Regulating Rooms Right

“The danger of any ordinance restricting commerce is that it will wind up protecting incumbent interests at the expense of new entrants into the market,” notes journalist Blake Fleetwood in “DIY B&B,” his contribution to the July/August issue of the Washington Monthly. And that’s exactly what’s been happening to the rapidly growing and recession-driven home-grown B&B industry as municipal governments around the country pursue a regulatory crackdown that seems designed not to ensure safety and honesty–or even revenue–but simply to protect traditional hospitality interests.

In New York, Fleetwood reports, a unemployed homeowner named Jonathan Hogan found himself confronted by police officers and city officials for the sin of renting out spare rooms over the internet:

For more than a year now, New York City has been enforcing a new state law that makes it illegal for homeowners like Hogan to rent out their house or apartment for less than a month. All across the city, police raids have shut down hundreds of similar informal bed-and-breakfast establishments, with nearly 1,900 different violations issued in under twelve months. Often, the fees associated with the citations stretch into tens of thousands of dollars. Hogan was threatened with a $25,000 fine—all for marketing the empty rooms in his house.

The backstory is that a combination of hotels, hotel unions, and tenant activists (who feared landlords would dump tenants from rent-controlled apartments to begin supplying vacation rentals) lobbied for and secured a new state law in 2010 making rentals for under a month in New York residential buildings illegal. Another tourist-rich city, New Orleans, has begun enforcing a similar ordinance, and several Florida municipalities have moved in the same direction. While some regulation (and taxation) of a previously obscure but now booming internet-based B&B industry seems reasonable, the over-reaction in New York and elsewhere threatens the ability of entirely legitimate enterprises that often makes use of the only asset struggling homeowners possess.

But it’s in New York, notes Fleetwood, that a workable compromise may emerge:

In a rare instance of an industry asking for more regulation and taxes, a group representing New York’s besieged short-term rental owners is backing a proposed state law that would similarly define, regulate, certify, and tax legitimate vacation rental apartments. In return for legitimacy and freedom from harassment and fines, the group, the Short Term Rental and Hospitality Association (STRAHA), says its members would gladly pay the same occupancy tax that regular hotels pay.

One can only hope–for homeowners and travelers alike–this kind of arrangement can be worked out in New York before the backlash against home-grown B&Bs really spreads.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.