• Despite continued growth, the hotel lobby continues to push for regulations restricting or effectively banning home-sharing services.
  • The Goldwater Institute has been taking legal action against cities across the country on behalf of home-sharers that it says are unfairly restricted and regulated.
  • As a model for home-sharing ordinances, the Goldwater Institute points to Colorado Springs, which has addressed basic health and safety concerns but otherwise leaves people free to use their property as they wish.

The travel and tourism industry has enjoyed a minor revolution in recent years with the exploding popularity of home-sharing, the practice of renting out one’s home through platforms such as Airbnb and Homeaway. In the 12 months leading up to October 2018, for instance, more than a quarter of travelers from the U.S., UK, France, and Germany used Airbnb, according to Morgan Stanley Research.

Hotel occupancies and demand have also continued to grow year-over-year, setting records in 2018, but that hasn’t stopped the industry from lobbying cities to heavily regulate and restrict home-sharing on the grounds that homeowners who rent out guest rooms “compete with the city’s hotels and threaten the jobs they create.”

The result is a series of local battle across America’s largest and most influential cities over where and how to regulate this innovative new method of meeting travelers’ growing demand for lodging while helping property owners stay afloat.

One group’s nationwide effort

One of the major players in this fight is the Goldwater Institute, a free-market public policy research and litigation organization, which has been taking legal action against cities on behalf of homeowners against local restrictions and regulations that severely limit (and in some cases effectively ban) home-sharing.

Miami Beach — More than half of residential properties in this vacation hotspot are non-homesteaded investment properties. With tourism driving the local economy, these “vacation rentals” help sustain local businesses, while property taxes levied from them help the city pay for things like schools, emergency and community services, and infrastructure improvements.

That hasn’t stopped the city from passing strict regulations controlling home-sharing. Individuals who rent outside of a small zone in North Beach, the only area where rentals are permitted, face fines of $20,000 to $100,000 per violation. Even within this zone, failure to comply with its many rules can result in similarly large fines.

The Goldwater Institute is challenging this ordinance on the grounds that it imposes “excessive fines” on citizens that are “grossly disproportional” to their actions, which violates the Florida Constitution’s prohibition of such punishments. State law also sets the maximum fine that cities like Miami Beach can levy at $1,000 for first offenders. Read more about the case here.

Seattle — Unlike the Miami Beach law, Seattle’s new home-sharing ordinance simply makes it impossible for someone to operate a home-sharing business at any sort of scale. It limits the number of rental properties that individuals or businesses are allowed to operate to three — their primary residence and two other properties.

The city’s “public purpose” for this law, which is required under the Washington state Constitution, is to increase the available supply of affordable housing and slow the rapid growth of housing prices the city has been experiencing in recent years. While the cost and availability of housing qualifies as a legitimate concern, the Goldwater Institute argues that it fails the second and third parts of state law. First, it fails to provide evidence of a link between short-term rentals and affordable housing. Second, the burden it places on Seattle’s home-sharing entrepreneurs greatly outweighs whatever minor public benefit it may achieve. Local entrepreneur Andy Morris and his company, Seattle Vacation Home, for instance, are in danger of going out of business because Morris will no longer be able to operate his company’s nine short-term rental properties across the city. Read more about the case here.

Pacific Grove — This small coastal city in Monterey County, California decided to let blind chance decide who would continue to be able to operate home-sharing properties. Last February the city imposed a 15 percent density rule to limit the ratio of properties that could be used for home-sharing. To decide which property owners would be among the lucky 15 percent, Pacific Grove literally set up a ping-pong ball lottery machine.

The problem with this, according to the Goldwater Institute’s legal team, is that it violates California state law. Under the state’s Coastal Act, which created a Coastal Commission to regulate development in the California’s coastal zone, cities have been urged to adopt only “reasonable and balanced regulations that can be tailored to address the specific issues” of home-sharing in the community. Prior to implementing land use restrictions and zoning ordinances, the Coastal Act requires local governments to submit a “local coastal plan” for certification, which Pacific Grove neglected to do. Unlike past home-sharing regulations that the Coastal Commission has approved, Pacific Grove’s new rules arbitrarily deprive property owners of their right to let people stay in their homes–rather than tailoring the regulations to address specific problems. Read more about the case here.

Chicago — When the Chicago city council passed a package of regulations severely limiting the use of home-sharing platforms in 2016, the Goldwater Institute and the Liberty Justice Center filed a lawsuit to protect the rights of property owners affected by the law. They achieved a partial victory the following year when a judge ruled that city officials can no longer be allowed to inspect home-sharers’ records of guests’ personal information at any time without a warrant.

“Chicago’s anti-home-sharing law is one of the most intrusive laws in the history of the city,” said Christina Sandefur, executive vice president of the Goldwater Institute and one of the attorneys on the case. “This change is a step in the right direction that helps protect the rights of Chicagoans to use their property as they see fit. But a lot remains to be done.”

The case will continue to challenge aspects of Chicago’s home-sharing ordinance that the Liberty Justice Center and the Goldwater Institute argue are unconstitutional, Illinois Policy reported in 2017. This includes provisions allowing the city to search home-sharers’ properties at any time, provisions restricting owners of a single-family home or a unit in a building with four or fewer units from renting it through a home-sharing platform, taxes rates that are higher for home-sharing rentals than hotel rooms, and provisions limiting the number of units in a single building allowed to be listed on a home-sharing platform. Read more about the case and its next steps here.

A better model for cities

Amid these cases, as well as recent actions by city councils in Washington, D.C. and Los Angeles to heavily restrict and regulate home-sharing, the Goldwater Institute points to one bright spot for would-be home-sharers. The city of Colorado Springs passed a relatively even-handed home-sharing ordinance that took effect this year. It requires home sharers to obtain an annual permit, have a local contact on call to respond to guest emergencies, pay sales tax (like anyone who offers lodging for money), and have property liability insurance.

Aside from that, the regulations are pretty much the same as they are for any other home owner.

“That’s about how it should be,” wrote Jacob Huebert, a Senior Attorney at the Goldwater Institute, in a blog post last month. “If cities are going to regulate home-sharing, they should do so in a way that addresses basic health and safety concerns, makes home-sharers follow the same rules against noise and other nuisances as everyone else, and otherwise leaves people free to rent out their property as they see fit.”

Huebert has minor critiques of the ordinance, such as its limit of no more than four short-term rental units on a single property (like an apartment building), but overall he argues it should serve as a model for other cities seeking to implement responsible regulations that ensure the public’s best interests while respecting homeowners’ property rights.

“Let’s hope that, in 2019, other cities notice how Colorado Springs respects its citizens’ rights, realize that the anti-home-sharers’ dubious predictions of negative consequences aren’t coming true, and follow its example,” he concluded.

Image Credit: “Mid Miami Beach” by Phillip Pessar is licensed under CC BY 2.0.