HomeAway’s hometown is the latest city trying to manage short-term rentals

It has taken two years filled with highly polarized debate, but the Austin City Council is poised next week to give final approval to a policy that allows commercial short-term rentals in neighborhoods.

Groups fighting for and against the policy have been increasing online campaigns, media blitzes and protests in advance of the Aug. 2 council meeting.

Two camps have emerged: Those who want tough restrictions say neighborhoods need protecting; the other side says the new policy should respect property rights and should not be so strict as to drive the industry underground.

Those arguments aren’t unique to Austin. Industry experts estimate the United States has more than 3 million short-term rental properties, in large part because of the ease of listing and finding the hotel alternatives using Internet brokerage firms.

In response to the trend, New York, San Francisco and Portland, Ore., banned the rentals completely. Maui, Hawaii, allowed them but imposed a limit of 400 properties and requires renters to pay a 9.25 percent hotel tax. In San Antonio and Austin, they have been completely unregulated.

“The regulations vary very widely,” said Carl Shepherd, co-founder and chief strategy and development officer of Austin-based HomeAway Inc., which operates one of the most popular vacation rental websites. Shepherd said the company does not know every city’s short-term rental rules but asks homeowners renting the property to affirm that they’re complying with all laws.

Different types of rental units

Arguments in Austin have focused on the so-called commercial rentals — homes that are not typically occupied by their owners and are primarily used as rentals. In a study commissioned by the city, about 1,500 short-term rental properties were found, with a third of them in the 78704 ZIP code, which covers South Austin. The city auditor could find owner information for only 900 of the properties, and of those, more than a third were commercial short-term rentals.

The city’s proposed regulations, given preliminary approval at the June 7 council meeting, would allow short-term commercial rentals but require all renters to register with the city and pay a 15 percent hotel tax. The rules also limit the number of short-term rentals to 3 percent of all houses in a ZIP code. The proposed rules do not apply to apartments, condominiums or other multifamily properties.

Neighborhood groups hoping for a complete ban on the rentals protested Saturday outside the headquarters of HomeAway and want the City Council to reverse course or at least tighten the restrictions. They complain that commercial rentals hollow out urban neighborhoods by replacing regular residents with temporary ones and are essentially businesses in a residential zone.

Joel Rasmussen, president of the Austin Rental Alliance, which represents renters and favors allowing rentals of homes not occupied by their owners, argues that an outright ban on residential rentals of less than 30 days isn’t effective. Furthermore, he said, cities that do so lose out on hotel taxes they could be collecting.

“The way that it works in New York … it’s a no-tell. I call and say, ‘I’m going to be in town for these eight days,’ and they say, ‘You have to stay 30 days. But if you leave earlier, then we’ll refund you,’ ” Rasmussen said.

Shepherd agreed that under bans, renters take their business underground. Instead, he said, cities should adopt simple rules.

Austin City Council Member Chris Riley, who favors the commercial rentals, said the ZIP code density limit might be too broad. Riley said he backs changing the rules to reduce clustering of commercial rentals in certain areas.

Laura Morrison and Kathie Tovo, the only two council members who voted against allowing short-term rentals in last month’s meeting, said they still want to ban them. But Tovo said she is working on amendments to Riley’s proposal to tighten restrictions on the rentals.

Even if the City Council approves a final set of rules, city staffers have asked to have at least until October to set up enforcement policies and fees for permits.

How other cities do it

In Portland, an enforcement team trolls the Internet to ferret out short-term rentals, and property owners are held to account for illegal rentals, said Mike Liefeld, that city’s enforcement program manager. Liefeld said that policing the Internet wipes out the possibility of an underground market.

“You need to (advertise the rentals), and there are only so many ways to do that if you’re booking a rental for people coming from out of town. It’s not as if you can keep it going using word of mouth,” Liefeld said.

In Maui, city officials plan to hire two code enforcement officers to regulate short-term rentals.

Tom Nuckols, a member of the Barton Hills Neighborhood Association board, is against allowing the commercial rentals. But, the South Austin resident said, if the city allows them, officials need to commit to enforcing the rules and crack down on problematic rentals.

Amanda Cribbs rents out a four-bedroom, two-bathroom house in Allandale in Central Austin for short periods. Cribbs is among those who say the rentals are a boon to the local economy and that there is plenty of incentive to make sure they get good renters: protecting their investment.

She said screening short-term renters is harder than running the several long-term rentals she has. But to her, it’s worth it. She says she’s never had any complaints from her neighbors.

“I’m very strict on no parties, and I will say that a thousand times to people,” Cribbs said. “I personally hung up all the window treatments and decorated the living room and picked the rugs. … I don’t want to see it trashed.”

Contact Farzad Mashhood at 445-3972