Worcester has joined a legion of cities trying to come to grips with the realities of the 21st century economy.
At issue is the regulation of Airbnb, an online platform that allows homeowners and renters to supplement their income by renting space on a short-term basis.
The issue of took center stage in Worcester in June when the City Council heard from residents of Zenith Drive who complain the activity at an Airbnb listing at 65 Zenith Drive is negatively impacting the quality of life in the neighborhood.
Zenith Drive resident Sharyn Eaton told Worcester Magazine, “Whether you call it a bed and breakfast, Airbnb, lodging house, motel, etc., it all boils down to the same thing – the operation of a full-time commercial business in a residential area.”
District 5 Councilor Gary Rosen referred to the house as “the ‘Zenith Motel’ and said if the home is being used as a lodging house, it is being run illegally and without a license,” according to an article from MassLive. “Rosen said he wasn’t against these types of businesses, but they need to operate in the commercial zones.”
Airbnb presents a worthwhile starting point in considering the impact of the new economy on the city of Worcester and surrounding towns.
An article in the University of Chicago Law Review states, “As explained by Airbnb cofounder Brian Chesky, ‘There were laws created for businesses, and there were laws for people. What the sharing economy did was create a third category: people as businesses,’ to which the application of existing laws is often unclear. These new business models raise complex questions that have not yet been addressed by either legislatures or courts.”
In an interview with McKinsey & Company, Chesky said, “What happens when a person becomes a business? Suddenly these laws feel a little bit outdated. They’re really 20th-century laws, and we’re in a 21st-century economy.”
Worcester is not alone in grappling with this issue. Airbnb, which has a valuation of $25.5 billion, more than Hyatt Hotel or Wyndham Worldwide, claims more than 2 million listings in 34,000 cities in 191 countries.
Some cities are proving to be downright hostile to the idea of short-term rentals. Paris, Barcelona and Berlin, in particular, are taking a dim view and a hard line on them. Among the most common complaints are the transformation of quiet residential neighborhoods and the possibility of rising rents based on landlords wishing to oust tenants and replace them with short-term rentals.
Other cities, such as London and Amsterdam, are more accommodating, simply requiring taxes be collected on behalf of the government.
We urge Worcester to proceed in considering regulating short-term rentals without being overly restrictive.
It is a stated goal of Airbnb to work with local and state governments on common-sense regulations like registration and collection of taxes. This stands in stark contrast to Uber, which has had a number of high-profile dustups with cities and has taken a much harder line in negotiating with governments.
Make no mistake, the stakes are high for those who get it wrong. In a world in which multiple income streams figure to replace income from a single job, governments owe it to their citizens to not unduly burden them or regulate them out of business.
Sixty percent of Airbnb hosts claim the income allows them to remain in their home, something that will stabilize if not boost housing prices in the long term. In addition, Airbnb hosts have significant incentive to maintain their housing lest their income suffer from negative reviews.
At the same time, common-sense regulation would allow individual homeowners and renters to supplement their incomes while not allowing loopholes that be can exploited by commercial operators.
Arun Sundararajan, a professor at the NYU Stern School of Business and expert on the “sharing” economy, was quoted in the Washington Post: “It doesn’t seem to be in the best interest of society to place the same regulatory burden on someone who does something occasionally and someone who does something frequently.”
The article goes on to make the point that, “We already make such distinctions, and along a spectrum of risk. Everyone who drives needs a driver’s license. But people who drive a lot — truckers, bus drivers, cabbies — face additional training, permits and safety precautions. You need a driver’s license to drive yourself. But you don’t need an additional permit to carry your family and friends in your car with you, even though that scenario creates more risk.”
To this end, we recommend the city of Worcester consider regulations along the lines of those enacted in Santa Monica, Calif., and being considered in Los Angeles.
Among the sensible regulations are requirements that the unit be the host’s primary residence, the host register with the city and occupancy tax be collected.
Requiring the host to live in the unit being rented will ensure that someone invested in the neighborhood is on site. It also serves a barrier to absentee owners who would gain from replacing long-term tenants with short-term visitors.
These limited regulations seem appropriate to us. They send a clear message that the city is open for business while providing citizens of Worcester and the city the ability to monitor and regulate while ensuring the playing field is level for all.