Short-Term Rental Regulation: Public Protection or Party Poopers?

By Cindy Morley
Investigative Journalist for the Georgia Public Policy Foundation

Short-term rentals have become an increasingly popular option, across the country and in cities and towns across Georgia, as tourists, travelers and those seeking temporary, budget-friendly accommodations embrace home-sharing platforms such as Airbnb, Vrbo, Booking.com and others.

At the same time, these home-sharing platforms – and by extension, the owners of these rental properties –  appear to be increasingly on the radar of municipalities, lawmakers and other interest groups.

On the positive side, short-term rentals provide a new and expansive category of  accommodations in the hospitality industry. Options have soared for anyone looking to book a place to stay for vacation or travel.

So, too, have new regulations and restrictions on how short-term rentals can operate.

The short-term rental boom seems to have caught everyone by surprise, igniting debate in communities across Georgia about how local officials should approach this issue.

Citing concerns about preserving the welfare of neighbors and community members, some have even gone beyond debate and are enacting regulations. Among them are Hall County and the cities of Sandy Springs and Savannah.

On the popular Georgia vacation spot of Tybee Island, near Savannah, 1,575 of the 2,994 housing units are registered for short-term vacation rentals. Of those rentals, 214 were registered in the weeks before an August 26 vote by the Tybee Island City Council to implement a 90-day moratorium on issuing permits. Officials stress that not all the registered rentals are necessarily active; some remain owner-occupied.

On September 9, the city council voted in an ordinance that hiked fees for these rentals. The previous annual renewal fee was $100. The new ordinance establishes a $200 base annual fee and an occupancy fee based on the rental’s capacity. For occupancy of one to five people, the fee is $10 per person. For six to 10 people, it is $15 per person. For more than 10 people, the fee is $20 per person.

City Manager Shawn Gillen said the fee structure was necessary “because when there’s more people who stay overnight there’s more need for police, code enforcement and fire services,” WTOC News reported[CD1] .

Asked whether Tybee officials have, in fact, experienced issues with excessive partying in short-term rentals or this has become a problem for local law enforcement, Gillen told the Georgia Public Policy Foundation, “We do not have this data. The city council is responding to concerns raised by the residents of Tybee.”

The issue of short-term rentals has divided the island’s residents, according to Savannah Morning News reports from local meetings. While rental owners cite the economic benefits, the rentals and the visitors they attract “have been a top concern among the island’s permanent residents for years. They decry the industry as an encroachment on quality of life and the sense of community inherent in residential neighborhoods,” the newspaper reported recently

Hall County seems to have taken a more civil approach. The county is sending out notifications to neighbors, according to property owner Kevin Beasley, who received a letter on October 27. 

“They notified me of a Short-Term Rental Business being operated within 500 feet of one of my homes,” said Beasley, who owns several long-term rentals. 

“They identified the property owner, and made me aware of the county’s website on short-term rentals. It looks like they have a process in place to file complaints, I assume if the property owner’s tenants cause problems. There is a 24-hour hotline if there’s a complaint. I think it’s good that that this is available for other property owners in the neighborhood, in case there are rowdy short-term renters.”

'Gone Too Far'

Many opponents of these new restrictions have raised concerns about private property rights, as well as concerns that state and local governments are turning short-term rentals into a revenue source. 

Michael Hendrix, Senior Fellow and Director of State and Local Policy at the Manhattan Institute, says he is “skeptical of any regulations on short-term rentals.”

“I think the trend should be going in the other direction,” Hendrix says. “I believe we should have fewer restrictions on housing right now as we are facing too much demand and too little housing across the country.

“We now have jurisdictions looking at placing limits on the number of visitors, limits on where short-term rentals can be located in a community and limits to how many properties can be turned over to short term rentals. It seems that while some reasonable restrictions are being discussed, others may have gone too far.” 

The Atlanta City Council passed new rules for the short-term rental industry in March 2021, effective September 1. In July, the council voted to delay the implementation of the regulations until March 1, 2022, saying the Department of City Planning needed more time to plan for the ordinance to go into effect. 

Atlanta’s new regulations will allow homeowners to rent out rooms or entire houses for 30 days at most. The maximum occupancy is two adults per bedroom. Homeowners will have to apply for a $150 certificate to operate rentals in the city, and the rentals will be taxed at the same 8% rate as hotels. Short-term rental properties will also be subject to $500 fines for loud parties or other violations.

These and actions by other local jurisdictions are raising concerns about violations of private property rights.

A Right to Rent

A recent publication by the National Association of Realtors points out the core rights of property owners to lease or rent their property, citing a ruling by the Supreme Court of Connecticut that the “right to rent” is one of the important “sticks” in the bundle of property rights. That court wrote in a 2001 case: 

“It is indisputable that the right of property owners to rent their real estate is one of the bundle of rights that, taken together, constitute the essence of ownership of property. …  Owners of a single-family residence can do one of three economically productive things with the residence: (1) live in it; (2) rent it; or (3) sell it.”

As the National Association of Realtors reports, courts in other states have also ruled that residential rentals “no matter how long the term, are a residential use because the renter uses the home for the same purpose as the owner.” 

As for restrictions on renting, a ruling by the Maryland Court of Appeals went so far as to state, “While the owner may be receiving rental income, the use of the property, is unquestionably ‘residential.’ The fact that the owner receives rental income is not, in any way, inconsistent with the property being used as a residence.”

'Undermining Hotels'

The Georgia Municipal Association (GMA), which represents 537 cities, has developed a policy position on short-term rental businesses, according to Thomas Gehl, Director of Governmental Relations. The association outlines its stance in its 2022 Legislative Policies publication: 

  • Local control is “necessary for quality of life, public safety and a competitive lodging marketplace.” 
  • “GMA supports the recurring legal use of properties as short-term or vacation rentals by individuals licensed to do business.” 
  • “State law should define short-term rental lodging to differentiate such businesses from hotels, motels and traditional bed and breakfasts.”

In the policy “Explanation” of its stance, GMA states that “Unregulated, unlicensed short-term rental providers are undermining the hotels, motels and traditional bed and breakfasts around the state by not paying taxes or following health and safety standards. Parking, noise and illicit substance abuse are documented, recurring issues with short-term rental properties in unregulated settings.”

Piling It On

Legislation passed during the 2021 session that took effect July 1 treats licensed short-term rentals like hotels. It requires licensed owners as well as short-term home rental companies like Airbnb and Vrbo to pay hotel taxes. That means Georgia Airbnb owners must collect a $5 per night lodging tax and the local government’s excise tax (up to 8%) from their renters. 

In an April report in Macon’s WMAZ, one Airbnb owner reacted to the new law. 

“In the scheme of things, $5 is not that much,” Trace Butler was quoted as saying. “I mean, it’s not a large percentage increase. There is a limit to how many fees we absorb before it distracts from our guests staying with us, but if it is distributed evenly between the hotels and motels, then we are at least on an even playing field with everyone else.”

Georgia State Rep. Joseph Gullett (R-Dallas), whose vote was one of 22 opposing the  legislation, explained why: “I try not to favor new taxes. I’d rather level the playing field by removing the current taxes than by adding another one to the group,” he said.

Short-term rentals are playing a major role in the lodging market in Georgia, especially in popular tourist areas such as Atlanta, the north Georgia mountains and along the coast. A 2019 report from the Vacation Rental Management Association found spending on accommodation by these visitors (not including studios or one-bedrooms) totaled $224.4 million the previous year. Additionally, their direct spending – on food and entertainment – was $682.2 million and led to almost 18,000 jobs. 

“To put these figures in context,” the report stated, “the economic activity attributable to [short-term rentals] is the equivalent of about 3 percent of the reported aggregate impact of travel to the state during 2018. As would be expected, the lion’s share of the activity tends to be found in the consumer-driven segments of the economy such as food services, retail trade and arts and entertainment.” 

So why all the new restrictions on short-term rentals? 

The Mercatus Center at George Mason University reports that one reason is housing affordability advocates who “complain that home-sharing platforms are crowding out long-term rentals, thus limiting the supply of rental housing and increasing the rental rates for residents.

“They view the supply of housing as fixed, that any unit currently used as a short-term rental can’t be used as a long-term rental. In response to these concerns and other considerations, municipalities have implemented a variety of regulations that restrict the right of homeowners to rent out rooms or their whole houses to guests.” 

This is an unwarranted characterization of the problem, according to Mercatus: “While home-sharing may reduce the supply of long-term rentals on markets with an inelastic supply, these practices are not nearly as problematic as zoning and other land use regulations that directly limit the construction of new housing. 

“Blaming home-sharing platforms for being a key driver of high housing costs is a distraction from the more insidious problem of stringent zoning regulations.”

The author of the report is Emily Hamilton, Senior Research Fellow and Director of the Urbanity Project at Mercatus. 

“There’s not always a bright line between short- and long-term rentals,” Hamilton says.

“In addition to tourists, people may use short-term rentals when they’re moving to a new location and looking for more permanent housing, going through a life transition, or if they can’t afford the security deposit and first month’s rent that long-term rentals often require. 

“Housing is housing; there isn’t a specific lease term that separates tourists from others in need of shelter.”

States including Arizona, Florida, Idaho, Indiana and Tennessee have adopted laws that prevent localities from banning short-term rentals and protect the rights of property owners to lease their houses with rental lengths of their choice, Hamilton notes. 

'Scapegoat'

The Manhattan Institute’s Hendrix agrees with the Mercatus report. Airbnb does not appear to increase the costs, he says. 

“The price increase is being driven by the restrictions of zoning. Airbnb is becoming the scapegoat. The only way Airbnb takes away any opportunity for long-term rentals if you assume no new units will be added to the market.” 

In fact, Hendrix maintains, short-term rentals are an “incredible way to deal with the current housing crisis.” 

“We have housing prices that are doubling. We have experienced the fastest increase this year in history. That result is higher property taxes, which forces some people away from neighborhoods they might like to live in.

“Suddenly, with Airbnb, people have a way to stay in their home, or even purchase a new home. They have a way to make money from their investments or save money for their kid’s college education.” 

The Mercatus report’s conclusion reinforces the comments by Hendrix: 

“Rather than focusing on restricting home-sharing platforms – which at worst have a modest effect on housing costs – advocates of housing affordability would better advance their cause by focusing on zoning reform, which is a key policy instrument in curbing the housing supply.”

 

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