The Short-term Rental Market Is Booming. Here’s Why Cities Should Regulate It.

When drafted and enforced thoughtfully, city ordinances work as intended to regulate Airbnb-style short-term rentals — but state preemption is complicating the issue and presenting a new challenge to local governments.

This is a guest post by Ulrik Binzer.

Short-term rentals are no longer just a vacation destination issue

The dramatic rise of Airbnb and other short-term rental vacation sites has turned short-term rentals into a $30 billion dollar industry. Whereas vacation rentals used to be confined to beach and mountain towns, the popularity of online platforms such as Airbnb, HomeAway and Flipkey has caused short-term rentals to become a real issue in all types of communities across the country. As a result, many cities and counties have begun regulating the practice of homesharing in an attempt to mitigate negative side effects such as noise, trash, parking and traffic problems as well as more serious issues like the impact of short-term rentals on affordable housing and neighborhood character.

When drafted and enforced thoughtfully, these new ordinances are working as intended: party houses are eliminated, residential neighborhoods are kept residential, and short-term rental hosts are paying their fair share of taxes and permit fees.

New state laws curtail the ability of local governments to do their job

Just as cities and counties are getting a handle on this new and growing industry, a number of states including Arizona, Utah, Florida, Texas, Illinois, Tennessee and Missouri have or are considering adopting preemptive measures that takes away the ability of local governments to effectively regulate homesharing and short-term rentals in their community.

Generally drafted by lobbyists from short-term rental behemoths such as Airbnb, Expedia and other companies that allow property owners to rent out houses online as lodging for travelers, these preemptive measures are introduced at the state assembly under the guise of protecting property rights, creating a level playing field, or simplifying compliance by eliminating the need for different rules and regulations across cities and counties. But the true intention of these measures is often to take away cities’ and counties’ land use jurisdiction as it pertains to this particular industry so local governments can no longer put in place restrictions on the practice of homesharing.

The consequences of these types of preemptive measures cannot be understated. For example, cities and counties would lose their right to put in place primary residency requirements, zoning restrictions and safety requirements and to place restrictions on the number and types of allowed short-term rentals. These are the same regulatory tools that make short-term rental ordinances effective on the ground — and by removing these regulatory options, state regulators are effectively creating a free-for-all marketplace with no protections for neighbors and other “innocent bystanders.”

Preemption in the short-term rental market sets a dangerous precedent

State preemption in the short-term rental market is problematic on a number of levels, resulting in real problems on the ground and countering the general principle that local problems are best solved at the local level. Preemption also erodes 100 years of municipal Home Rule law, which grants the power to regulate persons and property for the purpose of securing the public health, safety, welfare, comfort, peace and prosperity of the municipality and its inhabitants to local governments.

Adopting state-level preemptive measures when it comes to homesharing could therefore be the beginning of a slippery slope under which the ability of local governments to regulate other controversial industries such as marijuana dispensaries and sober homes are also revoked in favor of statewide, “one-size-fits-all” measures written by industry lobbyists.

City leaders must stand together against state preemption

With short-term rental companies coming under increased pressure to ensure compliance with local rules, it is likely that more attempts will be made to enact statewide rules to preempt them. Local government leaders must remain aware of these initiatives — and, when necessary, stand up for their right to enact sensible and fair short-term rental ordinances in their community.

In addition to homesharing and short-term rentals, NLC finds that states limit city power through preemption in a number of other policy areas ranging from labor protections to taxing authority. For more details, read our full report, City Rights in an Era of Preemption: A State-by-State Analysis.

Featured image: In 2015, the city of San Francisco began to regulate the short-term rental market, requiring rentals to have registration numbers. An additional ordinance passed in July 2016 requires that listings on sites like Airbnb publish these registration numbers, and holds both the host and the short-term rental company potentially liable for non-compliance. (Getty Images)

About the author: Ulrik Binzer is the founder and CEO of Host Compliance, an industry leader in short-term rental monitoring and compliance solutions for local governments. A pioneer in the short-term rental enforcement solution space, Ulrik developed the first compliance monitoring tools and now uses his expertise and insights to help local governments across North America implement, monitor, and enforce short-term rental regulation.