New policies for short-term rentals try to strike a balance and actually have teeth.
Spokane has had laws governing short-term rentals — residences rented on websites like AirBnb and VRBO for less than 30 days at a time — since 2015. Back then, the city council was trying to placate hoteliers and owners of traditional boutique hotels while also being proactive in following the lead of larger cities who sought to regulate these rentals when it became clear they were hurting renters.
Fast forward to today and Spokane is years into its own rental and housing crisis, which begs the question: what impact are these short-term rental laws having on the housing stock? Basically: none.
It turns out those laws weren’t clearly written back then and they aren’t being followed or enforced now. Of the 648 active short-term rental units in Spokane, only 44 are operating with active licenses — less than 7%, according to analysis from a city contractor.
Now, Spokane is considering updates to those laws that will regulate where short-term rentals can be located, establish fees for rental units and create licensing requirements for the rentals. With council set to consider the ordinance in the coming weeks, important questions remain: Will the new laws be as toothless as the current ones? Are the current laws unenforceable as written, or are they just not being enforced? Will the new laws restrict how many short-term rental units a given property can have?
Most importantly: does anyone even know the actual impact short-term rentals have on housing availability and affordability in Spokane?
Why now?
One of the reasons Spokane is getting closer to revising regulations on short-term rentals right now is that the city finally has a way to track how many properties are being rented across the AirBnB and VRBO platforms. Platforms like AirBnB don’t immediately show exact addresses in their listings, making it difficult to identify how many properties are being used as short-term rentals. Users have to get several steps into the booking process before you know exactly where a unit is located.
It’s too labor intensive for a person to run down the hundreds of listings in Spokane, so the city has contracted with Granicus — a company that offers a broad set of tools for municipal governments, including short-term rental analytics — to mine the data.
Knowing where short-term rentals are located is an important first step to figuring out a way for the city to demand compliance from the more than 90% of short-term rental owners that are currently not operating with city licenses.
“We as a council — for years — have begged the administration and allocated money to purchase the service that we now have,” Beggs said. “[The software] can tell us exactly who’s in business and not complying. Now that we have that data, we’re doing an update.”
With data in hand to track down out-of-compliance operators, the city is also updating the fees charged to short-term rental operators. The previous fees were $150 for an application and $100 a year for renewals after the first year. The new law ups the permit cost to $200 in residential zones with an $100 annual renewal fee and has higher costs in non-residential zones, where there will be a $300 application fee and $150 annual renewal. The city will also charge a $2 per night fee that will be processed by the online platforms.
With a contract in place to monitor where short-term rentals are being offered, city staff are confident that the new ordinance will actually be followed. “Monitoring would be aided by the work of the city’s contractor, Granicus, which has access to all major short-term rental platforms and can cross-check new listings against our database of STR permits,” explained Brian Walker, the communications manager for Neighborhoods, Housing and Human Services. “A form letter with information on permitting requirements and instructions on how to apply will be sent to any new listings operating without a permit.”
“After a grace period, the penalties in the code would apply similar to any other code violation. The process of taking action against non-compliant properties would be handled by the City’s Code Enforcement Department. In general, we expect compliance rates to be similar to other types of code requirements with the vast majority of violations resolving quickly through education and outreach to property owners.”
With compliance likely to ramp up, Beggs expressed a desire to penalize owners who have operated out of compliance out of fairness to the small portion of owners who have done their due diligence and stayed up to date with the current licensing requirements.
City legal staff said they’d be wary of any retroactive attempts to charge owners who haven’t been following the law.
Omissions & loopholes
The first public hearing on the new rental codes was on May 10 in front of the city’s Plan Commission — a board appointed by the mayor that’s primarily made up of building industry professionals like architects, developers and lawyers. At that hearing, city staff presented code updates that they had been working on for the last couple years with feedback from city council and the mayor’s administration.
A major emphasis of the new law was to clarify that short-term rentals will be allowed and regulated downtown in the future. Various interpretations of the current law have led to uncertainty and conflict over whether downtown building owners could rent spaces like condos or lofts on a short-term basis. Under the previous law, short-term rentals were only allowed in areas zoned for residential use — think neighborhoods. That meant that all of downtown, which is zoned as a commercial area, despite having roughly 4200 housing units as of 2017, falls outside the current wording of the law.
However, according to top brass in Mayor Nadine Woodward’s administration, there was a loophole that allowed commercial property owners to bypass the 2015 regulations completely. Last year, city communications director Brian Coddington told The Inlander that short-term rentals were an allowable use in nonresidential areas if the building was deemed to be a “retail sales and service” building and not a residential building. That, and an overall lack of data on where rentals are, allowed short-term rentals to proliferate downtown with effectively no regulation.
Under the new code proposed by city staff, short-term rentals would be allowed in residential and non-residential zones — taking away the ambiguity over whether the rentals are allowed downtown.
While new areas of the city were opened to short-term rentals, city staff’s plan placed new limits on how many short-term rentals a property could have. These limits seek to balance the desire of property owners to have short-term rentals with the broader community goal of maintaining long-term rentals during a housing crisis. The staff plan would have allowed one short-term rental in a duplex, house or detached house per property and would have limited buildings with three or more units to only have 20% of the total units be eligible to be rented as a short-term rental. So, a property with 10 apartments could only have two short-term rentals and a property that is a duplex could only have one such rental.
Pushback
After the Plan Commission heard the staff proposal on that early-May afternoon, public testimony was given by five people, each in the short-term rental and real estate industry, who spoke against regulations to limit how many short-term rentals a property can have.
Miranda LoPorto, the co-founder of BNB Smart Host, a short-term rental property management company in Spokane, urged the commission to reject staff plans. LoPorto highlighted the jobs created by short-term rental companies like hers and said that short-term rental owners have stepped in to clean up neighborhoods where the city has failed. “One [short-term rental] property owner has championed his entire neighborhood and almost completely rid it of drug activity, loitering, homeless encampments and sanitation issues from RVs and abandoned vehicles [by] himself,” LoPorto said.
LoPorto also emphasized the importance of short-term rentals for people visiting Spokane for healthcare services. She finished by urging the city to hear from owners and operators before they create new laws for short-term rentals. “Our contribution to the community greatly outweighs our ‘baggage’… there is no significant detrimental value to housing availability and affordability.”
A common concern among the people testifying was that the city might follow the staff plan and limit how many units each property could have. The Plan Commission was sympathetic to their argument against limiting short-term rentals. Following the testimony and some discussion amongst board members, the commission voted 7-0 (2 members were absent) to eliminate unit limits proposed by staff in residential areas. So, under the plan recommended by that board, every unit on a property could be rented as a short-term rental at once.
After the Plan Commission reviewed the new regulations, the next stop for the ordinance was the City Council’s Finance and Administration Committee on May 15.
There, Council Member Jonathan Bingle took a subtle jab at the landlord-tenant ordinances the city passed this winter. “I think a good question for us to ponder as a council is: Why do we have some people moving from long-term rentals to short-term rentals?” he said. “Why is it, perhaps, more profitable? Why is it potentially less of a headache? What are the issues we’re creating where we’re not incentivizing properly or creating a good climate for housing that we would like?”
“When we’re looking at policies that we pass, there are effects to the things that we do,” Bingle said.
Council Member Michael Cathcart floated an idea to incentivize people to convert their units back to long-term rentals by forgiving the licensing fees for short-term rentals upon conversion to a long-term rental. The one-time $127 business license and $15 per unit fees on long-term rentals are cheaper than the proposed fees for short-term rentals, which are $200-300 initially then $100-150 annually upon renewal.
Council Member Lori Kinnear was skeptical about the Plan Commission’s recommendation to take away restrictions on how many units could be rented short-term on a property. “We are allowing duplexes, triplexes, fourplexes in all zones and then we’re allowing them to rent both without owner-occupancy requirements — aren’t we incentivizing people to build those duplexes so they become short-term rentals — rather than if only one is a short-term rental, the other one is long-term?”
If that was the case, and the staff plan that limited the amount of short-term rentals per property was adopted, “it’s not as likely to become little hotels all over the city,” Kinnear said.
“I think the rock and the hard place that we’re trying to navigate between is that we’ve heard from some of the developers locally that they utilize short-term rentals to either pay back construction loans or actually to basically subsidize more affordable units within their project,” said planning staffer Amanda Beck. “So, the income from the short-term rental helps them reduce the rent charge for those more affordable units.”
“On the flipside, there’s research coming from various institutions that an increase in short-term rentals in a community has a positive correlation with an increase in home prices for sale, but also rent,” Beck said.
“That’s my concern,” Kinnear said. “I’m still kind of on the fence about this.”
Mixed reviews
The most salient and frustratingly unanswered question throughout the debate over short-term rentals was posed by Plan Commission Member Todd Beyreuther during the hearing on the proposed ordinance. Beyreuther asked, “what defensible data exists” that shows short-term rentals are having an impact on housing availability and affordability in Spokane?
City Planning Director Spencer Gardner replied: “Is that a rhetorical question?”
“No, it’s specific,” Beyreuther said. “It’s a fair question. Prove it.”
No one can — at least not for Spokane specifically.
That’s in part because, according to Gardner, no one has really studied the issue in other similarly sized cities, let alone Spokane. “The impact of short-term rentals on the housing market is not well understood in a market such as Spokane, even in academic literature,” Gardner explained to RANGE via email. “There is the obvious fact that a unit being used as a short-term rental is not being used as a long-term rental, but there’s also evidence that short-term rentals mixed in with long-term rentals can offer a pathway for developers to build more housing overall.” The latter argument, of course, assumes the units becoming short-term rentals are new builds and not conversions of existing housing stock, and are also part of a development that also includes long-term rentals.
These competing viewpoints are examined in a pair of Harvard Business Review articles from 2019 and 2021 that offer some interesting lessons for Spokane. On one hand, as Beck told council, short-term rentals increase rent and housing prices. According to the 2019 article, “the growth in home-sharing through Airbnb contributes to about one-fifth of the average annual increase in U.S. rents and about one-seventh of the average annual increase in U.S. housing prices.”
Projected onto a city like Spokane, where stories of $300 rent raises aren’t uncommon, that would blame short-term rentals for $60 of that increase.
“Our results are consistent with the story that, because of Airbnb, absentee landlords are moving their properties out of the long-term rental and for-sale markets and into the short-term rental market,” the researchers explain. They conclude the article with a recommendation that city staff took to heart when they crafted the proposals to limit the amount of rentals per property: “…absentee landlords are reducing the housing supply, which, in turn, increases the cost of living for local renters. According to our results, one way to reduce the latter effect while retaining the benefits of home-sharing would be to limit how many homes can be added to the short-term rental market, while still allowing owner-occupiers to share their extra space.”
The city staff’s proposal, which could still be adopted as council weighs staff input against Plan Commission recommendations, sought to ensure that new multi-unit construction couldn’t be for the sole purpose of short-term renting. This is in line with Kinnear’s expressed desire to make sure that new construction wasn’t being developed solely as short-term rentals.
But, there’s also data showing that short-term rentals can also be a catalyst for residential development and that restricting them reduces new construction. Researchers, including two authors of the 2019 study, found that an increase in Airbnb listings was correlated with an increase in construction permits. Conversely, in areas where short-term rentals restrictions passed, “Airbnb listings fell by an average of 21%, and residential permits fell by an average of 10%.”
The study also found that short-term rentals boost the tax base in areas where they are popular. And, in some cases short-term rentals have helped “revitalize” (or maybe just gentrify) “distressed neighborhoods.”
Ultimately, the researchers found that there’s no silver bullet for regulating short-term rentals, encouraging residential development and ensuring that short-term rentals don’t make housing unavailable and unaffordable. “There are no easy answers — but any effective solution will have to acknowledge the very real economic downsides of restricting what people can do on their property,” they wrote.
In development
Compared to previous years, Spokane has a lot of multi-family housing in the development process. According to a May 15 presentation, through April, the city had permits in process for 483 multi-family units — more than triple the year-to-date number last year. The city also has 28 duplexes in development through April compared to none at that time last year. It’s still far below population growth projections: The Washington State Commerce Department projects that Spokane County needs to build nearly 71,000 new housing units in the next 20 years.
How much of those units go to long-term renters or end up as short-term rentals is still up for public debate with the first reading of the ordinance coming before the city council on June 5. Beggs, who is sponsoring the ordinance along with Kinnear, said he doesn’t think they’ll follow the Plan Commission lead in eliminating all restrictions on short-term rentals.
But, Beggs said, the objective of the bill overall isn’t to come up with a perfect solution to balance the desire of people to profit from short-term rentals against the community desire for affordable housing.
“Right now, it’s the worst of all possible worlds because we have some rules but the majority of people aren’t following them,” Beggs said. “The priority is to get everyone into the regulatory system.”
Doing that should help the city actually demand operators have business licenses, and it should bring in money for affordable housing projects. But, the new laws as written aren’t intended to address the overall impact of short-term rentals on housing for people living in Spokane.
“It doesn’t answer the fundamental question: are these good to have or are they bad to have?” Beggs said.
