San Francisco votes down Airbnb limits: Can competing interests be balanced?

No one city has come up with the answer yet on how to regulate short-term housing rentals like Airbnb's, but a host of places are considering innovative ideas that could point to ways forward.

Eric Risberg/AP
Airbnb co-founder and CEO Brian Chesky at the Fortune Global Forum on Wednesday in San Francisco. Airbnb, the world's largest home-share platform, spent more than $8 million to defeat a ballot measure to restrict short-term rentals in San Francisco.

A defeated ballot measure in San Francisco, which would have imposed further restrictions on users of Airbnb and similar websites, is a sign of how the issue of short-term housing rentals is vexing city governments in the United States and beyond.

From Fort Lauderdale, Fla., to Los Angeles, lawmakers and residents alike are struggling to balance the power of technological change with the many critics of the home-sharing industry: homeowners who complain about deterioration in the quality of life in residential neighborhoods, hotels that fret about lost revenues, and activists who say that short-term housing is stripping the marketplace of affordable long-term units.

Yet even some of the trend’s most ardent critics suggest that more restrictions are not necessarily the answer. Better enforcement of current laws would go a long way toward balancing the conflicting interests, they say.

No one city has come up with the answer yet, says Florida attorney Paul Figg, but a host of cities are considering innovative ideas that could point to ways forward.

“I don’t see any city out there that has really solved the problem,” says Mr. Figg, who specializes in land-use policy. “Things are changing so rapidly that I haven’t seen the answer out there yet,” he says, adding, “There won’t be one universal solution for every city.”

Nashville, Tenn., for instance, has turned to registration, permitting, and monitoring. London, meanwhile, has opted to focus on imposing fines on property owners for violations of existing laws.

London is closer, Figg says, because vacation rentals are about economics. “There need to be economic disincentives for properties that abuse the rules about partying and noise. If the property owner faces a serious fine for a party, then he or she will put a provision in his contract passing on the cost or decide not to rent to certain groups. Then the problem will solve itself,” he suggests.

In fact, lax enforcement of current laws is the overriding issue, says Robert Cherno, a southern California land-use specialist. The Los Angeles City Council is considering new regulations on the short-term rental market, he notes, but this doesn’t take into account that currently, short-term rentals are illegal in the city.

“It’s a joke, frankly,” says Mr. Cherno, who sees a sort of Catch-22 in the response of the police and the city’s Department of Building and Safety. “On the one hand, police see complaints about noise and partying as low priority on the weekends,” he says, and yet the Department of Building and Safety has no personnel to deploy after hours, he adds.

Then, during the week, the department is struggling with a mountainous backlog of complaints. “There are 5,000 unanswered complaints right now,” says Cherno, “so no new complaints have a hope of being addressed.”

The Department of Building and Safety has not returned numerous calls for comment on this issue over the past two years.

On the other coast, just as many cities are struggling. New York City is still up in the air about how to handle the sharing economy, says Brooklyn Law School professor David Reiss, who has followed Airbnb’s evolution.

This week, Airbnb promised to provide detailed data to the New York City Council, he notes. “The company is doing this in part to fend off [legislation] that would severely limit their reach in NYC,” he says via e-mail. One piece of proposed legislation increases penalties for violations of existing laws, and another mandates that the city track illegal apartment conversions, according to Professor Reiss.

Still, the sharing economy is with us for the long term as consumers continue to vote with their wallets, he says. “The bottom line is that we are in a period of transition. And while it is unlikely that we will return to the pre-sharing economy, it is also unlikely that we will have a sharing economy that is driven just by market actors, without government regulation,” he adds.

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