Short-Term Rentals in a ‘Sharing Economy’

Councilwoman Mary Beth Susman is the chair for a special City Council Sharing Economy Task Force. “Sharing economy” terminology has developed from a culture that emerged as a creative response to the Great Recession.

The philosophy behind a sharing economy is the notion that people borrow tools, fine china, a wedding dress, or most anything that they only want to use for a limited amount of time when they do not wish/cannot afford to purchase. Sharing aside, Susman’s task force is primarily focused on the existence of short-term rentals and whether or not to modify the zoning code to allow people to rent out homes, apartments, condos, or rooms in their homes for less than 30 days.

These short-term rentals are increasingly being rented out via website platforms such as AirBnB, VRBO, and HomeStay. STRs are not an allowed use in residential zone districts by the 2010 Denver Zoning Code and the several thousand that exist in Denver are therefore in violation of the zoning code. Zoning code violations are enforced by Neighborhood Inspection Services (NIS). Currently, there aren’t even as many NIS officers as there are Denver City Council members.

For the most part, zoning code violations are brought to the attention of NIS via the complaints of neighbors. It is often difficult for NIS to police short term rentals. Since these short-term rentals are under-the-radar, the City of Denver is not collecting any revenue directly from this form of business.

On Saturday, Dec. 6, members of the Inter-Neighborhood Cooperation Zoning and Planning (INC-ZAP) Committee convened at the Park Hill Library for their combined November/December monthly meeting. Susman was in attendance to discuss this issue. Also on hand were AirBnB employees and recruited hosts. Susman listed the pros and cons of short-term rentals, and was followed by members of INC-ZAP who have formed their own task force to study the potential impacts of short-term rentals in residential districts.

Cons that were discussed include the following:

• Short-term rentals are a commercial/business operation and are not an allowed use in residential areas. Commercialization of residential areas will negatively impact the character and enjoyment of our neighborhoods.

• Many short-term rentals are run by commercial operators, absentee, or out-of-state owners. For them, it is a business and they are not interested in maintaining the character of the neighborhood.

• Short-term rentals reduce the already stressed rental and housing market for people who live and work here (a recent Denver Post article listed the vacancy rate as 3.7%). Along with this, rents are climbing and people are spending larger percentages of their take home pay on housing. Nightly rates for short-term rentals will quickly exceed a month’s rent garnered from a long-term tenant.

• Short-term rentals have the potential to be a nuisance property with a large number of people staying in a home, having parties and staying up late. A short-term renter is likely to be on vacation and therefore doesn’t follow the sleep patterns of someone who has to get up and go to work in the morning. Also, given that it is illegal to consume pot in public or in hotel rooms, a “pot-friendly” flavor of short-term rentals has come into existence in Denver and some properties are advertised as such.

• The existence of short-term rentals on a block will lower property values.

• Short-term rentals are a business, and businesses in residential districts are considered a home occupation. From the City of Denver Zoning Code a “home occupation” is a use that is accessory to primary residential use that allows limited business activities to be conducted from a residence. Allowable “home occupations” were created to reduce traffic impacts by commuters, facilitate small business ventures and provide services convenient to where potential clients and customers live. Prior to the 2010 Zoning Code, much of Park Hill was zoned R-0, which did not allow home occupations or rentals for any length of time. R-0 was established to protect residential areas and keep them as primarily for residential use. In the 2010 Zoning Code, Park Hill lost that protection.

• In addition to the loss of revenue to the City, these short-term rentals are not in compliance with insurance or mortgage lender requirements (see A Liability Risk for Airbnb Hosts, New York Times, December 5, 2014). San Francisco has a new ordinance that requires hosts to have at least $500,000 in liability coverage.

• Short-term rentals need to comply with the same Life Safety and Accessibility issues as legal forms of lodging (egress, fire alarms, fire suppression systems, elevators, ramps, etc.).

• District 2 reports at the monthly Greater Park Hill Community meetings and repeatedly emphasizes that neighbors who know each other are more likely to help prevent crime. Residents on a close-knit block know which people and cars belong there and can recognize potential threats to people and property. Short-term rentals degrade this sense of community.

On the pro side, short-term rentals hosts and renters shared their experiences and argument for allowing them in residential areas:

• Income from short-term rentals has allowed people to make the mortgage payments. Whether unemployed, divorced or retired, the short-term rental is providing them with a source of income so that they are able to keep their home. One host at a previous INC-ZAP meeting stated that she is renting out her mother’s home and the income pays for her assisted living expenses.

• Hosts and renters alike said how it has been such an enriching experience for them. They have met people from all over the world and all walks of life.

• Renters bring business to local restaurants, shops, museums, etc.

• The cost of a short-term rental per night is less than most hotels and therefore allows people to visit Denver who otherwise could not afford to stay. One comment on a New York Times article stated that “We stayed at beautiful condos at great prices while meeting great hosts.”

• Some hosts are in residence while renters are there and are like having an interactive guidebook and can direct them to places and businesses they would otherwise miss.

• One woman argued that the “history” or fear of short-term rentals as nuisance properties is unfair, as she has had permanent homeowners on her block that have wreaked havoc.

Whether you are pro or con short-term rental, if this issue is important to you, get involved in your Registered Neighborhood Organization (RNO). RNOs are the mechanism through which Denver residents have a collective voice to the City of Denver.

Park Hill’s RNO is Greater Park Hill Community, Inc. (GPHC) and meets the first Thursday of the month at 6:30 pm at the GPHC offices at 2823 Fairfax St.

Susman’s Task Force does not currently have a timeline for any proposed changes to the Zoning Code regarding short-term rentals. The Sharing Economy Task Force meets as needed Mondays at 3 p.m. in Room 391 of the City & County Building, at 1437 Bannock St. Task Force meetings are open to the public and if you wish to speak during public comment, you must arrive early to sign up. Go to denvergov.org for further information.

And, just for kicks, go to youtube.com and watch the Portlandia skit ‘Rent-It-Out!’ youtube.com/watch?v=-xrUYoleO98

Bernadette Kelly is chair of the zoning committee for Greater Park Hill Community, Inc.