Crackdown on Airbnb Highlights Diverse Municipal Approaches to Regulation

Posted on by Matthew Reiser

Over the past few years, there has been a surge in the size and importance of the digital sharing economy.  The short-term home rental ecosystem in particular has seen explosive growth.1 A leader in the space, Airbnb has rapidly grown to be one of the most successful of the new sharing economy companies.  Founded just 10 years ago in San Francisco, Airbnb now offers accommodations in over 80,000 cities in 191 countries.2

The widespread adoption of Airbnb as a platform for hosts to rent their properties for short time periods has led to concerns over displacement, gentrification, and quality of life for local residents.3  Of particular concern are landlords that choose to rent out properties on home sharing websites instead of renting properties to local residents.4  Responding to these concerns, many US jurisdictions have passed laws to regulate Airbnb.5  These regulations are as diverse as the jurisdictions that have passed them including various bans, taxes, and information sharing requirements.6 These varying laws can create a patchwork of local regulations, but the variations also allow each community to respond to local concerns and balance each community’s needs for economic activity with concerns over rising rental prices.7

Some cities have responded to Airbnb primarily with concern that Airbnb removes desperately needed rental units from the market and hurts local hotels.8  These cities, often larger, coastal tourist destinations, have led the way with stringent local restrictions and vigorous enforcement.9  Other cities have even gone as far as banning all short term home sharing rentals.10 The crackdown on Airbnb has been most notable in the largest US cities, the biggest of these, New York, has a large scheme of Airbnb regulations.11  

New York City had previously banned short-term rentals for less than 30 days in units not occupied by their owners.12 Following concerns that these regulations were not adequately enforced, New York added a new regulation forcing disclosures from Airbnb.13 These new disclosure requirements are some of the toughest regulations on Airbnb due to the volume and specificity of the required disclosures.  New York also recently launched a large and well-publicized crackdown on illegal rentals.14 In November of 2018, the city raided a condo where they issued summonses to over 20 people with an enforcement group of over 20 officers.15

Another leader in stringent Airbnb regulations is the city of Santa Monica in Los Angeles County, California.16 In a recent case, a local lessor was charged criminally for violating the rental laws for leasing his properties on Airbnb.17 The landlord pled no contest and was fined $3,600 and forced to complete 140 hours of community service.18

 Some jurisdictions simply tax Airbnb and similar services as hotels in an attempt to level the playing field between hotels and home shares.19 This option has the benefit of allowing local landlords to seek the best value for their property, while also raising revenues and preventing unfair competition with other accommodation offerors.  This lighter regulatory touch may not prevent local rent increases as much as harsher options, but it has the benefit of being simple to implement and enforce.20

Other jurisdictions have taken a more hands-off approach, some, for instance, have no municipal Airbnb regulations or taxes.  The local municipal approaches can also be heavily constrained by superseding state action.21 Indiana is one example, having moved to counter local municipal regulations through a state preemption approach.22 The Nebraska legislature also passed a similar bill, but it was vetoed by the governor.23

The diversity of approaches adopted by municipalities is well suited to regulating Airbnb and the larger home sharing economy.  While local owners and Airbnb will need to make the investment of time to learn about the taxes and regulations covering each property, this approach offers local communities control over their own affordability vs tourism dilemmas.  Cities where rental price concerns outweigh potential benefits to home sharing can adopt relatively heavy restrictions on companies like Airbnb.  At the same, cities where housing demand and affordability are less of a concern than increasing tourism can decline to restrict Airbnb.  These choices can be best made by those closest to the issue, at the municipal level.

  1. About Us, Airbnb Press Room, https://press.airbnb.com/about-us/ (last visited Nov. 18. 2018). ↩

  2. Id. ↩

  3. Marisa Kendall, Oakland: Airbnb Issue Highlights City’s Gentrification Fears, San Jose Mercury News (Jan. 16, 2017), https://www.mercurynews.com/2017/01/16/oakland-airbnb-issue-highlights-citys-gentrification-fears/. ↩

  4. See Alex Scott, Los Angeles, Displacement, and the Rise of Airbnb, UCLA L. Rev. https://www.uclalawreview.org/los-angeles-displacement-and-the-rise-of-airbnb/. ↩

  5. Lauren Hirshon et al., Nat’l. League of Cities: Ctr. for City Solutions & Applied Research, Cities, The Sharing Economy and What’s Next, 11 (2015), https://www.nlc.org/sites/default/files/2017-01/Report%20-%20%20Cities%20the%20Sharing%20Economy%20and%20Whats%20Next%20final.pdf. ↩

  6. Id. ↩

  7. See Kyle Barron et al., The Sharing Economy and Housing Affordability: Evidence from Airbnb (Apr. 1, 2018) (working paper), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006832. ↩

  8. Scott, supra note 4. ↩

  9. See, e.g., Scott, supra note 4; Blanca Barragan, Anaheim Flat-Out Bans Airbnb and Other Short-Term Rentals, Curbed LA, (Jun. 30, 2016 2:03 PM) https://la.curbed.com/2016/6/30/12072054/anaheim-flat-out-bans-airbnb-and-short-term-rentals. ↩

  10. Barragan, supra note 9. ↩

  11. Zoe Greenberg, New York City Looks to Crack Down on Airbnb Amid Housing Crisis, N.Y. Times (July 18, 2018), https://www.nytimes.com/2018/07/18/nyregion/new-york-city-airbnb-crackdown.html. ↩

  12. Josh Barbanel, New York City Raids Condo Building in Crackdown on Airbnb Rentals, Wall St. J. (Nov. 11, 2018 8:49 AM), https://www.wsj.com/articles/new-york-city-raids-condo-building-in-crackdown-on-airbnb-rentals-1541944153?mod=hp_lead_pos9. ↩

  13. Noah Manskar, Airbnb Disclosure Rules Signed Into Law By De Blasio, Patch (Aug. 6, 2018), https://patch.com/new-york/new-york-city/airbnb-disclosure-rules-signed-law-de-blasio. ↩

  14. Barbanel, supra note 12. ↩

  15. Id. ↩

  16. Memorandum from David Martin, Dir. of Planning & Cmty. Dev. to Mayor & City Council of Santa Monica (Feb. 9, 2018) (on file with author). ↩

  17. Illegal Short-Term Rental Host Receives Fines and Community Service, Santa Monica Daily Press (June 19, 2018 10:10 AM), http://www.smdp.com/illegal-short-term-rental-host-receives-fines-and-community-service/166930. ↩

  18. Id. ↩

  19. See, e.g., Bryleigh Hanson, New Law Creates Airbnb Tax in New Jersey, Patch (July 31 2018), https://patch.com/new-jersey/newarknj/new-law-creates-airbnb-tax-new-jersey. ↩

  20. See Barron, supra note 7 (showing increasing Airbnb usage increases rents). ↩

  21. See, e.g., H.B. 1035, 2018 Sess. (Ind. 2018); Aileen Chuang, No Love for Airbnb? Carmel Thumbs Nose at Indiana’s New Short-Term Rentals Law, Indy Star (Mar. 24, 2018 2:15 PM), https://www.indystar.com/story/news/politics/2018/03/24/carmel-thumbs-nose-indianas-short-term-rentals-law-airbnb/455817002/. ↩

  22. See H.B. 1035. ↩

  23. Chris Dunker, Ricketts Vetoes Three Bills, Ending 2018 Legislative Session, Lincoln J. Star (Apr. 23, 2018), https://journalstar.com/news/local/govt-and-politics/ricketts-vetoes-three-bills-ending-legislative-efforts/article_d3d68251-4b2e-58c3-8cb1-5f6823fc7c27.html. ↩

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