It’s been advertised as the Carpe Diem Estate.
Eight bedrooms. A pool, water slide and in-ground trampoline in the backyard. A rental price of $1,700 to $4,500 per night, on a quiet block of 18th Street, between Pease Park and the University of Texas.
For nearly two years, irate neighbors have railed against parties and comings-and-goings at the house, ever since the family who used to live there relocated temporarily to Florida so one son, a promising baseball player, could attend a particular high school. Neighbors filed complaint after complaint with the city that the property was an illegal short-term rental.
But it wasn’t. It was a city-licensed bed and breakfast.
Until one day in June, when Austin code enforcement officers figured out how to shut it down. Months after renewing the property’s bed and breakfast license, Austin Code sent a letter saying the home was too close to another bed and breakfast, its office had twice issued the license in error and the license was rescinded, effective immediately.
Code officers went to the house within 24 hours — while the guests who had checked in before the letter was received were still there — and issued citations to the owners for renting illegally. The citations likely will prevent the house’s owners from being granted another bed and breakfast or short-term rental license.
“Code’s actions were very intentive in shutting down this business,” said Lindsay Redwine, who manages the property. “When code came (the next day) to issue the violations, I couldn’t kick out the guests who had been here since before the letter was received. I would have been forcefully evicting them and breaking state law.”
The property remains a rental, and its owners have filed a lawsuit against the city.
Redwine acts as CEO of The Renters Club, which manages about 150 short-term rentals in Austin, and she’s a plaintiff in a Texas Public Policy Foundation lawsuit challenging the city’s short-term rental rules. Recently two Renters Club properties have become engaged in high-profile disputes with the city, after what Redwine called targeted efforts to keep them from being legally licensed.
Austin’s ordinance limiting the scope of short-term rentals, approved by the City Council in 2016, faces growing pushback on multiple fronts. The city is being sued by several rental owners, and others could grow emboldened as Texas courts increasingly rule that homeowners have a right to rent their properties for as short a period of time as they wish. Come January, the Texas Legislature will open its biennial session, and lawmakers are expected to reprise previous efforts to overturn local short-term rental rules.
With lucrative investments and the quality of life in Austin neighborhoods on the line, high-stakes battles are at the doorstep.
Redwine, who emphasizes that most of the rentals she manages have no conflicts with the city, said code officers have recently become more aggressive, and she’s finding it increasingly difficult to secure STR licenses. The properties she oversees, high-dollar investments in the center of the city, are examples of why rental owners aren’t going away without a fight.
The rules and the game
Austin has stopped issuing new licenses for Type 2 STRs, full-time rentals in residential areas where the owner does not live on the property, and plans to phase them out entirely by 2022. Type 1 licenses, for people who rent a portion of their home or their whole home only occasionally, are available. Type 3 licenses are allowed in areas zoned for commercial or multifamily uses — zoning that’s sometimes scattered within residential areas without many realizing it.
Owners, however, complain about delays and unexpected hurdles in the city’s licensing process. The $443 fee also costs more than a first citation for being unlicensed, which runs $300.
“They’re sitting there saying, ‘Illegal STR, illegal STR, illegal STR,’ but with new (owners) I’ve had a really, really difficult time getting licensed. I’ve had licenses pending for six months, eight months,” Redwine said. “They’re purposefully finding ways to prevent awarding licenses … Owners say, ‘OK, we’re going to play the same game.’ ”
PART 1 OF THIS SERIES: Recounting the rise of short-term rentals in Austin, a phenomenon linked to the popularity of vacation rental websites and the rapid rise in Austin property values, and one that’s increasingly pitting neighbor against neighbor.
Property owners who receive STR citations have the option of arguing their cases in an administrative hearing — the same as Austinites protesting a water bill or an animal control ticket. Three independent attorneys cycle through as hearing officers to arbitrate the cases.
Of the 49 cases that have been decided by an administrative hearing officer in the past three months, 39 were upheld, resulting in fines ranging from $500 to $1,000. Most of those dismissed involved administrative errors — citations that had already been paid, duplicated citations or a change in property ownership that wasn’t reflected on the ticket. Only two cases were dismissed on the merits of the evidence presented.
In one instance, multiple hearing officers issued opposite rulings on what was essentially the same case. During South by Southwest, code officers wrote two STR citations for a house on Summit View Place that had drawn complaints for being the site of parties and “day drinking.”
Hearing officer Brad Norton heard the case regarding the first citation on June 28 and found that two groups of people had stayed at the house in March under the same 31-day lease. After a representative of the owner produced a copy of the lease and evidence of two equal payments from the same person totaling $21,500, Norton found the lease was valid and dismissed the first citation.
A month later, hearing officer Gwendolyn Webb heard the case regarding the citation issued two days after the first. The same representative of the owner testified that the prior citation had been dismissed because the property was rented via a 31-day lease. Code employees provided the evidence on file from the first hearing.
Webb wrote that she was unable to connect the woman who had made the payments to the company listed on the lease and, moreover, understood that the woman had stayed there only 25 days. Webb upheld a $500 citation.
In another case, the owner of a property cited on East 43rd Street told hearing officers that his ex-wife ran a short-term rental next door to his STR and was probably the source of the complaints about his.
Off script and off-track
Inside a house on Baylor Street, a sign just inside of the front door provided a script for people staying there. It instructed guests of the would-be short-term rental to say they were friends of the owner.
Redwine posted it there this spring, she said, after months of back-and-forth with the city led the frustrated property owner to allow guests to stay for free.
In May 2017, Redwine had emailed city officials to say she had a client interested in buying the home, just behind Counter Cafe, as an STR investment. In the email, she asked if the property would be eligible for a license. Despite being on a residential street, the home has been zoned as commercial multifamily. City staff confirmed the owner could apply for a Type 3 license.
Brian Garsson bought the house and applied for a bed and breakfast license in September. Per the city’s instructions, he paid for a new deck and other improvements, but the license application stalled because of citations issued to the home’s previous owner, even as Redwine argued they shouldn’t apply to a new owner.
In January, frustrated that the house had been sitting unused for so long, The Renters Club rented the property on a 31-day lease to the Austin tech company SoftServe. Despite the lease, code officers cited the property twice during January, when people staying there said they were in town visiting. Norton, who heard the appeal of the citations, said sham leases are common in Austin and he didn’t consider the evidence persuasive that the lease was legitimate.
After the lease ended, renters already had booked the property on a short-term basis in March, but it still hadn’t been licensed. The Renters Club had a woman who had booked it sign a legal affidavit saying she paid nothing for the stay. Redwine pasted a notice on the inside of the door telling the guests what to say if code enforcement officers stopped by — but that backfired when one of the renters’ guests, confused, invited code officers into the house to take a photo of the script. Again, the house ended up with a citation.
Ultimately, Norton didn’t think it mattered whether the guests paid.
“Even if payments made by the customers staying at the property were refunded, it does not change the basic character of the commercial transaction,” he wrote in his decision upholding the citation and $1,000 fine.
Meanwhile, neighbors of the Baylor Street property have spent months bombarding code officials and City Council Member Kathie Tovo with thousands of emails. (An American-Statesman request for communications to and from Tovo’s office concerning just three STR properties in her Central Austin district returned more than 11,000 pages.) Neighbors, one of whom also operates an STR, called the Baylor Street house “a menace,” complained about people “dropping the ‘F’ bomb” on the back deck and sent photos of women wearing cat ears on the front porch.
One email sent in June contained a veiled political threat, telling Tovo, “All politics is local …We have heard little from your office, even though I receive mail soliciting support for your re-election campaign.” Tovo responded, defending her office’s work on the case, and another neighbor on the thread jumped in to note he “totally” supported her re-election.
Tovo, one of the strongest supporters of Austin’s STR policies, said in an interview that the Baylor home is an example of the need to increase enforcement of STRs and keep full-time rentals out of neighborhoods. Redwine has maintained that all the neighbors’ complaints have incorrectly concerned friends of the owner or, at times, the owner himself.
Garsson never received a bed and breakfast license for the Baylor Street property, Redwine said. He has given up on his plans, and as of last week, the house was under contract with a new owner.
Scrutiny by the courts and Legislature
During the most recent legislative session in 2017, the Texas Senate advanced a bill to bar cities from prohibiting STRs and regulate them only for health and safety concerns. Austin Mayor Steve Adler and Council Member Ellen Troxclair pushed opposite sides of the issue, with Adler backing efforts to keep neighborhoods composed of full-time residents, and Troxclair encouraging lawmakers to overturn Austin’s rules.
The bill ultimately died in the House, but the issue is widely expected to resurface when the Legislature resumes in January.
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.
In the meantime, STR supporters are buoyed by a Texas Supreme Court decision earlier this year, Tarr v. Timberwood, that held that a homeowners’ association couldn’t block a resident from making his home a short-term rental because renters were using the home for a residential purpose “no matter how short-lived.”
“It stops in its tracks the arguments that short-term rentals were commercial and inconsistent with residential zoning,” said Robert Henneke, a lawyer for the Texas Public Policy Foundation, a right-leaning advocacy group.
Plaintiffs represented by TPPF sued Austin with the help of Texas Attorney General Ken Paxton, arguing that some of Austin’s STR provisions are unconstitutional, including occupancy restrictions and the phasing-out of Type 2 licenses. The case is in the Third Court of Appeals, and Henneke hopes the Tarr case will weaken the city’s arguments.
Tovo said city attorneys have not given council members any reason to fret.
“It was my understanding that (Tarr) was so narrowly focused on homeowners’ associations that it shouldn’t have any impact on our ordinance,” she said.
New name, same ol’ fight
The owner of the 18th Street Carpe Diem Estate appealed the revocation of her bed and breakfast license, bringing Redwine and an attorney head to head with half a dozen angry neighbors during a city Buildings and Standards Commission meeting in July. Keith Lossen, whose home’s backyard abuts the estate’s pool, brought photos and videos of dozens of young people swimming and playing beer pong there.
“Jerri Bell was my neighbor for several years,” Lossen said of the home’s owner. “They moved on (to Florida). And she hired a commercial operator to take her place.”
Redwine and the attorney argued that signage at the other bed and breakfast did not meet requirements for a residential B&B so their license should be able to stand. If not, the city should at least allow them enough notice to host guests who have already booked stays and also allow them to apply for another type of rental license, they said.
Commissioners appeared to sympathize with both sides, with commissioner Andrea Freiburger remarking: “This affects someone’s livelihood … I’d like to see some kind of phasing out, at least.”
Ultimately, however, the commission upheld the license revocation.
As the debate moved out into a City Hall lobby, Redwine offered to make adjustments to a gate on the property and otherwise work with neighbors to address their concerns. Her comments only stoked the neighbors’ fury since she appeared to indicate that the business will continue.
On Aug. 24, Bell sued the city of Austin, arguing that the property’s license should not have been revoked. She also requested a temporary injunction prohibiting the city from writing citations against her until the court has ruled.
The luxury home remains listed online. It’s now known as The Eleanor Estate.
ABOUT THIS SERIES
This story is the second of three looking at the booming short-term rental market in Austin and the challenges associated with it.
The opening story recounted the rise of short-term rentals in Austin, a phenomenon linked to the popularity of vacation rental websites and the rapid rise in Austin property values and one that’s increasing pitting neighbor against neighbor.
The concluding story by American-Statesman reporter Elizabeth Findell looks at how 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.
Online: Dive into an interactive, citywide map that spotlights trouble spots within Austin’s short-term rental landscape.