For the past five years, Austin Hong and his husband have used Airbnb to rent out their second home in San Diego for a few days at a time. The extra cash has not only helped pay their mortgage, it has also allowed them to host visiting friends and family in the three-bedroom house not far from the beach.
In July, the city council passed a law that would ban short-term rentals of second homes through Airbnb, HomeAway, VRBO and other digital platforms.
So Hong fought back. He collected signatures on petitions at food courts, at a local mall, at social events. And he won a partial victory: The measure was blocked from taking effect until the matter can be decided by voters, possibly in 2020.
“They say it’s regulation, but really it’s a ban that they passed,” said Hong, 34, a creative director at a software company. “We absolutely want regulation. What we don’t want is a ban.”
The explosive growth of short-term rentals nationwide has pushed local governments to rein in the practice, with help from the hotel industry, which wants to stifle a formidable competitor. From San Francisco to New York, cities have been trying to regulate the blossoming “home-sharing” economy.
But that effort has divided communities and triggered a backlash in some places, where short-term rental companies and property owners are angry at the prospect of losing a lucrative enterprise.
In June, voters in Palm Springs, Calif., overwhelmingly approved a ballot measure rejecting limits on short-term rentals. Some state governments, including in Arizona and Tennessee, have intervened to protect hosts when legislators thought cities were setting limits that went too far.
In the District, the tug of war is expected to reach a climax Tuesday with a second D.C. Council vote expected to approve some of the toughest restrictions in the country. They would ban short-term rentals of a second home — a measure that has proved to be the single most divisive provision in debates nationwide.
As in many other cities, the District would allow property owners to rent out space in their primary residence when the host is present, and for a specified period — up to 90 days a year in Washington — when the host is absent.
In a last-minute effort to soften the bill, Airbnb sent council members a memo Monday warning it may try to put the issue directly to voters with a ballot initiative in 2020 if the current version passes.
These kinds of new restrictions — in scores of cities in the United States and hundreds worldwide — have barely slowed the rise in home-sharing, which is forecast to continue to expand rapidly, and permanently transform the lodging and tourism business.
Short-term rentals have soared because hosts like the extra income, guests can often find cheaper alternatives to hotels and the online platforms make arrangements simple.
The expansion aroused fear in the lodging industry, whose firms and unions have financed and promoted tight regulation of what they call “illegal hotels.” They have formed an alliance with residents unhappy that short-term rentals are altering their neighborhoods’ character and with affordable housing activists. They make claims, based on inconclusive data, that short-term rentals contribute significantly to housing shortages and rising rents.
“The real story over the last year or year and a half seems to be the hotel industry waking up to the fact that Airbnb poses a much bigger threat to their business than they originally imagined,” said Arun Sundararajan, a business professor at New York University.
He noted that last New Year’s Eve, more than 3 million guests were staying in Airbnb rooms, or more than the total number staying in hotels owned by Marriott and Hilton combined.
The regulations have established a legal framework for the new industry, which in many cities was operating in violation of zoning laws or other ordinances. They also have allowed local governments to collect taxes on short-term rentals. Airbnb says about 60 percent of its U.S. hosts now pay such levies.
“We’re encouraged to see places like San Diego, Boston and New York moving forward with regulations holding Airbnb and their counterparts accountable for fostering illegal hotel activity, which is really affecting quality of neighborhoods and housing affordability across the country,” said Troy Flanagan, vice president of the American Hotel and Lodging Association.
But the new regulations are barely slowing down the nascent industry. Globally, short-term rentals grew by 82 percent from 2012 to 2017, from 45.6 billion to 82.9 billion, according to a July report by Skift, a travel industry research firm. In the same period, hotel room reservations increased 27 percent, from 404.2 billion to 512.3 billion.
By 2022, Skift forecast, short-term rentals sales will jump 60 percent from the 2017 level, to 132.5 billion rooms, while hotel room sales will rise by 34 percent, to 686.9 billion.
It seems likely that short-term rentals would have grown even faster without the new regulations, but no figures are publicly available about how many listings were lost overall because of the new rules. In San Francisco, Airbnb reported in January that some of the tightest restrictions in the country had cost it nearly 5,000 listings.
Regulation can actually help encourage short-term rentals, according to the home-sharing industry, because it legitimizes the activity and attracts interest. Also, it’s so difficult to enforce many regulations that home-sharing continues even if it’s technically illicit.
“The more heavy-handed and draconian the regulations that cities try to impose, the more complicated it is for them to enforce,” said Matthew Kiessling, vice president of the Travel Technology Association.
But cities accuse the short-term rental companies of making enforcement difficult by declining to share data about who is listing properties. In Portland, Ore., a city audit in August found that nearly 80 percent of listed rentals were operating without the mandatory city permit. City officials complained that their hands were tied because they lacked data.
“It’s still very challenging to have what I would call smart regulation, because it depends on data, and data is largely held by the companies, and the companies are largely not super-interested in sharing the data,” said Kellen Zale, a law professor at the University of Houston.
She and other analysts said the research is inconclusive about whether the short-term rental business is contributing to shortages of affordable housing.
“I’ve seen various studies, and they point in different directions,” Zale said. “We haven’t really got good evidence.”
Despite the battle over regulation, some common ground exists. The short-term rental firms agree with the hotel industry that owners should be banned from having multiple listings. The hotel industry says it’s fine with what it calls “true” home-sharing, in which hosts rent space in their primary residence when they’re present.
The biggest challenge has been whether to allow short-term rentals of second homes. Phoenix and Seattle say yes, while New York and San Francisco have largely banned the practice.
The question resonates in San Diego, a seaside city with thousands of vacation homes that have been rented out on a short-term basis for generations.
Blaine Smith owns a company that manages 150 vacation homes. All but two or three of the properties are second homes, which could not be rented under the proposed law.
“As written, it would pretty much put us out of business,” said Smith, 32. “We have such a rich history of tourism and vacation rentals. It’s just crazy what happened here.”