Increasingly, short-term rental boom pits neighbor against neighbor


Highlights

As neighbors’ complaints about rentals grow, code enforcement officers struggle to enforce city regulations.

City records show 1,900 rentals with active licenses; Airbnb data showed more than 11,000 properties in July.

According to Airbnb report, city could receive millions in taxes if leaders struck a deal with the company.

The two houses on West 10th Street are charming and tidy, one yellow, one teal. But ask the neighbors and they’ll tell you some tales, of bachelor parties and noisy barbecues, of inflatable penises in the street and slamming car doors at 3 a.m. They’ll tell you the houses are basically a hotel they can’t get rid of.

As Austin code officer Khalid Marshall parked outside the houses one afternoon in mid-July, he was about to catch a break.

A blonde woman stood in front of the first house, unpacking shopping bags. She was renting the place for only a week, she quickly told the code inspector. That was all he needed to hear.

At the second house, employees of a maid service answered the door cautiously. They knew nothing about rentals, the man said, they were just hired to clean the place. No worries, Marshall said. Minutes later, the cleaner was grumbling that check-out time was at 11 a.m. and the guests had only just left.

The neighbors recognized Marshall’s truck and started buzzing. Kat Britt and Karen Troutman know him well by now. They often file complaints about the properties being operated as unlicensed short-term rentals, and Marshall writes $1,000 tickets for the owner regularly.

Last night, there was catering for a party , Troutman told Marshall. Eight cars lined the narrow street. More arrived after 10 p.m. On the Fourth of July, strangers ignited buckets of fireworks beneath the electrical linesand shot bottle rockets from their hands. The Saturday morning before the Fourth, a bus with a crew administering IVs for hangovers idled in front of the houses for two hours. A bachelorette party that weekend left a 3-foot inflatable penis in the street with a wig tied in place of pubic hair.

“At this point, I see a colorful matching tank top and my blood pressure just shoots to the sky,” Troutman said.

As she spoke, a car arrived at the second house. Zach Levitt, from Dallas, stepped out, a little concerned by the commotion. His group had rented the place for the weekend for a bachelor party, he said. Marshall strolled to the truck for his citation pad. Another inspector reassured Levitt that his rental wouldn’t be impacted and he should have a great weekend.

Marshall tacked three more tickets on the door as Levitt carried a cooler inside.

It was another Friday afternoon in Central Austin.

Austin’s short-term rental landscape, mapped

Sources: City of Austin, Inside Airbnb. Locations are approximate.

The enforcement game

The rise of such vacation rental websites as Airbnb, Homeaway and VRBO, paired with a rapid rise in Austin property values, has transformed the city’s festival and tourism landscapes.

It’s almost impossible to know how many STRs there are in Austin, but American-Statesman searches of various criteria returned more than 8,000 Austin listings on Airbnb alone in August. Inside Airbnb, a website that scrapes data from Airbnb listings, showed more than 11,300 Austin listings on the site in July, not all of them necessarily actively booking.

Just more than 1,900 properties have active short-term rental licenses, according to city records.

The boom in short-term rentals, or STRs, and the response to them, has left virtually no one but tourists happy. Not the residents living in desirable neighborhoods close to downtown who complain about party houses. Not the owners of the rentals, who consider the city of Austin’s regulations burdensome and unfair. Not the city workers who struggle to enforce rules the City Council passed in 2016, regulations facing attacks from lawsuits and, possibly, state lawmakers.

The city ordinance put a moratorium on issuing licenses to full-time, full-property STRs in residential areas and ordered phasing out existing ones by 2022. It limits occupancy in rentals to no more than 10 adults. No more than six people may gather outdoors at an STR, and code officers may enter a rental at any time to inspect it.

In the first 6½ months of 2018, Austin 311 fielded 868 STR-related complaints about 427 properties. Code officers wrote 98 citations against 38 properties. Sixteen citations were paid during that time.

Citations run $300 if paid by mail or, if the owner loses an administrative hearing, $500 for a first offense, $750 for a second and $1,000 from there out. Those fines can be pricey for a small rental, or barely noticeable for a large home renting for hundreds or thousands of dollars nightly.

In certain areas, neighbors have organized to call 311 every time they notice activity at homes they believe to be short-term rentals, ensuring that code officers keep responding. Having the ear of an elected official also can boost enforcement efforts.

At the West 10th Street houses, for example, code officers left 12 citations for owner Taylor Wilson over just three days in July.

“This one is designated ‘council action,’” Marshall said. “A council member has said, ‘I’ve gotten this complaint and I want to know what’s going on.’ Those are the ones we work hardest to get into compliance.”

Wilson did not return phone calls when asked to comment, and he did not attend an August administrative hearing to contest a citation he received in March.

PART 2 OF THIS SERIES: As lawsuits target local rules regarding short-term rentals, property owners complain about a balky licensing process and occasionally resort to subterfuge as they attempt to avoid citations.

For years, Austin has had only two code officers dedicated to STR complaints, and they must catch a renter in person or find an illegal property listing to write a citation. The city recently hired four more code officers, though, and is looking at acquiring software to monitor illegal listings.

After six years on STR duty, Marshall has seen it all. He and Farah Presley, a code inspector who sometimes earns overtime helping out on STR issues, try to stay low-key. Their interactions are mostly with guests, who don’t like to answer questions, but typically blurt out “I’m just renting the place” as their first sentence.

That’s the only information the inspectors really need. They usually tell the renters to have a good time, and give them bar recommendations. They decline when the renters offer them drinks. Marshall, a good looking guy outfitted in a uniform, is sometimes mistaken for a stripper when he knocks on the door of a bachelorette party.

“They’re more than happy to talk to you at that point,” he said wryly.

Turning away taxes

Click “book now” on Airbnb for an Austin rental and you’ll see a line listed for the Texas hotel occupancy tax that is sent directly to the state. To pay Austin’s portion of hotel tax, however, hosts must separately write a check to the city.

If Airbnb collected hotel occupancy taxes automatically for the city, the tax revenue would average $7 million per year, according to a 2016 Airbnb report. That approach would bring in far more revenue than the city receives now, because it would tax the thousands of unlicensed rentals currently not paying city taxes.

Austin officials have so far rebuffed offers from Airbnb and locally based HomeAway to collect taxes automatically, unless the companies agree to turn over data about rental hosts and verify that those hosts have licensed their properties with the city. Hosting sites have done that in a few cases, most notably in San Francisco and Chicago, but only after extensive negotiation and legal battles. In both cities, Airbnb reached tax agreements with the cities years before reaching host-registration agreements.

Austin Controller Diana Thomas sent local Airbnb and HomeAway representatives a letter last month saying an agreement similar to the one Airbnb has with Texas, which requires the website to turn over only anonymized data, “would not provide the City with the level of detail that is needed to enforce” local ordinances.

It’s unclear how either company will respond, but representatives of both said they consider STR enforcement a separate issue from tax collection. In other words, Austin can take the money or not, but the payments won’t be tied to information sharing.

“The conversation about taxes needs to stand alone and distinct from the conversation about data,” said Philip Minardi, communications director for Expedia, which owns HomeAway.

This year, 1,792 STRs have paid hotel occupancy taxes to Austin, and all but about 230 of them are licensed. If an unlicensed STR pays the tax to the city, Austin officials will use the payment as evidence to cite its owners.

Renting to keep a home

As short-term rental have increased nationwide, concerns about their impact on housing stock and pricing has grown. A March report by a New Orleans neighborhood advocacy group found that 82 percent of Airbnb listings citywide were for whole homes, and rent increases had occurred in neighborhoods with the most listings.

Similarly, a 2016 University of Massachusetts study found that census tracts with the highest number of STR listings in Boston had the highest rent increases for residents. Both the New Orleans and Boston studies found that about half of the Airbnb listings in both cities were owned by less than 20 percent of all owners.

The Boston study also found evidence for the flip side of the argument: That STR rentals allow some people to stay in their homes in increasingly expensive neighborhoods.

In Austin, some STR owners said, they used to rent garage apartments and extra buildings to college students and artists, but now rent them to tourists. Others said they might have moved out of Austin if not for the added income from STRs.

While large party houses often draw the eye of neighbors and code compliance officers, thousands more unlicensed rentals go less noticed in Austin neighborhoods. One phenomenon involves travel trailers, which some Austinites keep in their backyards and rent nightly. Tourists like them because they’re hip and retro, more private and less expensive than a hotel.

PART 3 OF THIS SERIES: Many of the upscale apartment complexes popping up in Austin share an interesting trait. They are licensing chunks of units as short-term rentals to be furnished and leased by the night, just like hotel rooms.

Airbnb lists 93 trailers for rent in the Austin area. In the city, however, they’re considered mobile homes, and it is impossible to license them as short-term rentals. Code officers cite them when they’re discovered.

That’s unfortunate, said one owner of a popular East Austin Airstream trailer, who spoke on the condition of anonymity because she rents it, illegally, nearly every night. She wishes that weren’t the case, she said. She and her husband would get a city license if they could.

“We’re both architects, with modest incomes, so this helps us keep up with the mortgage,” she said of the rental trailer. “Our property taxes keep rising … Without this, it would be really hard for us to do the creative work that we do and stay close to Austin.”

Building an extra bedroom to rent is far more expensive than buying a trailer, she added.

An owner of a trailer for rent in South Central Austin, who also wished to remain anonymous, said he’s been “treading lightly” in renting it, both because he knows he’s violating city regulations and because he’s gauging the reaction from his neighbors. So far, no one has expressed concerns, and he likes having the opportunity to show his city to visitors.

“In good faith, I don’t feel like I’m doing anything wrong,” he said.

‘I wish I had normal neighbors’

Marshall and Presley’s second stop on that Friday in mid-July was an upscale home on East Eighth Street, with a historic landmark designation. The home, just two blocks from bars like Shangri-La and Violet Crown Social Club, was the subject of 54 short-term rental complaint calls to 311 in the first half of 2018. The total was more than that for any other property in the city.

Andrew and Dana Kull, who live across the street, know the schedule well for what Andrew calls a “weird bachelorette party hotel.” On weekend days, 15 to 20 people will spend the day around the house’s front pool. Around 7 p.m. the house becomes quiet for the evening as the groups go out, but after the bars close at 2 a.m., the party resumes around the pool, often waking Andrew, who sleeps more lightly than Dana.

They submit 311 complaints regularly, at the instruction of code officers, who have told them complaints are what bring response. Two doors down is another STR that’s often rented to six or eight people, but only one loud party there has ever bothered the Kulls, and an email to the owner about it brought a quick and sincere response, they said.

“Sometimes they’ll be out laughing and you think, ‘Oh gee, I wish I had normal neighbors,’ but it’s never really bad,” Andrew Kull said of the quieter STR. “These guys across the street, they’re just outlaws. They figured: ‘This is a great way to make money, we’re going to keep doing this until they stop us.’ But it doesn’t seem code enforcement has the means to stop them.”

Rosa Santis, who owns the historic rental with her son Pedro Santis, declined to comment for this story. At a citation hearing in July, Aaron Ashmore, the Santis’ representative, said his brother was staying at the house and people were coming and going because it is “hard to find roommates.”

As Marshall and Presley approached the East Eighth Street house, women could be heard talking and laughing near a pool and a cabana, behind a tall fence. Two beer cans rested on either side of a front gate to mark the entrance.

The gate was padlocked. That was new since code enforcement had last cited the property.

Without catching a renter on the move, the agents would be out of luck. Presley tried to call over the fence to the occupants, and Marshall went to search home rental sites to see if the property was advertising illegally. No luck. From over the fence came the sound of a champagne bottle popping and loud cheers.

Marshall gave up and drove away. Maybe after dinner he would catch a break.



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