Primary Residency and Hosted/Unhosted Short Term Rentals: Why Does It Matter?

Sponsored Content from Harmari STR

The effort to regulate the impact of short-term rentals (STRs) on a community requires an ongoing commitment; it is never finished once and for all. Because of the ongoing and complicated nature of this effort, municipal leaders should work as hard as possible to enact the short-term rental ordinances that will have the most impact, and perhaps the most powerful of these is the primary residency requirement.

Creating ordinances requiring that STRs must be the primary residence of the owner, and/or establishing that the host must be present during a guest stay, will help block the impact of commercial operators who want to buy up multiple residential properties as investments. If unchecked, commercial STR growth will have many negative impacts, including:

• The disappearance of affordable housing stock.
• Excessive STR activity, to the detriment of quality of life in the community.
• STR revenue leaving the community.

By restricting STR operations to a host's primary residence, municipalities can respect a homeowner's wish to generate income from their property without opening the door to a flood of outside speculative investors.

A Balancing Act Between Different Interests

Whether a municipality is drafting its first set of ordinances, or whether it is opening past ordinances to renegotiation, there will be some in the community who want to restrict STRs as much as possible — to the point of banning them outright in residential zones — and some who want as few regulations as possible. Many towns will eventually find a stable balance between the two, but often the debate will continue to evolve over the years. In 2020 we looked at how some major markets are trying to protect their affordable housing stock through enforcing primary residency. Revisiting a few of them now can illustrate some of the major trends in STR compliance.

Denver: Not Waiting for Airbnb to Take Responsibility

In 2019, Denver became the first city in the country to crack down on STR owners who violated its primary residency ordinance. Hundreds of owners either surrendered their licenses or withdrew their applications once the city began asking them to sign affidavits, swearing they complied with the rule. City officials asked the major STR platforms to do their share in enforcing compliance by connecting each online listing to a rental license number and expiration date. Not surprisingly, Airbnb and the other platforms fought this request.

Now, after three years of fruitless negotiations with these companies, the City has taken a new strong measure to ensure compliance, imposing a $1,000 fine on STR platforms for each illegal short-term rental transaction. The City Council approved the proposal unanimously, and the rule took effect on February 1^st.

Eric Escudero, spokesperson for Denver's Excise and Licenses Division, said, "We couldn't get the platform to take action. We had no choice" but to propose the fine.

Vermont: Moving the Requirements to the STATE-LEVEL

A year ago, Vermont was just beginning to draft ordinances to curb STR growth in response to a rapid and troubling depletion of affordable long-term housing. Our past research has indicated Vermont is one of the top 5 states where STRs are the highest percentage of overall housing stock. Since then, two local towns (Killington and Woodstock) have enacted restrictive legislation, and the State seems to be following their lead by introducing a bill that would impose similar restrictions state-wide.

Bill H.200 states that it has four aims: protecting the residential rental market, supporting full-time residency, discouraging real estate speculation, and leveling the playing field for short-term rentals and other types of lodging.

(Two other Vermont bills to keep an eye on are H.257 and S.79, which would create a rental registry that includes STRs.)

Opponents to this bill include The Vermont Association of Realtors, which expressed concern that the bill "has the potential to eliminate the short-term rental of second homes, condominiums and any property other than a primary residence," and VRBO.

Long Beach, California: Maintaining Compliance without Legislative Support

The ideal situation for municipal leaders is to have a primary residence ordinance, but some communities won't support the idea, and the City has to find alternatives.

Previously, Long Beach required STRs to be hosted by the primary resident, but there were also talks of allowing unhosted rentals as well. This came to pass in December 2020, when the City expanded the short-term rental (STR) program registration to property owners who wanted to operate a non-primary residence as an STR. Despite removing the primary residency requirement, the City is still attempting to maintain some restrictions, including:

• Limiting the number of non-primary STR registrations in the City to 800, to be selected by a lottery system.
• Limiting ownership to one primary residence STR and one non-primary residence STR.
• Limiting unhosted rentals to 90 days per year, with no limit on hosted rentals.
• Providing a process for residential property owners within a census tract block group to petition to ban unhosted rentals in their neighborhood.

By adopting these restrictions instead of a primary residency ordinance, Long Beach may have created more work for itself. The 90-day limit on unhosted rentals is not only an additional metric to track, but it will become much harder to measure if the hosts rotate their listing between different platforms or take reservations through their independent site (known as off-platform booking). There is also the potential for owners to change their records so that unhosted rentals appear to be taking place at their properties. Harmari's Insights module gives municipalities subtle clues within the guest reviews that help shed light on what's happening.

Residents Deserve Proactive Leadership, Equitable Enforcement

In addition, the process for other residents to ban unhosted rentals in their area demonstrates a lack of leadership from the City. While a recent article highlights community groups in Arizona, Texas, and Massachusetts that succeeded in opposing pro-STR legislation, it notes that many residents had to use their savings and invest many hours each week to make an impact. Residents with fewer resources should not have to suffer more from quality-of-life issues just because their leaders are taking a hands-off approach.

Enforcing primary residency requirements within a short-term rental ordinance helps keep commercial interests from unduly influencing residential neighborhoods and housing affordability. They are worth fighting for, but enacting and keeping them requires patience and input from key stakeholders over time.

ABOUT THE CONTENT AUTHORs AND SPONSORs: Harmari STR and Linebarger Analytics & Information Services

Founded in 2011, Harmari assists government and municipalities with online compliance including short-term rentals. Harmari STR is used by over 60 municipal customers worldwide to ensure compliance and protect housing affordability while balancing the accommodation needs of tourists. Linebarger Analytics & Information Services, LLC (LAIS) is a wholly-owned non-law-firm subsidiary of Linebarger Goggan Blair & Sampson, LLP (Linebarger), dedicated to providing clients with Analytics & Discovery Services. In this proposal, references to "Linebarger" or "the firm" refer to the parent, whereas "LAIS" refers to the subsidiary. LAIS-Harmari was recently awarded a contract with the City and County of Denver.