Property Rights

Zoning Meets Property Rights: Airbnb and VRBO Outlawed in Several Utah Cities


Recently we interviewed a St. George resident who was warned by a city code enforcement officer that his house sharing attempts via the popular site Airbnb were in violation of an ordinance prohibiting short-term rentals. The Palmers were using Airbnb to rent the basement of their home to tourists in order to supplement their family’s income—an activity that yielded not a single complaint from anybody.

This crackdown highlights the strong arm of the regulatory state over a growing “sharing economy” which pits innovation, individual liberty, free enterprise, and private property rights against the regulatory “police power” of local government. This is reminiscent of recent actions in Utah to regulate popular ride-sharing apps Lyft and Uber, and innovative insurance broker Zenefits—except in this case the government is not just attempting to regulate commerce alone, but the very rights of an individual property owner.

In house-sharing arrangements, sites like Airbnb and VRBO match travelers with individual property owners who are willing to share all or part of their property with someone for a short period of time. In Utah you can find anything from someone’s air mattress for $10 per night to an entire luxurious ski lodge for thousands of dollars per night. Such a wide range of options do not exist in the commercial lodging market.

Private short-term rentals play an important role, as they cater to an underserved market segment. Many potential travelers feel constrained by a market where their options are limited to commercial hotel and motel rooms, which are often clustered in specific areas and lack the feel and warmth of a home environment. Commercial rooms are also usually priced within a specific consistent range, leaving few options for cost-conscience consumers. Additionally, most commercial options do not serve large groups and families very well; large groups might prefer an extended stay in a venue that permits cooking and other activities more akin to a home than a hotel. These are all features that the sharing economy can (and does!) provide.

The strength of a sharing economy is that there is diversity of choice for consumers at a variety of price points. The success of house sharing services to date reveals existing market inefficiencies created by regulation and central planning that have gone unnoticed. No commercial provider is offering air mattresses in someone’s spare bedroom for $10 per night. Too often we assume that the preferences of consumers are relatively homogenous and match the existing market supply. The principle of disruptive innovation reveals the fallacy of this short-sighted assumption. Steve Jobs articulated this idea well when talking about the development of the iMac. He explained that when developing an innovative new product, “a lot of times, people don’t know what they want until you show it to them.” In the case of short-term rentals, consumers did not realize they would like to rent a private person’s home until these sharing platforms showed how easy and beneficial it could be.

Of course, we didn’t need the internet to know that this was possible or useful. “Boarding-out” has been in practice for hundreds of years in this country. Many households in the nineteenth century took on boarders routinely to help pay the bills. Such an arrangement is efficient, as it takes advantage of unused space and can be particularly helpful to the real estate market by increasing the demand for homes. For example, a small but growing family may justify buying a five bedroom house, knowing they can rent out two of the rooms until they need the space at a later date. In this way, they can offset the cost of the larger house and avoid having to rent a smaller three bedroom apartment or move from a smaller starter home once their family has grown.

The sharing economy empowers individuals to participate in the marketplace as a sort of “micro-supplier” and not just as a consumer. This adds diversity to the market by giving consumers more choices, thereby creating efficiencies previously not possible because the transaction costs for a micro-supplier to find willing buyers was too high for any one micro-supplier. Innovative social pairing sites like Airbnb, VRBO, Lyft, and Uber bear the large upfront transaction costs of creating a platform to match these new micro-suppliers with willing consumers. The internet merely reveals the diverse suppliers and consumers and helps match them for a small fee.

Across Utah we have identified several cities that have specific regulations prohibiting short-term rentals; many more have used existing zoning restrictions to ban the practice of house sharing. The city councils of Moab, St. George, Park City, and Provo have each enacted ordinances prohibiting residents from renting their own properties to patrons. Interestingly, Park City makes an exception for residents in one specific subdivision; residents in the Prospector Village subdivision are welcome to host tourists, but those living elsewhere are not. We have also spoken to a number of individuals in other cities where code enforcement has cited zoning ordinances as the reason individuals in residential zones are not permitted to rent a portion of their house for a short-term (despite the city not having any ordinance that explicitly bans them). Utah is not unique; short-term rentals have faced opposition across the country including notable battles in New York City.

Regulation on short-term rentals, if regulated at all, should not differ significantly from regulations on long-term rentals and should not be instituted for the purpose of limiting the number of short-term rentals. Renting a home long-term does not change the property from residential to commercial, nor does a short-term stay turn the property into commercial use. The type of tenant does not change the structure or nature of the residence, and therefore should not change the zoning. A property that is rented for a short-term today may, at the discretion of the owner, be rented for a longer-term tomorrow.

Additionally, using zoning regulations to micromanage property use interferes with the fundamental right of use and enjoyment of property. It is our belief that such a practice is in fact unconstitutional and constitutes a regulatory taking. While zoning has been ruled constitutional by the Supreme Court in Euclid v. Ambler Realty as a reasonable extension of the police power to regulate nuisances, we feel that this prospective approach to control speculative potential nuisances that have not actually presented themselves runs counter to the principle of liberty. As readers learn in our interview with Mr. Palmer, existing nuisance regulations are sufficient because they apply equally to all citizens whether owners, guests, or tenants—and these ordinances are not dependent on the arrangement or length of the tenancy. If there is a noise or parking problem, then enforcement should address that nuisance instead of creating blanket rules infringing on the rights of innocent property owners in hopes of mitigating future potential (and infrequent) nuisances.

When weighing private property rights against the regulatory interests of the government, deference should always go to property rights. Government exists to protect these rights—rights whose conceptual existence pre-date the government itself. Zoning regulations turn this model on its head, arguing that property rights are in fact privileges granted by government. Once we have collectively transformed our rights into privileges granted by government, we have changed the form of government from one predicated on liberty, where government derives its power from a delegation by individuals, to a type of government where individuals are subordinate to, and serve the interests of, the state.

Creating regulations aimed at reducing the number of short-term rentals does not serve as a protection of the public or of any particular right of a neighbor. Rather, it reeks of protectionism and central planning with no substantive or legitimate public benefit. Cities in Utah should welcome the market efficiencies and economic development brought on by the innovations of the sharing economy, rather than bowing to the interests of incumbent industries using the complaint process to send enforcement officers after the upstart competitors.

The U.S. Conference of Mayors in 2012 voted unanimously in favor of a resolution that supports allowing short-term rentals in America’s cities as an economic development opportunity and proposed treating short-term rental tenants the same as long-term rental tenants. If Utah really cares about free enterprise and private property rights, it is important that cities get this right.

  • Written by:  “Brad Winget”

    After reading this article, I am impressed and enthused by the
    prospects of short term vacation rentals becoming more recognized and
    accepted by our local government and municipalities as I have been trying
    to pro actively change the ordinances in Salt Lake City and Salt Lake County,
    surrounding short term rentals for the past 2 years.  

    We own a vacation rental/furnished rental company
    in Salt Lake City and have been operating this business for 7+ years. 
    This business has saved my family and our financial well being
    since the market tanked in 2008 at a time when we owned more than 45
    properties & in some cases lost more than 50% of their market value. 
    This business has also created countless jobs for over 100+ people since 2008 &
    gave us a sense of purpose & glimmer of hope when NO ONE was coming tour
    aid. 

    I am a real estate investor, broker & have managed real
    estate for years.  This business has help me an my friends and family
    save many homes from foreclosure or disrepair and has been a key component in
    the preservation of our homes improved condition.  In fact, when
    we decided to furnish an market 4 of our homes to short/long term tenants, my
    homes were in such disrepair, I had to discount the rates significantly. 
    Because I was able to rent these homes for more than I did when I had long term
    renters, I was able to slowly improve the home and restore them to their
    original condition. 

    We have found that this business has improved the
    marketplace helping the consumer looking for more affordable &
    comfortable lodging on a more private and intimate level.  This business
    is a compliment to what the market wants, needs and currently does not have
    enough of and is a unique market that appeals to a different traveler than the
    one who prefers to stay in a hotel typically.   

    I strongly recommend we don’t restrict what the market wants and
    needs.  Instead, lets encourage growth and stabilization and proper
    licensing and monitoring of this business so the state/cities can continue
    benefiting from the tax revenue this has been generating (For the few of us who
    have actually been paying), The homeowners can benefit from the use of their
    2nd home when not being rented to a vacationer and the renters can benefit
    from a fully furnished and equipped home that feels like “their home away
    from home”.  (Important Note: Vacation Homes are typically only
    occupied 120-220 days per year). 

    Without Question, there are legitimate pros and cons but I
    promise you that any concerns neighbors or cities have are no different and n
    some cases, much worse than the problems being caused by all the long
    term renters.  Fact:  Studies have shown that 911 calls and
    recorded complaints are being caused by long term renters not vacationers or
    short term renters paying a premium to enjoy themselves away from home. 
    Vacation renters are held to a much higher standard and are typically
    responsible people who have signed a very restrictive contract and have a
    credit card on file along with damage insurance in place.  

    Vacation homes have to be well kept and in good condition
    or renters will never stay in them and the home will get bad online
    reviews.   Typically vacation homes are among the nicest on
    the street and kept in showroom condition which is ideal for a
    property owner/investors when compared to a long term rental. 
    Rental Properties are a key component to our economy and the real estate
    market in general.  This subject isn’t going away and the sooner we all
    get together and figure this out the better for all!

    Respectfully,

    Brad Winget, Salt Lake City, UT

  • Pingback: Perspectives: Time to rethink code enforcement | St George News()

  • Sandy is the same way. I lost a house during the 2008 real estate bubble and part of losing the house was Sandy City’s proclivity to control personal property, precluding my ability to rent my house as a seasonal rental at the mouth of LCC. They grandfathered a few homeowners but made short-term rentals of PERSONAL property illegal.

  • RayLynne

    Thank you so much for this article. I am at a lost with all the rules and regulations the public servants at our courthouse create. I am sad how I hard I work for my home and as a one person household enjoy the company and sharing of my home. Now Wayne County Utah has put a cost, rezoning guidlines etc on me that other hotels are not required ot up hold . ARGHHHH!

  • Sandy_airbnb

    Per Sandy City, It is also illegal to do short term rentals for money within the city limits. They investigate it on a case by case complaint basis. A neighbor complained about us. It’s a shame. We’ve made a little money and made so many friends in the 14 months we were operating.

  • BradWinget

    My name is Brad Winget and my wife and I own http://www.Utahsbestvacationrentals.com. Like many of you, we have run into code enforcement multiple times since rolling our 40+ long term rentals over to short term vacation rentals to survive the real estate crash in 2008. Since then, we have been fighting with salt lake county and other municipalities who have targeted certain homes due to unwarranted neighbor complaints. We are leading this fight and have hired some attorneys and lobbyists who have been working on our behalffoe the past few years to change these laws and adopt what the public and market want. As we all know, short term rentals, if managed properly, do not cause problems and in many cases, bring amazing solutions to homeowners and real estate values alike. I am also a real estate broker and have seen the impact a vacation home or community can make as i have been involved in creating Paradise Village at Zion in Santa Clara, UT in St. George which has been the fastest selling subdivision in the state and maybe the country. Every home is licensed for vacation rentals and the city has benefited greatly by all the tax revenue and home sales and even got Harmons to build an amazing store next door as a result.
    Long story short: This is a fairly complex issue that needs immediate resolution. Homeowners have property rights and cities are over stepping their bounds and it has to stop. If you are interested in joining us in this fight and working together towards resolution please reach out to me at brad@ubvrs.com
    We had a bill up with legislation that unfortunately didnt pass but we are hoping to get something done in 2017’s session. Its amazing that this discussion is now being had at the state level and everyone knows about the issue now. Its only a matter of time if we work together, before we can solidify this industry as its the wave of the future.
    Thx.
    Brad Winget, CEO of Utah’s Best Vacation Rentals
    http://www.Bradwinget.com

  • Kat lee

    Sandy_airbnb I am so sorry to hear this.  We are getting ready to open our home this month using airbnb and I was surfing the net to see if there had been any issues.  We are in Draper, UT.  I find it hard to believe that I can rent my whole home to someone longterm, but not short term so I can stay in it too.     So sorry that a neighbor complained 🙁

  • Sidewiner7228

    Hello  I agree with most of what you were saying but I too am a property owner and what about my rights?  I move into a Subdivision where I could get to know my neighbors.

    Renting out a room which my Mother did for years to help with her SS income.  So I am not against renting out a room. 
    What I am against is the VRBO and Airb where they rent out a home that is not their Primary home where they live at least part of the year.

    What we are seeing in my area is people who purchase homes solely for the purpose of renting out short term.  One person has three in our neighborhood and has a total of 8 VRBO homes in the area.

    Now this is a big business they not live in any of these homes.  I have two homes that I rent out in another State and they are long term.  We do a credit check, background check etc.

    These short term rentals do not care.

    “Long term renters are vetted, credit checked, and background checked.
    You know who you are dealing with. When you move into a single family
    neighborhood you have an expectation of knowing who your neighbors are. Strangers
    in and out of a neighbor’s house destroy neighborhood connections. If the
    argument for “home sharing” is to help a homeowner pay the mortgage, a
    homeowner can rent a spare bedroom for six months or a year and currently get
    the same benefit.”

    Zoning codes were established to prevent Hotels/Motel commercial properties from being built in single family zones.  WHO wants to live next door to a Hotel.  My question for you Josh, what if both homes next to you became a VRBO and you had small kids 8 or 10 year olds or maybe a little younger.  How would you feel letting your kids play out in front of your home with these two VRBO not knowing if they were sex offenders etc.?  What about your property rights as a homeowner who purchased in a single family zoning code area.  Do you not have rights?  That you expected to have neighbors on both side of your home that you can get to know and thrust.  
    VRBO do not belong in the single family zones.  You know what zone you are buying into so if you want to rent out like a Hotel/Motel then buy a place in a resort area where they allow you to purchase condos and rent them out short term.
    Zoning codes and laws are made to protect people property rights .

    I hope both houses next to yours and also across the street become short term rentals.  Then let’s see how you feel about short term rentals.  Until you walk in a person’s shoes you cannot understand what it means to live next door to a hotel.  And it also reduces the rental market of available housing and thus runs up the rents for single family homes be cause of the shortages. Plus there are many people who would not want to purchase your home knowing that there are VRBO nextdoor.

    Today just in one small county there are 103 VRBO.  And only 15 homes for rent long term.  

    Vacation rentals if you look up the term was where a person had two homes and spent time in both homes.  For example say you had a home in Florida and one in Utah.  In the winter you rent out your Utah home for five months  while you lived in your Florida home.  Then in the summer you go to your Utah home and rent out your Florida home. 
    That is a true vacation rental.  Not what they are doing today.
    Reason many people want to rent short term is because they can make more money doing it short term than long term.
    VRBO do not belong in Residential zoning.

    I appreciate you for serving our country in the Military.

  • Sidewiner7228

    There’s a good reason every city has zoning laws. They separate various types of buildings and building uses for the mutual benefit of everyone, so people don’t have to live next to a factory or a motel. Most cities also have laws related to the minimum rental period for a single-family house or a multifamily dwelling. In Los Angeles, for example, a residential rental of less than 30 days — called a “short-term rental” — is currently prohibited.

  • Sidewiner7228

    Internet companies such as Airbnb and VRBO pay no mind to such ordinances. They’ve swamped the market in California and elsewhere with thousands of STR listings, making the rules difficult or impossible to enforce. These rental sites appeal to home owners who need additional income. Then the companies use those owners as examples to coax cities into making STRs legal. Even though there’s clear demand on the part of home owners, that doesn’t justify the many problems STRs cause for the larger community.
    Usually, there’s no problem with people renting a room in their home, as long as the lease is longer than 30 days and the home owner is present to monitor the renter’s activities. The owner has an opportunity to check the potential renter’s credit, employment, and references. However, STR websites are calling this type of pre-existing rental the “shared economy” to sell their quite different concept to cities.

    These websites claim that home owners should have the right to do whatever they want with their property — but that’s a fallacy. When someone has purchased in a single-family or multifamily zone, they have accepted the rules of that zoning. They do not have the right to turn their home into a motel (transient zoning), a restaurant, or a factory to the detriment of everyone else in that zone.Airbnb Is Crashing the NeighborhoodShort-term rental websites raise risks for home owners, their neighbors, and communities.DECEMBER 2015 | BY http://realtormag.realtor.org/author/barbara-nichols

0

Your Cart