This week’s Short-Term Rental Update features a number of interesting topics, including these highlights:
Short-Term Rental Operator Lyric raises $160M
("Airbnb Leads $160 Million Investment in Business-Travel Startup," Bloomberg Quint - Stories on Apr 17, 2019)
Lyric is a small, luxury apartment rental company working to change the narrative around short-term rentals. It prioritizes regulatory compliance in every jurisdiction where it operates. Of note, Airbnb, which has been deeply involved in regulatory compliance litigation nationwide, is leading Lyric’s latest funding round of $160 million. It appears that Airbnb is doing everything in its power to tidy up its house before a highly-anticipated IPO.
Airbnb Back in Court
("New rules don’t seem to be bringing Boston many short-term rental applications," Curbed - Boston on Apr 10)
Earlier this week, Airbnb was in court arguing that the City of Boston’s short-term rental ordinance that took effect in January is “draconian” and violates the Communications Decency Act. A Massachusetts federal judge questioned why the City of Boston shouldn’t be free to impose restrictions on Airbnb’s units as the City sees fit. The judge has yet to rule on the motion. As always, we will continue to monitor.
HomeAway and Airbnb Lose the Battle Against Santa Monica
("Airbnb Loses Major Fight Over California City's Rental Law," Bloomberg Quint - Stories on Mar 13, 2019)
On March 13, the Ninth Circuit ruled against HomeAway and Airbnb in a closely-watched lawsuit the two short-term rental platforms filed against the City of Santa Monica. The lawsuit alleges that Santa Monica’s ordinance regulating the short-term vacation rental market is preempted by the Communications Decency Act and impermissibly infringes upon each company’s First Amendment rights. The ordinance authorizes licensed “home-sharing” (rentals where residents remain on-site with guests) but prohibits all other short-term home rentals of 30 consecutive days or less. It also requires the platforms to collect and remit taxes and regularly disclose listings and booking information to the city. We expect that this decision will bolster the confidence of some local governments that have been watching from the sidelines to determine if strict short-term rental regulations will hold up in court. An obvious corollary is that the industry is likely to invest more resources in jurisdictions that have shown greater hospitality to these platforms. In our view, some regulation is both necessary and reasonable if short-term rentals wish to stake a permanent claim in the travel industry. We will continue to monitor where that line of reasonableness is drawn as the arguments play out in the courts and local legislative bodies.
Short-Term Rentals Continue to Gain Market Share
("Booking Holdings breaks down private accommodation revenues for first time, now at
20% of total," Phocuswire, Feb 27, 2019)
Alternative accommodations, including short-term rentals, accounted for 20% of the overall annual revenue for Booking Holdings, the parent company of Booking.com. Notably, 40% of Booking.com’s active customer base booked an alternative accommodation within the past 12 months. We see no indication that growth in the short-term rental market will slow down anytime soon.
On February 19, Bisnow hosted its 2019 Pacific Northwest Hotel Summit held at the Four Seasons Hotel in Seattle. Reputed real estate property developers, hotelier and principal consultant of an architectural and design services firm convened to share their insights on how Seattle’s booming tourism is impacting the hotel industry, specifically with regard to the increase in development, investment, supply, and branding of hotel properties.
- The industry is exploring ultra-short-term stays (in increments of minutes or hours) under startup Recharge, which allow hotels to rent out rooms for less than one day to people who need space for a quick nap. Recharge recently added private homes to its platform. We could see this model being useful for travelers with long layovers who need a place to leave bags and freshen up between flights. We’ll monitor to see if the concept gains traction.
("Short-term rental platform Recharge adds private homes" on Inman, Jan 29, 2019)
- The City of Victoria in British Columbia is ratcheting up its enforcement efforts against illegal short-term rentals. It started by educating short-term rental owners, then sending out warning letters, and is now preparing to dish out hefty fines to violators, which could amount to $500 per day. ("City of Victoria to start charging illegal short-term rental operators" on Vancouver Island Free Daily, Jan 21, 2019)
Florida Blacklists Airbnb Over Israeli Rental Policy, GC Denies Discrimination
Law.com - Legal News on Jan 29, 2019 (subscription required)
Florida Gov. Ron DeSantis Tuesday prohibited state agencies from using the short-term rental service. DeSantis had earlier criticized Airbnb for its decision to not list properties in the West Bank area of Israel.
Will Berkshire Pot Shops Create More Income for Airbnb Hosts?
Spectrum Local News - New York Capital Region on Jan 23, 2019
Airbnb hosts in Berkshire County earned $9.8 million in 2018, serving nearly 62,000 visitors. With two recreational marijuana shops already open in Berkshire County, and the potential for more on the way, 1Berkshire CEO Jonathan Butler said it's an opportunity for even more green in the area. "We're a visitor destination and this has the potential to bring in another audience of visitors," Butler said. And Airbnb hosts like Andy agree. He offers a whole house in Housatonic on the app, just a few minutes away from the shop in Great Barrington.
Regulation & Legal Developments
Ogden residents vote to regulate short-term rentals
Las Vegas Review Journal - Business on Jan 31, 2019
The Ogden high-rise in downtown Las Vegas, a case in point in the fight against illegal vacation rentals, has almost entirely relied on the city for policing for a decade. But now for the first time, enforcement is possible in-house. A supermajority of residents at the condominium tower voted to allow the homeowners association to regulate illegitimate short-term rentals, targeting a point of contention that had never been addressed by policy since the building opened in 2008. By a 189-29 vote as of Tuesday, the residents agreed to a revision to The Ogden’s bylaws that creates background checks for long-term lessees, boosts funding for expanded security and institutes a fine system for units found to be operating in the home-sharing space without the proper licensing from the city.
Va. bill would override Fairfax rule limiting short-term rentals to 60 days
The Washington Post - Local News on Jan 30, 2019
The debate over how to regulate the booming short-term-rental market found new life in the Virginia General Assembly this week under a bill that seeks to override how the state’s largest jurisdiction chose to handle the issue. Legislation on its way to the Senate floor would triple the amount of time homeowners in Fairfax County are allowed to take in tenants under Airbnb and similar websites, replacing a 60-day annual cap approved by the county last year with a 180-day limit.
Airbnb critics say blocked law would save housing units
Crain's NY - Retail News on Jan 22, 2019
A new report from critics of Airbnb and other home-sharing platforms claims New York City could lose nearly 11,000 housing units if new regulations on the companies don't go forward. A federal judge this month blocked a New York City law that would have subjected Airbnb and HomeAway to reveal detailed information about their business. The ruling comes as the companies challenge the new law in court. The groups New York Communities for Change and Tenants PAC issued a report on Tuesday that analyzed government and rental data. It found that without the law, 10,800 units could be diverted for use as short-term rentals. The groups maintain that home-sharing platforms drive up rental prices by reducing available residential units.
D.C. mayor declines to sign unanimously approved bill regulating Airbnb activity
Curbed - Washington DC on Jan 18, 2019
According to Mayor Muriel Bowser, the bill is overly restrictive and may be challenged in court. In a signal of her disapproval, D.C. Mayor Muriel Bowser has opted to leave unsigned a bill that prohibits homeowners from renting out, on a short-term basis, homes other than their primary residences. The legislation, which the D.C. Council unanimously green-lighted last November, also limits the total number of days per year that homeowners may rent out their primary residences when they are absent (for so-called “vacation stays”), to 90 in most cases.
Oceanside to crack down on short-term rentals with new program
San Diego Union-Tribune News on Jan 28, 2019
Oceanside plans to better regulate its short-term vacation rentals by hiring a full-time enforcement officer, requiring licenses and annual fees, and streamlining the tax collection process. The proposal outlined by first-term Councilman Chris Rodriguez got the City Council’s unanimous approval Wednesday, along with the stipulation that details of the program be worked out by city staffers and ready for the council’s consideration in 120 days. Like San Diego, Del Mar and many other tourist destinations, Oceanside has been looking for years for better ways to regulate short-term rentals.
Complaints Over Rowdy Partiers Could Revoke This Airbnb Manor's Business License
Colorado Public Radio - News on Jan 17, 2019
As communities grapple with how to regulate short-term home rentals on sites like Airbnb, residents in one Denver neighborhood gathered at a hearing Thursday to ask the city to revoke their neighbor’s license to rent. Garth Yettick has been renting his property on Marion Street, “Marion Manor,” through sites like Airbnb, HomeAway, VRBO and others since summer 2017. He argues the million-dollar home is his primary residence, while neighbors have said they hardly see him at the house.
Privacy concerns are front and center in this week’s Short-Term Rental Update:
Regulation & Legal Developments
- A federal district court judge in New York preliminarily enjoined from taking effect a New York City ordinance that would require home-sharing platforms to turn over voluminous customer data on a monthly basis. The court held that the ordinance likely violates the Fourth Amendment’s prohibition against unreasonable searches and seizures. ("Airbnb, Inc. v. NYC: Data Collection And Fourth Amendment Protection" on Forbes news, Jan 7, 2019)
This week, the first statewide short-term rental regulations were signed into law in Massachusetts with a number of crucial details. We also note that big money is moving into the startup funding world, which indicates potential future partnerships in the industry, including those between short-term rental giants like Airbnb and co-working communities.
Regulatory & Legal Developments
Massachusetts governor signs law regulating short-term rentals
Smart Cities Dive - News on Jan 2, 2019
Massachusetts will be the first state to require short-term rental hosts to register, pay excise tax and carry insurance.
Transactions & Investments
The Wing gets $75M from Sequoia, Airbnb
TechCrunch on Dec 19, 2018
The Wing, the inspirational New-York based network of work and community spaces designed for women, announced a $75M round of funding. Airbnb, a company that does not regularly invest in startups, and WeWork, are two of the investors in The Wing.
WeHo short-term rental startup AvantStay snags $5M in funding
Real Deal - LA Real Estate News on Dec 20, 2018
AvantStay, a platform that offers short-term rental options for group travel, recently won $5M in funding to further expand its technology initiatives.
In our Short-Term Rental Update this week, we focus on developments in the industry. New regulations in Los Angeles, which are expected to go into effect in July 2019, will prohibit “rogue hotels” but allow limited home-sharing. The Las Vegas City Council has restricted the number of legal home-sharing units by limiting the number of new permits that are available to owner-occupied homes. In a very close vote, the only areas in South Lake Tahoe that will allow short-term rentals include commercial zones and the tourist core. Additionally, as the cannabis industry continues to benefit from legalization efforts across the globe, we can expect to see more short-term rental owners market their rental units as cannabis-friendly. Cannabis Air has opened in Toronto, which is not exactly a hotel concept, but instead presents as a short-term rental to guests. We look forward to continue sharing with you the vast number of ways this industry is revolutionizing the way people travel.
In our upcoming Short-Term Rental Updates, we will share with you the latest news and stories related to short-term rentals, with a focus on industry-wide trends and regulatory developments, enforcement, and practical implications for owners and operators. Anyone involved in this industry knows that it is continuing to experience immense expansion pressure from companies looking to play in the space, from long-standing industry behemoths to scrappy start-ups and everything in-between. The growth side faces strong competition from local governments attempting to regulate an industry that is constantly evolving and innovating. In this inaugural Update, I'd like to share with you some interesting notes from this week’s news:
We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.