July 24, 2015 by Omar Passons
For the better part of the last year I’ve found myself involved – mostly through Airbnb – in the City of San Diego’s short term rental issue. First as a host, then a guest, and most recently as an attorney representing clients on all sides of the issue, I have come to know the ins and outs of the dynamic well. A local political group, the Point Loma Democratic Club, has asked me to moderate a panel on Sunday July 26, 2015, and I wanted to add some information to inform that discussion. You can read specific background about some of the legal issues specific to the City of San Diego here, which is a personal food and travel blog I keep as a hobby. In preparation for the Sunday panel discussion, though, I wanted to offer a few specific notes to help frame the conversation about this relatively new phenomenon.
What do you mean “new phenomenon?”
People have been renting out spare bedrooms, homes on the beach, back houses, and probably everything else under the sun for generations, so it is obviously not true to call the whole idea of renting your property new. What is new, however, is the increased ability to screen people, the dramatic flexibility for property owners to rent from a day to a month, and the ease with which people can create additional value out of their homes. What is also new, unfortunately, is the scope of some of the problems that irresponsible use of this new tool has created. And, I think, the not unreasonable question of how (or perhaps whether?) to juggle traditional residential uses with the spectrum of uses the new technology makes easy.
What is the sharing economy?
The “sharing economy” is a term that people have given to making some amount of money leveraging an asset that you already have. This can be your time, your home, your car, your stuff, and many other things out there. I suppose it’s not technically “sharing” if you are getting paid for it, but the idea I think is that if you’re staying in my home I’m sharing my experience of my community with you not just charging you a couple bucks for a place to crash. While I don’t think it’s credible to contend that the “sharing economy” is NOT commerce, it’s probably also not fair to call it purely commerce, either. At least not in many instances. Let’s just accept that the term exists but for purposes of this post I think we can also agree that someone is generally making money when an item is “shared”.
Get to the point – what is a short term rental?
This gets to the heart of the matter. The City of San Diego does not have a definition of a “short term rental” or a “short term vacation rental” in the zoning code. As a result, the term is tossed around in a very casual way that doesn’t lead to any real understanding. For purposes of this post, I’ll define it as renting any real or personal property, home, portion of a home to any person who pays for the right to stay for less than 30 days. As you’ll see in a moment, this definition encompasses many situations and we might be better off with a tiered approach that treats different uses in different ways depending on the circumstance or location.
Once we accept that the current San Diego Municipal Code is inadequate to address the issues this new phenomenon raises, then we can get to the much more meaningful step of deciding what ought to replace it. And an important ancillary issue is what part of our City government – the City Attorney or the civil service Development Services staff – ought to be charged with interpreting the law once we do figure it out.
While the City may continue to try to squeeze the variety of uses that fit under the category of renting property for less than 30 days into some neat existing box, the reality is we’d be better off simply realizing the shortcomings and creating a stand-alone regulatory framework for this type of use. To help, I’ve included the table below.
The above framework can help us think through the real issues that exist. For instance, do opponents really intend to eliminate every two-week foreign exchange stay, every weekend guest, and every renting out of a home when you take a quick vacation in every residential neighborhood? Conversely, do the supporters really want a free-for-all in which the only difference between the house on the corner and the Marriott is the sign and the little chocolates on the pillow? Should it matter if the homeowner or some responsible designee lives in the home? Do we want different rules for certain beach zones than other beach zones or certain hotel-deficient parts of town versus the heavily concentrated ones? These are all interesting questions that could use well-reasoned answers.
Too often our elected leaders default to whoever they’ve heard from the most as a proxy for what “the community” actually thinks. Perhaps all elected officials should get briefing materials when they are sworn in that include definitions of selection bias and confirmation bias. This is not tongue-in-cheek, as depending on life experience there is no particular reason to assume any one of us is exposed to these principles any more than our elected representatives.
What are the key issues?
The following table can help dial in some of the important questions we ought to consider. People who are tired of disruptive tenants or, conversely, who are clinging to their piece of the American Dream by subsidizing their homes with rental guests are typically pretty fired up about the topic. But if we set our respective passions aside for a moment, there are some practical issues that this new dynamic brings up. Regardless of what side of the issue we are on these are things worth discussing. Here’s a table
The point of this table is to make clear some of the ramifications of decisions we might make. And to flesh out issues that aren’t always part of the conversation. For example:
- How will the City ensure that the enforcement of rules is fair to property owners and their neighbors and that a complaint is legitimate?
- Should there be a registration requirement and a small administrative permit for everyone who wishes to rent any portion of their property for less than 30 days?
- How will Transient Occupancy Tax issues be resolved for the many other internet sources that enable renting (e.g. VRBO, Couchsurfing.com, Flipkey, etc.)?
- Should certain offenses be the subject of permanent bans for use?
As a lawyer, I care very much about making sure that the rule of law is upheld. I am especially sensitive to this in the land use context where the government has massive power to severely impact an individual’s life. The City of San Diego must be held to a very high standard – indeed the constitutional requirements for due process – before it punishes people. Imagine getting pulled over going 25 in a 25 mile an hour zone and being told that law really means ‘close to’ 25 miles per hour. This is not the way we expect our government to work.
The City of Carlsbad recently passed a municipal ordinance related to this issue. But perhaps even more useful for our purposes than the ordinance is the Frequently Asked Questions page. Please take a quick moment and click here. What you’ll find is that it crystal clear what the rule is, how to abide by that rule, what standards are required, and where to get more information. At a minimum, any city looking to enforce a short term rental law ought to have something exactly this clear for its citizens.
As mentioned above, a tiered approach might end up being the best strategy for most cities. This might include defining all stays shorter than 30 days as “short term” but then having classifications based on where the property is and how often it is used for that purpose. The two major classifications might be “owner on property” versus “no owner present.” Then each of these types might have their own tiered structure. For “Owner absent” properties, a “Tier 1” might be a classic beach rental on the boardwalk that is full-time available for hire for stays of any length. A “Tier 2” might be a beach-adjacent zone that is in a residential neighborhood and limits the number of times per month or requires a minimum stay. The “Owner present” properties might be a bit more relaxed. Presumably if an owner lives either in the same house or on the same property they’ll be more careful about who they let through the door. This isn’t a guarantee, but it might be a starting point.
One of the stickiest issues created in the “owner present” situation is that there does not appear to be a simple way to distinguish rental guests from non-rental visitors. What happens if all the noise is from non-rental visitors? How will we address these issues in a way that respects property rights but also the residential character of a community? Again, more tough questions than immediate answers but hopefully our panelists will have good thoughts on these issues.