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In one of our previous articles1, we discussed some of the recent trends in city regulations that are being implemented around the US to crack down on short-term rentals. With the unprecedented growth of tech giant Airbnb, which now has more listings than the top five hotel brands combined2, many folks have been voicing concerns about a shortage in the housing market, and blaming short-term rentals for an increase in housing prices. Subsequently, cities are starting to really lay down the law to enforce strict restrictions against short-term rentals.
Generally speaking, there are two types of regulations on short-term rentals:
1. Limitations on the number of nights a tenant can rent out his or her home, either as hosted (host lives on-site with guests) or unhosted (host is not on-site) nights.
2. Limitations on the number of properties a tenant can list on Airbnb as short-term rentals.
Keep in mind that most cities with short-term rental laws require some sort of license, permit, or registration, which all hosts must obtain from the city. There can be some considerable penalties for anyone who violates short-term rental regulations in their respective cities. So without further ado, here are six cities that have recently taken serious measures against Airbnb hosts and homeowners who have failed to heed short-term rental laws.
Short-term rentals through sites like Airbnb and VRBO are strictly regulated in Miami Beach. Miami Beach has one of the highest fines in the US with the first violation set at $20,000.3 Homeowners in this city are facing huge fines as their properties are being listed illegally on Airbnb, sometimes unbeknownst to them by their own tenants. One prominent example of such a case was when Drew Grewal, a Miami Beach homeowner, faced numerous fines that totaled nearly $500,000.4 Mr. Grewal got his first notice from the city in January 2017, which he thought was a mistake, as he hadn’t used Airbnb for years. He soon discovered that his long-term tenants were responsible after he hired an agent to check up on his property.
Mr. Grewal tried to find the Airbnb listing for his property so he could explain the situation to Airbnb. However, this proved to be difficult, as Airbnb does not allow users to search listings by address. When he finally found the illegal listing, he reached out to Airbnb with the link, explaining that his home was being rented out by his tenants without his authorization, and requested it be removed immediately. Unfortunately, the issue was not resolved there. Mr. Grewal stated that Airbnb had sent him down a customer service rabbit hole before he was finally given a formal response many weeks later. Concurrently, Mr. Grewal’s fines from the city were quickly piling up. It was only in April 2017 – three months after he received his first notice – when Airbnb took down the listing, leaving Grewal with fines that added up to almost half a million dollars. Mr. Grewal said due to this terrible experience involving his tenants going behind his back to secretly host Airbnb rentals, he had to sell his house much earlier than he wanted to. After months of lost rent, Mr. Grewal sold his Miami Beach property for a price 10 to 15 percent lower than what he would have sought under different circumstances.
In San Diego, a 70-year old retired schoolteacher, was ordered to pay more than $15,000 in fines for renting out rooms in her own home on Airbnb without a city permit5. In the hearing officer’s decision, it was ruled that Rachel Smith had violated the city’s law against running a bed and breakfast without a valid permit. She had accrued $22,400 in civil penalties, but she was ordered to pay $15,000 – plus about $3000 in city investigation fees – if she agreed to stop renting out her rooms.
Ms. Smith began renting out two bedrooms in her 1912 Craftsman home in Burlingame in 2012, charging $80 each per night. Her daughter and granddaughter helped her set up an Airbnb account such that she could earn some supplemental income after her retirement. It was reported that Ms. Smith had made around $13,800 from using Airbnb since 2013. However, her neighbors began to complain about foot traffic and she was soon mailed a civil penalty notice and order (CPNO), demanding she cease and desist her illegal bed and breakfast business. However, Ms. Smith refused, arguing that her Airbnb rentals do not qualify as a bed and breakfast. Although the city did not have a specific code addressing short-term rentals, Ms. Smith’s situation did fall under bed and breakfast code, as she provided lodging for less than 30 days to paying guests. The total fine was calculated by charging $200 per day that she did not comply with the city’s order to cease and desist. In the end, since Ms. Smith had no idea she was violating local city regulations, she was forced to pay fines that summed up to be much larger than what she had earned through her two years hosting on Airbnb.
As of this year, San Francisco strictly requires all Airbnb hosts to be registered with the city. Airbnb and other short-term rental sites like HomeAway are now not allowed to let unregistered hosts post on their sites, and other services like FlipKey, a vacation rental marketplace, will be fined up to $1000 per day for each illegal listing and criminal penalties if they help arrange unregistered listings.
Violations of the city’s short-term rental laws are subject to penalties of at least $484 per day for each unit in violation6. The penalties begins on the day that a Notice of Violation is issued by the Office of Short-Term Rentals and accrue until the hosts cease all illegal short-term rentals. Repeat violations are subject to escalated penalties and even additional civic and/or criminal penalties by San Francisco’s Attorney’s Office.
So far, San Francisco has issued over $1 million in fines to Airbnb hosts since 2015 with a total of approximately 480 violations – most of these citations were issued in the last year7.
The city of Portland is no longer giving Airbnb hosts a grace period when they violate city regulations8. Portland was the first city to formally legalize short-term rentals in the US in 2014 and it was known for being somewhat lax with their rules, giving Airbnb hosts a short “compliance period” to rectify their actions before actually issuing fines. However, starting last year, the Bureau of Development services adopted an Administrative Rule for the enforcement of ASTR. This means that the city will be issuing civil penalties immediately ranging from $1000 to $5000: $1000 for the first offense, $3000 for the second, and $5000 for the third9.
To demonstrate that the city is now serious about cracking down on home-sharing using the full force of city code, the city has issued a North Portland Airbnb host a $52,000 fine for charging up to $549 per night for a property with six bedrooms10. Furthermore, Airbnb reported last year that it was forced to close down over 500 listings in Portland due to many Airbnb hosts not complying with the city’s “One Host One Policy.”
Stay on Top of Your City’s Regulations
As property owners, it’s in your best interest to be aware of unregistered hosts who may be secretly renting out your units. As witnessed through the countless instances of innocent homeowners who were left with hefty fines as a result of their tenants violating city regulations, it’s important that you be able to quickly and effectively enforce any rules you set in your lease agreements. You can rely on Pillow to ensure that your residents are honoring your lease agreement and are in compliance with city regulations. When you sign up your building with Pillow, we consolidate all data regarding Airbnb listings and tenant information, allowing you to see which of your residents are hosting short-term rentals at any given moment. In other words, we’ll provide you with all information about hosting activity in your building, which significantly mitigates any risk for you.
Similarly, for hosts, it’s extremely important to be on the lookout for your city’s local regulations and take the steps necessary to abide by those rules. Even if you are eligible for home-sharing in your city, you must also be in compliance with the specific terms your landlord has set for your building. Failing to do so can result in eviction or more serious legal consequences. Luckily, Pillow solves this problem by creating tailored lease addendums that work for both residents and property owners.
Written by Harry Lee · February 1, 2018