Seattle’s vacation rental industry hit with new rules

Seattle’s vacation rentals industry hit with new rules
The Seattle City Council this week approved new regulations for short-term rentals. The 7-0 vote came after many vacation home operators warned that some of the new restrictions could put them out of business.

The Seattle City Council unanimously approved new regulations at a Monday meeting on short-term and vacation rentals that industry members warn will backfire as the city looks to address a lack of affordable housing. Instead of opening more residential space to long-term renters, platform owners say it will lead to fewer units on the market and job loss both within the industry as well as in businesses that depend on vacationers and tourists.

“It very much is going to have job impacts,” Seattle Oasis Co-owner Darik Eaton told Lens.

Although less than one percent of the city’s housing is used as short-term rentals, the City Council’s new regulations aims to discourage much of that use through companies like Airbnb, VRBO and HomeAway in an effort to drive more units into the long-term housing market.

“We are not the cause of the affordable housing crisis,” Seattle City Suite Co-owner Emma Woods told the council. She is also the vice chair of the Seattle Short-Term Rental Alliance (SSTRA).

The ordinance imposes new requirements on short-term rentals, including:

  • A special license for all renters or platform operators such as Airbnb;
  • Limits new renters to offering their primary home and one additional unit; and
  • Current renters are limited to two units.

The new regulations won’t affect those people who rent out parts of their houses to help cover their mortgage or rent, a fact highlighted by Councilmember Teresa Mosqueda. “The legislation before us I think allows people to maintain that mom and pop approach…I think that this is a priority to make sure that individuals can stay and be financially stable in our city” while “looking to constantly bring more homes onto the market.”

Also, some neighborhoods are allowed to be exempt from the rental unit limits. That includes downtown, along with First Hill and Capitol Hill buildings built after 2012.

However, the council agreed not to include Belltown, a move that vacation rental owners warned would cripple their businesses. Seattle Oasis Vacation co-owner Sally Lauren Nichols told the council that 40 percent of her company’s revenue comes from short-term rentals in that neighborhood alone.

“Remember that we are people of this community too,” she said. “If you pass further geographic restrictions…it will most likely put us out of business, and there will be no money to go toward funding affordable housing.”

Other vacation rental industry members voiced opposition, including Eaton. He said the “designed effect will be the complete opposite of what I believe the council is trying to do” by pushing their business activity into a more concentrated part of the city “because those are going to be the only places that can have legal short-term rentals.”

Also considered at the Monday meeting was an additional $2 nightly tax on top of a tax previously approved of $14 for homes and $8 for rooms. However, the council rejected the tax following protests from industry members. “With the current slated bill, we are now set to be taxed at the highest of any short-term company in the United States,” Nichols said.

Eaton agreed. “It will pass further onto the travelers, not the platforms.”

Another short-term rental operator who testified argued that the tax disproportionally impacts certain renters. “Most people are like me; we have one unit and there’s no difference between an $80 and a $200 a night, which is an unfair tax or fee. I think it should be…a percentage of what your revenue is.”

Also opposing the nightly tax was TechNet, a national, bipartisan network. In a statement, Executive Director for Washington and the Northwest Joanie Deustch wrote that although they support new regulations as a “fair compromise, this tax is a poison pill that would upend the compromise.  It unfairly targets the short-term rental industry made up of over 4,500 Seattle residents who serve as hosts to visitors in our city.”

“Additionally, this type of tax would stifle innovation and growth for future internet-based marketplaces, which thousands of Seattle residents depend upon to pay their bills,” she wrote further.

Under their ordinance passed last month, short-term rentals are defined as 30 consecutive days or less. Industry members had previously warned that many owners used their rental property during some parts of the year. If not allowed to rent them out short-term, many will simply not rent them out at all.

Eaton told Lens that although the ordinance is “still heavy-handed…it’s a hell of a lot better than what it started out as, in that people can actually own an investment property in the city of Seattle, whereas the original legislation didn’t allow for that at all.”

Still, with the anticipated loss of 40 percent of its business, Eaton said they’re looking at all the options. “We do have a year to figure this out. We have time to put our thinking caps on to honestly stay in business. Tough decisions are being made.”

A big unintended consequence for the city will be the lost jobs, economic activity and revenue that will result from this action, he added. The ordinance will take hundreds of units off the market, which means fewer workers in the industry, as well as vacationers and tourists spending money in Seattle.

The new regulations will take effect in January 2019.

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