BY CLIFF HOCKLEY | OB GUEST CONTRIBUTOR
Eric was in a bind. The rent on his Southeast Portland studio had increased for the third year in a row. His salary as a paralegal at a downtown law firm wasn’t enough to cover the rent increases. Then one of his coworkers mentioned he could subsidize his rent with short term vacation rentals through Airbnb. His coworker did warn Eric about the city’s new Airbnb tax and said permitting procedures adding red tape to the process. Nevertheless, Eric created a profile and put his apartment up for rent for $100 a night. Soon he had two reservations and was expecting to earn $200.
Eric had turned his apartment into a money maker, but there were some larger issues Eric had overlooked. With cities and landlords catching up to the Airbnb craze, the laws and policies Eric’s coworker warned him about doomed Eric’s new operation.
Eric is a composite figure. But the problems I've described above challenge plenty of real world Airbnb landlords. After months of city hall battles March 2014 brought with it Portland’s new attitude towards Airbnb. Mayor Charlie Hales struck a deal with the online lodging coordinator, which uses a network of members throughout the world to offer their homes to travelers for a fee. The agreement called for Airbnb operators to pay an 11.5% tax, to cover the city’s 6% lodging tax and the 5.5% county tax.
Airbnb is a wildly popular concept that nevertheless violates many standard leases and zoning codes while angering a hotel industry that pays heavy tourism taxes. That combination, along with a new Airbnb headquarters scheduled to open in Portland this summer, forced officials to address the illegal short-term rental issue. A solution could come with the proposed revisions of Chapter 33.207 of the Regulatory Improvement Code Amendment Package 6 (RICAP 6), which introduced the accessory short-term rental.
The accessory short term rental language creates a new property classification which reads as follows:
An accessory short term rental is one where an individual resides in a house, attached house, duplex, or manufactured home and rents bedrooms to overnight guests. There are two types of short-term rentals
Type A: accessory short term rental where the operator is renting no more than 2 bedrooms to overnight guests
Type B: accessory short term rental where the operator is renting between 3 and 5 bedrooms to overnight guests.
The tax and the proposed laws would allow Airbnb to operate legally in Portland. Operators would need to apply for a permit from the Building Development Services. The application to acquire a permit for both Type A and B rentals includes:
- Notifying neighbors and the property owner by mailing a letter which describes the operation and the number of available bedrooms, operator contact information and how rental standards are being met.
- Operators must submit a copy of the notification letter and a list of the necessary recipients of the notification letter as well as their addresses.
- Two copies of a paper application which includes
- Property location
- Name, address and telephone number of the operator
- Operator signature
These proposed laws don’t bode well for current Airbnb renters, especially those in rented properties. My daughter Ellen, a New York renter who agreed to speak on the issue, sub-rents her apartment through Airbnb, says these new proposals would dissuade her if New York were to adopt them. “I use Airbnb because it’s simple and allows me to subsidize my rent. It provides people a home when they’re traveling and assures me that someone is staying in my apartment overnight when I’m away.” Ellen’s lease, similar to most apartment leases, does not allow for any short term rentals. The recently updated rental agreement we use at Bluestone & Hockley says “tenants shall not advertise available occupancy of their unit if that available occupancy is in exchange for any sort of compensation." Language like this is assures liability and resident safety are respected in addition to making sure the lease agreement is upheld and that the Tenant / Landlord relationship stays intact.
With these new laws, to be voted on at the April 22nd 2014, Portland city hall meeting, operators like Eric and Ellen may have to reevaluate their commitment to Airbnb. These regulations protect Portland’s strict zoning codes and hotel operators, but they may have an adverse effect on Airbnb’s business. The popularity of the concept Airbnb could inspire renters to ignore both Airbnb and the law. Existing operators of cheap short term vacation rentals will could bypass these new laws and find alternatives ways to rent. Other on-line companies could use this business model more creatively to capitalize and help operators fill their empty pocket books.
Cliff Hockley is the president of Bluestone & Hockley Real Estate Services