.  However, state-wide hospitality industries in Maryland are lobbying to impose strict regulations on platforms and their hosts.  Boccia, supra.  It is speculated that Maryland’s 2018 Regular Session “bill represent[ed] an anti-competitive measure to stifle . . . entrepreneurship to protect the special interest of hotels.”  Id. (discussing $62 million of subsidies Marriott recently received to build their new headquarters in Bethesda, Maryland).  Additionally, the “[h]ospitality industry interests in Baltimore have pushed for the city to regulate and tax short-term rental disruptors.”  Adam Bednar, Baltimore Festivals Set Airbnb Records as Lawmakers Debate Regulations, Daily Rec. (Aug. 7, 2018), https://thedailyrecord-com.proxy-bl.researchport.umd.edu/2018/08/07/baltimore-festivals-set-airbnb-records-as-lawmakers-debate-regulations/.  Hotels argue that short-term rentals have a competitive advantage because they are not subject to taxes and regulations.  Id.

In response to this criticism legislation was introduced, during Maryland’s 2018 Regular Session, to enforce local zoning, regulatory violations, and impose taxes on short-term rentals.  Boccia, supra.   The Baltimore City Council is currently considering a bill to tax and regulate short-term rentals.  Emily Hamilton, Home Sharing Is a Boon to Baltimore, Daily Rec. (Sept. 14, 2018), https://thedailyrecord-com.proxy-bl.researchport.umd.edu/2018/09/14/emily-hamilton-home-sharing-is-a-boon-to-baltimore/.  The bill would impose a 9.5% hotel occupancy tax, a licensing fee, and limit hosts to renting two properties.  Id.

At the county level, local governments are playing a more active role with shortterm rentals. Keara Dowd, Listing Your Home on Airbnb?  New Regulations Have Started, WTOP (July 1, 2018), https://wtop.com/consumer-news/2018/07/listing-your-home-on-airbnb-new-regulations-have-started/.  In July, short-term property rental regulations began in Montgomery County, Maryland and Loudoun County, Virginia; both counties require registration, licensing fees, and established penalties for noncompliance.  Id.  Montgomery County’s regulations are generally stricter.  Id.  The County has additional limits on the number of days properties can be rented, the number of guests, and local zoning regulations apply which will entirely prohibit residents in specific neighborhoods from listing their property.  Id.

In October, the Council of the District of Columbia passed the Short-Term Rental Regulation and Housing Protection Amendment Act, known as the AirBnB bill.  Council Addresses Initiative 77, Passes Short-Term Rental Regulations, Council of the Dist. of Columbia (Oct. 9, 2018), http://dccouncil.us/council-addresses-initiative-77-passes-short-term-rental-regulations/.  The bill includes a rental limit of ninety days, which may be expanded before the Council’s second vote on November 13, 2018.  Id.; Council Queues Up Consequential November Legislative Meeting, Council of the Dist. of Columbia (Oct. 17, 2018), http://dccouncil.us/council-queues-consequential-november-legislative-meeting/.

The above laundry list of regulations will frustrate residents that rely on short-term rentals to make ends meet, pay their bills, or maintain their homes.  Povich, supra.  A significant difficulty with short-term rental regulations is the varying constituencies.  Id.  Each short-term rental has a different purpose: some property owners rent out rooms in their home to make a living, others rent multiple properties for profit, and still others use the money to restore and maintain their historic homes.  Id.  Hosts that invest and renovate properties argue that they are improving neighborhoods and local businesses.  Id.  However, no matter the form of short-term rental, there continues to be a lack of safety standards; fire extinguishers, emergency lighting, and handicap access to name a few.  Id.

The home sharing industry can benefit from regulations because they will “legitimize the activity and attract[] interest.”  McCartney, supra.  However, states and local governments are having difficulty enforcing the regulations.  Id.  A major issue is that platforms are declining to share data about listed properties.  Id.  The proposed Maryland bill would require platforms to enforce the regulations and “would impose onerous information collection requirements on hosts and platforms, undermining the privacy of hosts and their guests.”  Boccia, supra.  This misplaces the responsibility and purpose of the online platforms which is merely to advertise the listed properties.  Id.

A possible strategy for local governments would be to realize the benefits of short-term rentals and equal the playing field by reducing hotel taxes.  Hamilton, supra.  Another option for local governments would be to embrace rental market diversity by putting consumer preferences first and protecting host and guest privacy.  Boccia, supra.  The current enacted and pending regulations have the power to eliminate local short-term rentals.  Hamilton, supra.  Cities should look at what is in everyone’s best interest rather than catering to powerful special interests.  Id.; Boccia, supra.

*Elizabeth Strunk is a second-year day law student at the University of Baltimore School of Law, where she is a staff editor for Law Review. Elizabeth is also a member of the Royal Graham Shannonhouse III Honor Society and the Women’s Bar Association. This summer, Elizabeth will be joining Gorman & Williams as a law clerk.

 

 

 

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