Commentary: Wild West-like growth of short-term rentals threatens public safety, business fairness

Scott Lowell is chair of the Detroit Restaurant & Lodging Association.

Hotels across America are subject to a number of longstanding local, state and federal standards, regulations and taxes — with good reason. These provisions help ensure guest safety and security, enforce fair treatment of and wage standards for all workers at a given hotel, and raise taxes that support local economies. They also direct contributions to tourism marketing and other programs that help drive visitors to our city and state.

Enter the “sharing” economy, the Airbnb phenomenon where individuals rent their personal residence. A homeowner can raise extra cash to help with the monthly mortgage, while appealing to those who seek a more individualized travel experience.

At the neighborhood level, many homeowners disregard local zoning and use ordinances and mortgage covenants, and create thoroughfares for strangers to come and go throughout the year. Notably, more than 7,000 Michigan residents listed their homes on Airbnb as of August 2018, while another site, Vrbo, listed more than 10,000 vacation rentals in Michigan this year.

Individuals who own multiple properties — from houses and condos to apartments — and operate them like a hotel are driving exponential growth in short-term rentals. In the city of Detroit alone, there are nearly 1,000 active short-term rental properties, more than 60 percent of which are rented out more than 90 nights, or 25 percent, annually. For instance, approximately 80 percent of Airbnb stays are at “whole unit” locations with no owner present.

In the commercial arena, developers are leveraging the Airbnb phenomenon by creating short-term rental units marketed as a “hotel-like” stay that have generated nationwide concerns about the negative impact on housing inventories, ballooning rent and real estate prices, and overtourism. And some cities are fighting back.

City officials in Boston recently passed a law banning investors and “absentee landlords” from non-owner occupied buildings and have started to levy thousands of dollars in fines against holdouts. In 2018, Los Angeles city officials passed a Home-Sharing Ordinance law that prevents the city’s affordable housing supply from being listed on various websites as short term rentals. Nearly 5,000 warning letters were sent in November to individuals who were not in compliance with the law.

And in Detroit, a San Francisco based real estate development company named Sonder announced in October that it will open 168 apartment-like short-term rentals in downtown Detroit. While the development was originally intended to secure affordable multifamily housing downtown, the dramatic about face by Sonder to pivot the property to short-term rentals has exacerbated an already tense issue. The result has not just been more unfair competition in the lodging sector, but also a dearth of affordable housing and the erosion of longstanding neighborhoods.

My colleagues and I at the Detroit Restaurant & Lodging Association are working with stakeholders to level this playing field in the interest of our guests and of community stability. We are working with Councilwoman Janeé Ayers, who has sponsored a common-sense city ordinance to maintain the integrity of our neighborhoods and the safety of our guests by properly regulating the industry.

She starts by very adroitly recognizing the right of Detroit residents to pursue revenue through the occasional sharing of their home. The ordinance, therefore, allows their principal residence to be rented up to 90 days per year. To prevent the onslaught of multi-unit illegal hotels, however, she limits the existence of short-term rentals to not within 1,000 feet of another registered property. It is a balanced approach that preserves individual rights and neighborhoods alike.

At the end of the day, when it comes to the burgeoning short-term rental phenomenon, in the name of guest safety, community stability and economic fairness, a hotel by any other name must be regulated and taxed as such.