BUSINESS & ECONOMIC DEVELOPMENT COMMITTEE Tuesday, February 16, 5:15 P.M. City Council Chambers Via Zoom

REGULAR AGENDA

1. Downtown Bangor Partnership Transition Update (See Attached Memo)

2. Short Term Rentals (See Attached Memo)

3. Executive Session – Economic Development – Property Disposition – 2 Hammond Street (Map-Lot 042-188/189) – 1 M.R.S.A. § 405 (6) (C) (See Attached Confidential Memo

Memo

To: Business & Economic Development Committee

From: Tanya Emery, Director of Community and Economic Development

cc: Catherine M. Conlow, City Manager

Date: February 9, 2021

Re: Downtown Bangor Partnership Transition Update

The Downtown Bangor Partnership (DBP) voted in January to leave the City’s offices and employment arrangement and proceed with establishing themselves as an independent organization with separate offices and staff.

Brian Hinrichs, DBP board chair, has been working with City Manager Conlow and myself on the particulars of the transition and a new contract. The contract will spell out the terms for both parties – the City will give the special assessment funds to the DBP, they will perform certain tasks such as marketing and beautification, and the City will provide certain services like assistance with tasks by public works, maintenance downtown, watering planters, etc. The contract negotiation is ongoing and legal is assisting us with preparation of a draft.

If there are particular items that Councilors would like included in the contract, please let us know so we can work these in to negotiations.

The timeline for the change has been pushed out to April 1, meaning the transition of space, IT, bookkeeping, etc. will happen in March, and the DBP will be fully on their own by April 1, 2021.

Planning Division

February 9, 2021

Project: Possible Regulation of Bed & Breakfast, Shared Housing, and Short-term Rentals1 Project Support: Implementation Project from the Recommendations to Improve the Status of Housing in Bangor from the Bangor Housing Work Group March 2019 Purpose: Receive feedback on options available for regulating the noted uses

Background – Short-term rentals2: The noted document recommends the city create a policy that covers short-term rentals, defined herein as renting for less than 30 days. It is assumed that the reason for this recommendation is that there may be a correlation between the proliferation of the short-term rental3 industry and the market for affordable housing. This is based upon the following observations: A. People or investors who purchase homes exclusively to rent short-term are able to pay a higher price for the home because the return on investment of the rentals covers or exceeds their costs of the initial investment. In sharp contrast, people who purchase a single-family home or condominium unit for themselves make the purchase based upon many factors but most notably here is what they can afford to pay for a mortgage. This, in many markets, creates a large disparity in price. B. The same observation holds for the long-term rental market. People or investors who purchase apartment buildings can make a higher income by renting the units on a short- term basis than year-round rents can generate. This can create a higher market value for apartment buildings or condominiums. This also reduces the supply of year-round rentals, also causing a market jump where demand exceeds supply. Other concerns with short-term rentals include: C. Loss of neighborhood and community connections (not knowing your neighbor). D. Issues with noise from parties or events that occur on a regular basis at a rental.

1 Staff Disclosure: Anne Krieg rents her primary residence in Bar Harbor as a short-term rental and moves to a family home in another town for the summer season. She also worked on creating the initial policy in Bar Harbor in the early 2000’s. 2 For background about Airbnb: https://www.businessinsider.com/how-airbnb-was-founded-a-visual-history-2016-2 3 Defined herein as renting for less than 30 days \\APP1\City_Hall\B&ED Committee\B&ED Comm 2021\4 - February 16, 2021\2 - BB Tourist homes vacation rentals boarding houses 2.16.21 BED & PB review.docx City of Bangor Planning Division Bed & Breakfasts, Boarding Houses, Short-term rentals, & Affordable Housing Proposed Options for Discussion February 2021

E. Equity issues from hotel and bed & breakfast establishments regarding inspections and life-safety code requirements. This includes concerns with the safety of visitors staying in a home that may not meet basic, yet crucial, code requirements. There is recent data from other cities that supports these observations. Boston4, New York City5, and San Francisco have all completed excellent data supporting the observations of A and B above. This abstract from another study, on a national scale, indicates similar results: We assess the impact of home-sharing on residential house prices and rents. Using a dataset of Airbnb listings from the entire United States and an instrumental variables estimation strategy, we show that Airbnb has a positive impact on house prices and rents. This effect is stronger in zip codes with a lower share of owner-occupiers, consistent with non-owner-occupiers being more likely to reallocate their homes from the long- to the short-term rental market. At the median owner-occupancy rate zip code, we find that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices. Finally, we formally test whether the Airbnb effect is due to the reallocation of the housing supply. Consistent with this hypothesis, we find that, while the total supply of housing is not affected by the entry of Airbnb, Airbnb listings increase the supply of short-term rental units and decrease the supply of long-term rental units. Citation: Barron, Kyle and Kung, Edward and Proserpio, Davide, The Effect of Home-Sharing on House Prices and Rents: Evidence from Airbnb (March 29, 2018). Available at SSRN: https://ssrn.com/abstract=3006832 or http://dx.doi.org/10.2139/ssrn.3006832 From an investor perspective, it makes it difficult to invest in long term rentals6. As noted in the footnoted article: In big cities, demand is the enemy that is pushing prices, tourists are more ready to be wallet happy spenders unlike locals that’s why landlords are focusing on hosting tourists rather than locals. It is all connected in the end, but the conclusion is that Airbnb rental properties are now probably biggest player in the housing market. A system needs to be created that helps housing affordability while not preventing people from listing properties on Airbnb. In contrast to other studies, and not without controversy, the City of San Diego and the county of Santa Barbara7 looked at short-term rentals from an economic development perspective, namely tourism and job growth. They see spending per household increasing which helps local businesses and the need for maintenance workers and the like which helps their community.

4 Study is here: http://repec.umb.edu/RePEc/files/2016_03.pdf 5 Study is here: https://ag.ny.gov/pdfs/AIRBNB%20REPORT.pdf 6 See https://www.mashvisor.com/blog/4-ways-rental-properties-affect-housing-market/ 7 Study here: http://media.independent.com/news/documents/2016/07/20/STR_Effect_on_Housing_Supply_-_2016-05-12.pdf

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San Diego used this work to bolster the need to charge an affordable housing fee to rentals to accommodate this workforce population8. There are also many positive aspects of the allowance for short-term rentals including: 1. Potential for tourist/visitor spending on local goods & services. 2. Potential to attract new visitors to the area that prefer to stay in a house or apartment. From experience, this visitor type is often couples traveling on a budget, young families, multi-generational family trips, as well as people attending events together such as weddings or family reunions. In the case of Bangor, Waterfront Concerts and events at the Cross Insurance Center are an added draw. By staying in neighborhoods, there is the potential to attract new residents as Bangor community life can be showcased with short-term stays. 3. Providing short term rentals for the traveling business community as seen with professionals in the medical, sales, and construction industries. 4. Creation of accompanying and support businesses such as home maintenance, landscaping, cleaning and general property management, as well as bolstering local businesses in the retail and food service industries. One other aspect of short-term rentals worth noting is the positive financial impact to the renter, whether they rent a unit in/on the property, a room, or the entire home. This can provide an income stream that may make it possible for an owner to continue to afford a home where otherwise they may not be able to. There is also the traditional view of short-term rentals that it is not in the public interest to regulate or monitor the use. Renting your home or unit/room was considered a customary use of a dwelling. For decades, this held true for coastal/tourist communities nationwide; however, its success and resulting proliferation has led to a shift in perspective of the public interest. One element, however anecdotal, that appears to be consistent in discussions on this use in other communities is common support for people who are the primary occupants and owners of a dwelling that rent out their home on a seasonal basis, or rent out an extra room. For many, it is crucial extra income, provides capital to invest in their home and add to their operating budget for upkeep of their home, and for others, a rainy day or vacation fund; all of which are positive investments residents make in community life. It is important that there is equity in this allowance/regulation. Potentially, for Bangor, allowing short-term rentals is another option for these homeowners to have added sources of income to make the high level of capital investment necessary to maintain, preserve, or restore the historic homes that dominate the high assessed value neighborhoods which help to define Bangor. Another element to consider is registration of units. Registration is helpful to the city:

8 It is not recommended Bangor set a fee higher than the cost of administrating a permit, if registration is sought for this use, as Maine does not empower local municipalities to impose a capital fee or a tax on services. An act of the state legislature appears to be necessary to do this. Even the impact fee law in the state statute is limited to public works or school related capital expenditures. The economic impact fee in state statute is only for large-scale residential.

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A. It provides the city data to track how much of the housing stock is dedicated to this use and where rentals may be congregating.9 B. Registration assists with public safety, as it can include a local contact in case of emergencies. C. Registration that includes an inspection for life safety codes ensures a safer stay for visitors, which is in keeping with city and state policies and regulations for hotels/bed & breakfasts, which are required to follow life safety codes. The key with this policy is to balance the positive aspects with the negative impacts. Bangor is in an enviable position as the city is not overrun with short-term rentals at this time; however it is a growing segment of the sharing economy so it is important to have it addressed. Attached please find a map that a company called Granicus prepared showing listed properties right now in Bangor. Granicus is a company that manages monitoring of short-term rentals for communities (https://granicus.com/). They are seeking possible future business in Bangor. I am not advocating funding this service at this time; however I do appreciate a map and it’s good to know what we should be thinking about for monitoring/regulating.

Please note the location of the rentals are almost all in the walkable neighborhoods and the downtown area. What are our options? 1. No regulation, no changes to the Code Currently the Code Enforcement office deems the use not allowed as it’s a use not listed in any district. The issue with this option is people that are renting are in violation and the use is in limbo. This option is not recommended at this time.

2. Allow in all districts with registration and inspection This option would define the use in the code and make it an allowable use in all districts in the city. This is the best option if the Council wants to have minimal regulation of the use. The benefit of registration and inspection is we ensure visitors have as safe a stay in a unit/room as they would in any transient establishment (as in hotels, b&b’s). The downside of this allowance is it may be difficult for the city to reign in the use later on. For example, if the city went with this option and in a future time, the city wanted to disallow them in a district or in multi-family units, there may be units that have nonconforming protections10. This means they had conformed to the allowance and then the code changed and they are no longer allowed – they would be able to continue to operate in this scenario which may not be the desired outcome. The other option in this example would be to what is called

9 This isn’t necessarily recommending a cap, as Portland and other communities do now. It does force a discussion of a cap when the number of registrations reach a certain percentage of the housing stock. Caps are not typically favorable as the cap makes a permit a commodity and not as its title suggests, permission to do something. 10 It should be noted that the listings active currently do not have nonconforming protections because the city has deemed the use not allowed. Protections occur when the use was allowed and the code changes and it’s no longer allowed. That is not the case currently.

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“sunsetting” the use, which means on a date certain, the unit could no longer be rented. This is an aggressive zoning technique that is rarely recommended.

3. Allow in certain districts This option means that the use would be allowed (assuming registration/inspection) in certain parts of the city. As can be seen on the map, there are clusters of short-term rentals in the core business district, near the waterfront concert space and Cross Insurance Center, and going out towards the hospital and the airport. It is clear there is a market in these locations for this use. These neighborhoods are also neighborhoods that help make up what is great about residential life in Bangor. If neighborhoods are overrun with short term rentals, then is it a neighborhood anymore? Does it get to affordability if prices rise because of the new income production from a unit/room? Are we standing in the way of a market that is useful and helpful to Bangor’s economy? Are we preventing people from making necessary added income from their property? We would also discuss which districts, which also goes to the above questions of market versus neighborhood erosion. If everyone wants to stay in the downtown area, then wouldn’t we allow them there? But if everyone is staying in the downtown area, then what does that do to our downtown neighborhoods? This option is recommended only if the city wants to bar certain areas by either the zoning district, or, as a sub-option, by an overlay. What’s an overlay? An overlay is regulating a use or other zoning element over a specified geographic area. It’s different than a district because, for example, URD-1 encompasses multiple neighborhoods. If the city wanted to regulate this use in just one neighborhood of URD-1, then the city would drop an overlay on top of that neighborhood (and over the URD-1 designation). It’s more surgical zoning but it works if there are neighborhoods that the city is most concerned with for this use.

4. Allow in all districts, but only single-family or in owner-occupied properties (with more than one unit) As noted previously, in many other communities grappling with this use, one common element is consistent: people who live more than 6 months a year in a house that want to move out and rent their house out, or, want to rent a room in their home on a short-term basis, should be able to do this freely. If this is an accurate assumption for Bangor, then this option might be workable. Questions from this include: Are we okay if an accessory dwelling unit is allowed to be rented short–term? What about multifamily units? If the owner lives in one of the units, is that okay for this use? The concern here is the scenario of an entity buying an apartment building and converting it to short term rentals. This happens worldwide and is a concern in many cities. In terms of affordable housing, that is a pretty big loss of available units.

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At the same time, the downtown core district units that are rented are in buildings with multiple units. This is an important element to add more life to the core business district by allowing travelers to stay here. There are limited options for travelers to stay downtown in Bangor – do we want to take that away? If the Council chooses this option, perhaps it gives relief to downtown units and allows the use freely in single- and two-family units.

Conclusion Perhaps the solution is a combination of the above options. Staff does not have a specific recommendation. We do recommend, regardless of where and what type the city allows/disallows, that there is registration and inspection for compliance with life safety codes.

Background – Shared Housing Wait, why are we doing this now? Shared housing is also listed in the Recommendations from the Affordable Housing Work Group. Nationally, shared housing is a modern movement in housing options, both for young professionals and elder adults. In the land development code right now, there is a definition of boarding houses with accompanying allowances. As part of the work for short-term rentals, it is noted that tourist homes are linked by Code with boarding houses. The work here is to modernize the concept of boarding house to a use that is desired in the marketplace today. Because the definition of “tourist homes”, “bed and breakfast” and “boarding houses” are grouped as one definition in the City’s code, it is recommended we address this use at the same time as short-term rentals. The elements of shared housing include:  The space rented is a sleeping room that may or may not include a sitting space and personal lavatory.

 Access to kitchen space and a common room or rooms is also included.

 It is distinguished from a short-term rental or a bed and breakfast in that a shared housing unit is rented monthly, akin to long-term rentals (apartments).

 It is distinguished from an Accessory Dwelling Unit in that a shared housing unit has shared facilities and common areas whereas an ADU is a distinct dwelling unit.

 The owner may or may not be on premises. Sometimes it’s a large home that is rented out with the owner living on the premises, other times it may be the owner lives elsewhere and functions like a landlord.

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This is a viable option for affordability for low income residents as well as transient workers. There is a market for this type of housing for young adults11 embarking on their careers and living more independently, and also for elderly citizens12 who may not need assisted living level of care, but do not want to live alone. There are even start-ups with this use. From TechCrunch13:

The early developers of the U.S. suburban planned communities of the 1950s and 60s weren’t just selling houses. They were selling a vision of the American Dream, complete with quarter-acre lawns, dishwashers and spacious garages.

By the same token, today’s shared housing startups are selling another vision. It’s not just about renting a room; it’s also about being part of a community, making friends and exploring a new city.

Comments from Inc.14 regarding new professional co-living: There are several reasons Millennials are flocking to co-living. First, it's cheaper than living alone, and just as cost-effective as getting a shared room in an apartment.

Second, it gives you built-in community. Instead of watching Netflix alone, you can join the debate in the kitchen about which is less obnoxious, Tinder or Bumble; or watch Game of Thrones with fellow members; or take your guitar to the fire pit and jam with the other musicians in the house.

There are also companies that cater to senior home sharing. From A Place for Mom: Rodney Harrell, director of Livable Communities for AARP’s Public Policy Institute, told The Mercury News that “one of the things we hear a lot is that people do want to age in place. In our latest survey, 8 out of 10 people over 65 want to stay in their own homes or a home environment as long as possible. Shared housing is a great option for someone that’s open to it,” he says. “It can provide companionship, save costs, and provide a feeling of security having other people in the home.” See also from Curbed15 about the benefits of multi-generational shared housing:

These projects are billed as a way to address two key social concerns: loneliness and a lack of affordable housing for both older and younger people — two

11 See: https://www.marketwatch.com/story/millennials-are-lining-up-to-live-in-instagram-worthy-communes-2018-11-21 - shared housing 12 See: https://www.washingtonpost.com/realestate/the-golden-girls-trend-could-be-a-golden-opportunity-for-retirees-facing- isolation/2019/01/23/6311a3f8-0ec8-11e9-831f-3aa2c2be4cbd_story.html?noredirect=on&utm_term=.d88d95217457 See also https://www.kcrw.com/culture/shows/design-and-architecture/la-seniors-find-housing-solution-with-home-share-program 13 https://techcrunch.com/2018/05/19/shared-housing-startups-are-taking-off/ 14 https://www.inc.com/melanie-curtin/millennials-are-flocking-to-this-new-kind-of-communal-housing.html See also: https://www.latimes.com/business/la-fi-coliving-development-20256106-story.html 15 https://www.curbed.com/2019/1/23/18192963/nesterly-home-share-program-elderly-university-students See also https://www.wbur.org/onpoint/2018/11/06/senior-citizen-roommates-rent-companions

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generations that are not always likely to intersect in professional or personal environments, but who share these overlapping challenges.

The plight of the modern millennial—burdensome student loans, high housing costs, and unstable employment—has become familiar. When new congresswoman Alexandria Ocasio-Cortez was mocked online for saying she was unable to afford an apartment in D.C. until her congressional salary kicked in, supporters in their 20s and 30s chimed in to share similar situations. According to the Pew Research Center, more millennial households live in poverty than any other generation.

Many seniors in cities with tight housing markets, on the other hand, end up living alone with spare bedrooms they don’t use. According to one estimate, there are 5 million empty bedrooms in Ontario alone, and about 40 percent of those belong to seniors. Through senior-student matching programs, students pay affordable rents, often hundreds of dollars below market averages, in return for spending roughly five hours a week helping out around the house, whether that’s walking pets, picking up groceries, or shoveling a front walk during one of New York City’s or Toronto’s predictably lousy winters.

Shared housing also is another economic mechanism for maintaining, preserving and restoring historic homes:  For people currently in a historic home, it allows them to rent rooms to help with costs.

 For prospective buyers of historic homes, it provides an optional market for shared housing. Care needs to be taken to ensure that shared housing doesn’t become a housing hazard in derelict properties.

Possible Policy Option – shared housing  Remove the term “boarding houses” from the code.

 Insert “shared housing” and define it.

 Allow as a conditional use by the Planning Board in historic homes only in the Urban Residence 1 (URD-1) District

 Allow by right in historic homes only in the Urban Residence 2 (URD-2) District

 Allow by right in existing building or new construction in the Multi-family and Service District (M&SD), Neighborhood Service District (NSD), Waterfront Development District (WDD), High Density Residential (HDR), and Downtown Development District (DDD).

 Allow as a conditional use by the Planning Board in an existing building or new construction in the Rural Residence and Agricultural District (RR&A).

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Background – Bed & Breakfasts (B&Bs) Why are we doing this too? Bed & Breakfast as a use is currently connected in regulation with boarding houses and tourist homes. To change boarding houses and tourist homes forces us to address bed & breakfasts as well so as to not create conflicts and flaws in the Code. B&Bs are a great option for the traveling public16 and can be used as a way to showcase your community to tourists17. They are also a good technique to save large historic homes; that is, allowing the use of a B&B provides an added niche of buyers to the market. The Historic Tax Credit for Rehabilitation also applies for investments made to historic homes for commercial uses which becomes another benefit18. This use adds to our visitation numbers and accompanying spending on goods & services, as well as showcasing our community life.

Proposed Policy – Bed & Breakfasts • Define Bed & Breakfasts as distinct from hotels as the owner/operator resides on the property.

• Allow as a conditional use (thus items as traffic and parking are more closely reviewed) by the Planning Board in historic homes only in Urban Residence 1 (URD-1,) and Urban Residence 2 (URD-2.)

• Keep current allowance as a conditional use in the Multifamily and Service District (M&SD.) and Rural Residence and Agriculture (RR&A.)

This is very complicated set of uses with far reaching implications for housing and residential life, as well as for the economy. It is hoped this document helps the Council deliberate and provide direction to staff. Once we have this direction, then language can be created for further review. Thank you for this opportunity to facilitate this important conversation. amk

16 Including the next generation of travelers: https://nthp- savingplaces.s3.amazonaws.com/2017/06/27/09/02/25/407/Millennial%20Research%20Report.pdf 17 See 2018 Study of B&B consumers: https://www.independent-innkeeping.org/assets/IndustryNews/PressRelease- TheBBTravelerProfile%20and%20IndustryStudy-2018-v3%20(AIHP).pdf 18 See info on tax credits: https://www.irs.gov/businesses/small-businesses-self-employed/tax-aspects-of-the-historic-preservation- tax-incentives-faqs

Page 9 | 9 representing 94 unique rental units*

granicus.com 10 ZONING PRACTICE OCTOBER 2015

AMERICAN PLANNING ASSOCIATION

ISSUE NUMBER 10 PRACTICE SHORT-TERM RENTALS PRACTICE ZONING ZONING AMERICAN PLANNING ASSOCIATION Ave. 205 N. Michigan 1200 Suite 60601–5927 IL Chicago, NW Street, 15th 1030 West Suite 750 20005–1503 DC Washington,

DOES YOUR COMMUNITY REGULATE SHORT-TERM RENTALS? 10 10 Peering into the Peer Economy: Short-Term Rental Regulation

By Dwight H. Merriam, faicp

You will recall, or if you are a millennial (18 to 34 years old), you might have read about the mantra that James Carville dreamed up for President Bill Clinton’s 1992 campaign: “It’s the economy, stupid.”

Today, for planners, thanks to the entirely new perspective brought to us by the millennials, our theme must be “It’s the sharing economy, stupid.” It is called variously collaborative con- sumption, the peer economy, and the sharing economy. More than half of millennials have used sharing services. It is permeating our daily lives in many ways. This new ethic about our relationship to things, to transportation, to where we bed down, and even to other people has taken us away from owning and exclusively using, to not Dwight H. Merriam owning, not possessing, and not using alone. We see the sharing economy in three broad spheres—transportation, goods and services, and housing. While our focus here is on short- This four-bedroom colonial home in Wetherfield, Connecticut, rents for $385 per term rentals, it helps to understand the larger night, with a four-night minimum stay. context for “home sharing.”

RIDE-SHARING REVOLUTION Ride sharing as a generic term encompass- Got a car, not making much use of it, and Transportation may be the most obvious and es short-term rentals, making your car available interested in making some money? You can most pervasive face of the sharing economy. to others, sharing rides, and driving or riding in make it available to others on a short-term Millennials own fewer automobiles than other taxi-like services brokered online through com- basis through peer-to-peer car-sharing services age cohorts. Millennials purchased almost 30 panies like Uber. including Getaround, which presently operates percent fewer cars from 2007 to 2011 (Plache Instead of owning a car, you can rent one in Portland, Oregon; San Francisco; San Diego; 2013). Why? Because they use short-term car on a short-term basis from companies such Austin, Texas; and Chicago. They will rent your rentals, public transportation, and ride-shar- as Zipcar and Enterprise Rent-A-Car. Why own car for you while you are away. Cars are covered ing services. They are less likely to get driver’s a car when you can conveniently pick one up with a $1 million policy, and they even clean licenses. One-third of 16 to 24 year olds don’t curbside and use it to run errands for a few it for you. RelayRides connects neighbors to have a driver’s license, the lowest percentage hours? let them rent cars by the hour or the day, and in over 50 years (Tefft et al. 2013). At the same Sharing a ride and splitting the cost is if you’re traveling more than 14 days, they will time, so we don’t get too carried away with made easier with services like Zimride (also by take your car at the airport, rent it for you, and this trend, as the millennials age, they will buy Enterprise Rent-A-Car), which links drivers with pay you. You can even do it for boats with Boat- more cars. Forty-three percent said they are riders at universities and businesses. You boom- bound. With the help of Spinlister, you can con- likely to buy a car in the next five years (Kadlec ers will remember the ride-share bulletin boards nect with others and rent a bicycle, surfboard, 2015). on campus. Same thing. or snowboard.

Dwight Merriam, faicp, founded Robinson & Cole’s Land Use Group in 1978, where he represents land owners, developers, governments, and individuals in land-use matters. He is past president of the American Institute of Certified Planners and received his masters of Regional Planning from the University of North Carolina and his juris doctor from Yale.

ZONINGPRACTICE 10.15 AMERICAN PLANNING ASSOCIATION | page 2 Want to make some money by driving others to help freelance home-service workers connect Maybe it began with the sale of timeshares in around in your car, or are you a rider who wants with home owners. the United States in 1974. These fractional in- to be driven? Just about everyone has heard of There seems no end to the sharing. Fon, terests have proved difficult to sell. Short-term Uber, the leader in this form of ride sharing, which touting over 7 million members, lets you share vacation rentals emerged as a better way for includes other services such as Lyft and now your home WiFi in exchange for access. The many, linking property owners with vacation- Shuddle for ferrying children around and Sidecar Lending Club connects borrowers and inves- ers through companies like HomeAway and its for both people and packages. Wireless communi- tors, enabling, so they say, better rates than numerous related entities, claiming over one cations, the Internet, and smartphones have made credit cards and more return for lenders than million listings. FlipKey does much the same such ride-sharing and delivery services possible. what banks offer. Over $11 billion has been with what it says are over 300,000 listings in This is a big deal. Lyft and Uber are worth $2.5 borrowed since it started in July 2007, with 179 countries. billion and $50 billion (more than FedEx and 405 investors earning a median of 8.1 percent. But Airbnb goes beyond vacation rent- companies in the S&P 500) respectively (Dugan Poshmark lets you show your unneeded cloth- als. You can rent a shared or private room 2015; Tam and de la Merced 2015). And want to ing in a virtual closet and get linked with for a night, a whole house, an apartment for be a driver but don’t have a car? You can rent one people who share your sense of style. You can your exclusive use for a week, a British castle from Breeze just for that purpose. even share your dog, or become a sitter, with (Airbnb says it has 1,400-plus castles), a tee- DogVacay and Rover helping you find a local pee, an igloo, a caboose, or an eight-foot by GOODS AND SERVICES PEER TO PEER dog sitter to care for your dog at your home or 14-foot treehouse in Illinois ($195 a night) if Beyond transportation, the sharing economy theirs. you wish. extends to relationships between people and The power of the Internet in facilitating The company, originally “AirBed & Break- service providers. There is peer-to-peer or collab- collaborative consumption was probably best fast,” was founded in 2008 by Brian Chesky, orative consumption through services like Task- evidenced first when eBay and Craigslist pro- Joe Gebbia, and later Nathan Blecharczyk. It Rabbit and Skillshare which provide help, paid or vided an online marketplace never experienced began when Chesky and Gebbia, to help pay bartered, or sometimes free. Instacart will grocery before. Today, we have web-based services like their rent, rented sleeping accommodations shop for you and claims it will deliver to your door Freecycle where people can post things they on three air mattresses in their San Francisco in an hour. You can be a shopper and delivery don’t want, the remnants of our overconsump- apartment living room and made breakfast for person for them, making up to $25 an hour. tion, and others can take that flotsam and jet- the guests (Salter 2012). The company is now NeighborGoods lets you share all those sam for free. Yes, for free. It solves the donor’s worth $25.5 billion and joins the ranks of the things you have but use so little, from leaf blow- solid waste disposal problem and provides free rest of the great ideas we wish we had thought ers, to pressure washers, to . . . well, take a look goods for the takers. of first (O’Brien 2015). in your garage, that place where you used to park your car. If you live in Austin, Texas; Den- SHARING THE ROOF OVER OUR HEADS GOOD OR BAD? ver; Kansas City, Missouri; Minneapolis; or San That brings us to the subject matter of great- Are short-term rentals good or bad for your com- Francisco, Zaarly seeks to create a marketplace est interest to planners—the sharing of space. munity? Like so many things, it depends. Brian J. Connolly

A second-floor condominium in this converted mansion in Denver’s Capitol Hill neighborhood offers a private bedroom and bath rental for $105 per night, with a two-night minimum stay.

ZONINGPRACTICE 10.15 AMERICAN PLANNING ASSOCIATION | page 3 term rentals may reduce commercial lodging revenues. In many situations STRs have an advantage over commercial lodging because the STRs do not pay the occupancy taxes paid by commercial lodging. Short-term rentals generally do not need the service workers employed in commercial lodging. Unions and service workers often oppose STRs.

State and Local Government Revenues to state and local government may go down as a result of STRs because, as noted, such rentals usually do not pay the occupancy and other taxes levied on commercial lodging.

Sorell E. Negro Airbnb does provide 1099 forms to hosts to report their income, and it has begun collect- ing and remitting hotel and tourist taxes in San Francisco; San Jose, California; Chicago; and This three-bedroom home near Miami’s Coconut Grove rents for $325 per Washington, D.C. (Hantman 2015). night, with a five-night minimum stay.

Health and Safety Affordable Housing Much of the STR market today is unregulated. Short-term rentals (STRs) increase the stock of Those who rent typically do not have their prem- furnished, short-term accommodations. Be- ises inspected to determine compliance with cause many of the rentals involve renting a room health, building, housing, and safety codes. For in a permanently occupied dwelling, they are of- its part, Airbnb does clearly state in its terms ten less expensive than commercial lodging. The of service that some localities have zoning or benefit for home owners or long-term tenants administrative laws that prohibit or restrict STRs who host STR guests is additional income, which and that “hosts should review local laws before can help offset mortgage or rent payments. listing a space on Airbnb.” Some contend that STRs may exacerbate Airbnb also provides a guide to respon- the shortage of lower cost rentals because land- sible hosting on its website, and what they do lords, attracted by the higher revenue stream address is good guidance for local planners and from STRs, are taking apartments out of long- regulators, and thus worth reading. How many term rentals, especially in tight markets like New hosts read and follow up on the suggestions is York and San Francisco (Monroe 2014; another matter. Airbnb’s list is still a good start- Moskowitz 2015). Others say high tenant de- ing point for local action. mand and demographics are the cause of the Many STR hosts do not have home own- problem, not STRs, which are a small share of ers and liability insurance to cover losses that the market (Lewyn 2015; Rosen 2013). may result from occupancy. There is a life safety issue here, and in the event of death, injury, or Aging in Place property damage, there may not be insurance

Short-term rentals of rooms in homes and apart- H. ThomasRobert coverage or sufficient assets available to cover ments not only provide additional revenue for the liability. those aging in place, but they may provide an opportunity for sharing of chores and bartering This condo hotel in downtown AN OUNCE OF PREVENTION IS WORTH for services, just as accessory apartments do. Honolulu includes owner- and A POUND OF CURE This can enable older people to stay in their long-term renter-occupied units, So said Benjamin Franklin, and it is apt here. homes longer before transitioning to an inde- privately owned units available You need only take a few relatively easy steps pendent or assisted living facility. for daily rental through the to get out ahead of the potential problems with building’s hotel operator, units STRs and capitalize on the good that such rent- Commercial Lodging owned by the hotel operators, als can provide your community. The only possible benefit of STRs with regard and privately owned units to existing commercial lodging is that it may available for short-term rental Moratorium stimulate competition and lower prices for the through Airbnb and similar sites. This is not a recommendation, but something consumer. The negatives are several. Short- worth considering. As you work down this list of

ZONINGPRACTICE 10.15 AMERICAN PLANNING ASSOCIATION | page 4 steps you will have the sense that you need to you want, and how do you get it. You need to Austin has separate application forms for do six things at once. You do. One way to get a know who is renting and what is being rented to Type 1 primary, secondary, and partial STRs. grip on it is take a “planning pause” moratorium whom for how long. You need to determine what All of these forms include owner and property on all STRs for, say, six months, during which you may expect in the future. What do you think identification information as well as insurance time no one can rent. However, given that the the demand is for STRs, in what mix of accom- information, number of sleeping rooms, occu- number of such rentals in many places is still modations, and for what length of tenancy? This pancy limit, and average charge per structure. To relatively small, it is unlikely that much harm will prove useful to deciding whether you need qualify as a Type 1 primary STR, the unit must be will come from letting them continue on while to limit the number of units available for STR owner occupied at least 51 percent of the time you plan and prepare to regulate. It may not be and to regulate the length of occupancy. and can only be rented out in its entirety and for worth the effort to have a moratorium. A morato- periods of 30 days or less. To qualify as a Type 2 rium takes time—for drafting, maybe some legal Regulate secondary STR, the unit must be accessory to an advice, and the expenditure of political capital Regulation probably will come in two forms: owner-occupied principal residence and can only in most cases—and may cause some pushback licensing of individual hosts to insure code com- be rented out in its entirety and for periods of 30 from those already renting, all of which may cost pliance and general regulation (either through days or less. To qualify as a Type 1 partial unit, more than the planning pause is worth. Morato- zoning or licensing standards) as to location, namely a room rental, the unit must provide ex- ria sometimes serve only to delay the inevitable number of units, and terms of tenancy. You will clusive use of a sleeping room and shared bath- hard work and are often extended. Back to Ben have to draw the line somewhere as to what is room access. Only one partial unit can be rented Franklin: “Don’t put off until tomorrow what you an STR and what is simply an unregulated rental. out at a time, to a single party of individuals, and can do today.” for periods of 30 days or less. Owners must be present for the duration of the rental. Education Conduct educational The annual licensing fee for STRs in Austin Learn what is available out there now by going is $235. Applicants must also pay a one-time to all of the websites and services that you can sessions in your notification fee of $50. find, most of which are identified here. Look Of course, as with all regulation there online to see what STRs are being offered in your community even before are those with schemes to beat the regulation. community. You may be surprised at how many trying to regulate, to There are sites online that advise potential of your friends and neighbors are already in the STR hosts to avoid posting on Craigslist, use STR business. Don’t forget to check Craigslist sensitize present and Airbnb’s community and social features to as well, and use an online search engine, such screen the reservations (presumably to avoid as Google, with a few key terms, like “rentals potential hosts to the enforcement types), “hide your home” by using Anytown” and “house-sharing Anytown,” to find Airbnb’s public view that only shows a large other STR activity. need for proper code circle within which the unit is located, use word Conduct educational sessions in your com- of mouth (or social networking sites) to rent the munity (“Everything You Need To Know About compliance. unit, and “get lost in the crowd” in that there are Short-Term Rentals”) even before trying to regu- thousands of listings in large places like Austin late, to sensitize present and potential hosts Is an STR a rental of less than 30 days or 90 (but not in the rural counties, suburbs, and to the need for proper code compliance, fire days, or some other somewhat arbitrary number small towns). This advice to those interested in prevention, emergency response, following rules of days, and everything else is just an unregu- breaking the law suggests that it will not always for rent controlled units, first aid, protecting lated rental? It is for you to decide. You will also be easy for code enforcement to find the STRs. privacy (e.g., disclosing security cameras), insur- want to consider whether owner-occupied STRs Perhaps some notice to all property owners, ance coverage, parking, noise, smoking, pets, might be regulated less strictly, given that the maybe a note with the tax bill, telling them of childproofing, operation of heating and ventilat- owner is present during the STR. the need to register would help. Free, simple, ing systems (including fireplaces and heating Austin, Texas, has a robust program with online registration might increase compliance. stoves), safe access, occupancy limits, deciding licensing. They carve out three types of STRs: The critical issue is life safety—you need to find what to tell neighbors, home owners association owner-occupied single-family, multifamily, or all of these STRs to make sure they are safe. approval, tax obligations, and any required zon- duplex units (Type 1); single-family or duplex San Francisco has an Office of Short-Term ing approvals. These sessions may also provide units that are not owner occupied (Type 2); and Rental, and in 2014 the city adopted major an opportunity to learn who is renting and to multifamily units that are not owner occupied revisions to its planning codes for STRs. Those connect with them. Consider establishing a (Type 3). There is a three percent limit by census amendments include some useful definitions of section of your municipal website as a resource tract on the Type 2 single-family and duplex hosting platform, primary residence, residential portal. You will not have all the answers to all STRs, a three percent limit per property on Type unit, short-term residential rental, and tourist the questions as you start, but you need to start. 3 STRs in any noncommercial zoning district, or transient use. The code requires registration, and a 25 percent limit per property on Type 3 occupancy of the unit by the owner not less than Planning STRs in any commercial zoning district. Howev- 275 days a year, maintenance of records for two Yes, planning. The rational planning model in er, each multifamily property is allowed at least years, certain insurance coverage, payment of its simplest terms is what do you have, what do one Type 3 STR, regardless of these limits. transient occupancy taxes, compliance with the

ZONINGPRACTICE 10.15 AMERICAN PLANNING ASSOCIATION | page 5 housing code, posting the registration number THE MAKINGS OF WORKABLE PROGRAM What Is the Limit of Use? on the hosting platform’s listing, and a clearly Overarching issues to consider include the Will you require the host to live in the residence printed sign inside of the front door with the nature of the activity you aim to regulate, the at least some minimum number of days per locations of all fire extinguishers in the unit and management structure of the STR, and the year? Will you limit rentals to some maximum building, gas shut-off valves, fire exits, and pull limits on STR use. number of days per year? Will you define STR fire alarms. The application fee and renewal fee as a rental of 30 consecutive days or less and every two years is $50. The hosting platform has What Is the Nature of the Activity You Will not regulate longer rentals in any way? Will numerous responsibilities, and there are fines Regulate? you regulate whole-house, exclusive-use rent- for violations. It is a good model from which to Presumably, hosting a STR is a private enterprise als differently, for example by only regulating start. and almost certainly not a commercial lodging when the house is rented for less than a week Isle of Palms, South Carolina, regulates business. It is a type of lodging that is largely or two weeks? And will you regulate renting STRs through zoning, defining an STR to be advertised online, through social media, and of rooms on a different schedule, for example three months or less. The city’s STR standards on bulletin boards. How will you draw the line by including room rentals only if they are less limit the number of overnight occupants to six between that modest, private activity and a than one month and otherwise not regulating and daytime occupants to 40 (can we assume a commercial operation? longer room rentals, which may be covered by wedding party or the like?), set a minimum floor zoning anyway, possibly under the definition of area per occupant, and establish off-street park- How Is It Managed? a rooming house? There are so many questions ing requirements. Does the host have to be the owner, and does to be answered and so many lines to be drawn. Monterey County, California, also regulates the host need to be there during the rental? If A checklist of considerations for hosts and STRs in its zoning code, defining STRs as rentals not, will you regulate differently in terms of num- public officials for planning, regulation, and between seven and 30 consecutive calendar bers of units allowed, number of days per year, operation might include current zoning require- days. The county considers stays of less than or terms of occupancy? ments; applicable codes (sanitation, health, seven days to be a motel/hotel use. The regula- building, occupancy among many); business tion provided for administrative approval of all licensing; business organization (none, limited STRs in operation at the time of its adoption in liability corporation, general or limited liability 1997 if the property owners applied within 90 partnership, Subchapter S, etc.); home owners days. Most of the existing, legal STRs date from association covenants and restrictions; other that initial round of approvals. Since then, there easements, covenants, restrictions on the land; have been some discretionary approvals, and lodging to be offered (room, whole house, host- many STRs are believed to be operating without occupied, length of stay); 911 marking at the the required permits. street; emergency notifications; food service San Bernardino County, California, permits (permitted? licensed?); federal, state, and local STRs, defined as rentals of less than 30 days, taxes; safety inspections; fire, smoke, CO2, and by zoning in the “Mountain Region” by special other detectors; fire extinguishers; child safety; use permit exempting multifamily condominium parking; insurance; emergency notifications; units in fee simple and timeshares with a previ- water and septic; safe hot water temperature; ous land-use approval. The development stan- electrical and plumbing in good repair; pest/ver- dards include code compliance, maximum oc- min-free (especially bed bugs); ventilation, heat, cupancy based on floor area per occupant and air conditioning adequate; no hazards; no mold the number of beds, off-street parking require- or excessive moisture; working doors, windows, ments, and signage specifications. Conditions and screens; adequate means of egress; linen of operations address the contents of the rental sanitation; and pool and spa maintenance. agreement, posting of the property within the unit with all the conditions of use, and details YOU’VE MADE YOUR BED . . . of fire safety and maintenance, even including a So goes the idiom from the French as early as prohibition on the use of extension cords. 1590: “Comme on faict son lict, on le treuve” (As Miami Beach, Florida, prohibits STRs in all one makes one’s bed, so one finds it). In plan- single-family homes and in many multifamily Karla L. Chaffee ning for and regulating STRs, you will indeed be buildings in certain zoning districts. the ones making the bed, and you will have to Registering all these STRs can be burden- lie in it. There are benefits and burdens in how some. Since May 1, 2015, Nashville has issued This building in downtown you permit STRs and many considerations to be 1,000 permits, and staff estimates the city still Boston includes a two-bedroom weighed. If you start with life-safety issues first, has 800 illegal hotels and motels (Bailey 2015). loft apartment that rents for $245 you can be quite certain the most important Wait times for all types permits went from 30 per night, with a seven-night aspect of this rapidly emerging sharing economy minutes to four hours because of all the STR minimum stay. phenomenon will be addressed. After that, it is registrations (Bailey 2015). the usual planning and politics.

ZONINGPRACTICE 10.15 AMERICAN PLANNING ASSOCIATION | page 6 REFERENCES

Airbnb. 2015. “Responsible Hosting.” Available at www.airbnb.com Nashville-Davidson (Tennessee), Metropolitan Government of. 2015. /help/responsible-hosting. “Short Term Rental Property.” Available at http://tinyurl.com Airbnb. 2015. “Terms of Service.” Available at www.airbnb.com/terms. /pnvn34s. Austin (Texas), City of. 2015. “Vacation Rental Licensing.” Available at O’Brien, Sara Ashley. 2015. “‘Crazy Money’—Airbnb Valued at Over http://austintexas.gov/str. $25 Billion.” CNNMoney, June 27. Available at http://tinyurl.com Bailey, Phillip. 2015. “Council Panel Gets Earful on Airbnb Proposal.” /oeus4ar. Courier-Journal, August 5. Available at http://tinyurl.com/nkaxf23. Plache, Lacey. 2013. “Millennials in Reverse: Why New Car Sales To Dugan, Kevin. 2015. “Lyft Value Soars to $2.5 Billion.” New York Post, The Youngest Generation of Drivers Slowed In 2013.” Edmonds. March 12. Available at http://tinyurl.com/pwj5g44. com, November 1. Available at http://tinyurl.com/nfn5qyc. Hantman, David. 2015. “Working Together to Collect and Remit in Rosen, Kenneth. 2013. “Short-Term Rentals and the Housing Market.” Washington D.C. and Chicago, Illinois.” Airbnb Public Policy Blog, Urban Land, November 22. Available at http://tinyurl.com January 28. Available at http://tinyurl.com/q36hht7. /pwfah33. Isle of Palms (South Carolina), City of. 2007. Ordinance 2007-2. Avail- Salter, Jessica. 2012. “Airbnb: The Story Behind the $1.3bn Room- able at http://tinyurl.com/q38aj7x. Letting Website.” Telegraph, September 7. Available at http:// Kadlec, Dan. 2015. “Turns Out (Gasp) Millennials Do Want to Own tinyurl.com/nkfes8t. Cars.” Money, January 20. Available at http://tinyurl.com/oyrn9sp. San Bernardino (California), County of. 2015. Code of Ordinances. Lewyn, Michael. 2015. “Airbnb and Affordable Housing.” Planetizen, Title 8: Development Code. Division 4: Standards for Specific Land April 21. Available at http://tinyurl.com/nju7yst. Uses and Activities. Chapter 84.28: Short-Term Private Home Rent- Montgomery (California), County of. 2015. Code of Ordinances. Title als. Available at www.amlegal.com/library/ca/sanbernardino 21: Zoning Ordinance. Chapter 21.64: Special Regulations. Section .shtml. 21.64.280: Administrative Permits for Transient Use of Residential San Francisco (California), City and County of. 2015. “Office of Short- Property for Remuneration. Available at http://tinyurl.com Term Rental Registry & FAQs.” Available at www.sf-planning.org /oae2tqw. /index.aspx?page=4004. Miami Beach (Florida), City of. 2015. “Vacation/Short-Term Rentals.” Tam, Pui-Wing and Michael J. de la Merced. 2015. “Uber Fund-Raising Available at http://tinyurl.com/o233g7z. Points to $50 Billion Valuation.” New York Times, May 9. Avail- Monroe, Rachel. 2014. “More Guests, Empty Houses.” Slate, February able at http://tinyurl.com/pawed6a. 13. Available at http://tinyurl.com/mbn6266. Tefft, Brian C., Allan F. Williams, and Jurek G. Grabowski. 2013. Moskowitz, Peter. 2015. “Why Airbnb Could Be Making It Even Harder Timing of Driver’s License Acquisition and Reasons for Delay among to Find Affordable Housing.” Daily Dot, July 27. Available at http:// Young People in the United States, 2012. Washington, D.C.: AAA tinyurl.com/qd97gv3. Foundation for Traffic Safety. Available at http://tinyurl.com/qjlu44y.

Cover image by Susan Deegan; design concept by Lisa Barton.

VOL. 32, NO. 10 Zoning Practice is a monthly ­publication of the American Planning Association. Subscriptions are available for $95 (U.S.) and $120 (foreign). James M. Drinan, jd, Executive Director; David Rouse, aicp, Managing Director of Research and Advisory Services. Zoning Practice (ISSN 1548–0135) is produced at APA. Jim Schwab, aicp, and David Morley, aicp, Editors; Julie Von Bergen, Assistant Editor; Lisa Barton, Design and Production. Missing and damaged print issues: Contact Customer Service, American Planning Association, 205 N. Michigan Ave., Suite 1200, Chicago, IL 60601 (312-431- 9100 or [email protected]) within 90 days of the publication date. Include the name of the publication, year, volume and issue number or month, and your name, mailing address, and membership number if applicable. Copyright ©2015 by the American Planning Association, 205 N. Michigan Ave., Suite 1200, Chicago, IL 60601–5927. The American Planning Association also has offices at 1030 15th St., NW, Suite 750 West, Washington, DC 20005–1503; www.planning.org. All rights reserved. No part of this publication may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the American Planning Association. Printed on recycled paper, including 50-70% recycled fiber and 10% postconsumer waste.

ZONINGPRACTICE 10.15 AMERICAN PLANNING ASSOCIATION | page 7 ZONING PRACTICE OCTOBER 2015

AMERICAN PLANNING ASSOCIATION

ISSUE NUMBER 10 PRACTICE SHORT-TERM RENTALS PRACTICE ZONING ZONING AMERICAN PLANNING ASSOCIATION Ave. 205 N. Michigan 1200 Suite 60601–5927 IL Chicago, NW Street, 15th 1030 West Suite 750 20005–1503 DC Washington,

DOES YOUR COMMUNITY REGULATE SHORT-TERM RENTALS? 10 10