Airbnb & Short-Term Rentals Part 1: How the Sharing Economy Can Impact Your Multi-Family Building
One of the most recent societal shifts has been a move towards a sharing economy – and if you’ve ever been driven home in an Uber car, or reserved a distinctive blue CitiBike for a few hours to pedal across town, you’ve experienced this practice first-hand. In this article, we discuss how the quick growth of the sharing economy – particularly, home sharing – is impacting buildings in large cities, and we’ll follow up next week with valuable advice on how your Board or Strata council can address this mushrooming trend.
Why has the sharing economy taken off? Proponents of this business model cite how it efficiently utilizes existing assets and capital – after all, owners can leverage the cost of ownership and earn extra money, while consumers can enjoy short-term usage at a reasonable price, without the cost of ownership. It’s a win-win situation for ordinary people like us, right?
Not so fast. The quick and increasing growth of the sharing economy is sometimes outpacing both legal and practical considerations. Take popular home-sharing websites like Airbnb, HomeAway, VRBO and even Craigslist, which enable people to monetize their living spaces through short-term or vacation rentals to travelers – in essence, blurring the lines between a traditional rental and a hotel room. Sounds great, especially if you own or lease a home or apartment in an area known for high-priced hotel rates, like New York City or Vancouver.
But in both of these cities, and many others, it is illegal to rent out your entire unit or even just a room for fewer than 30 days. Specifically, in New York City, current legislation forbids short-term leasing of apartments in multi-family buildings. In the City of Vancouver, only units located in a hotel or bed and breakfast can be rented to others on a short-term basis.
Airbnb is fighting back in New York and other major cities, trying to get this legislation changed. And in many other areas, home sharing is not prohibited – but there are other considerations that can impact homeowners as well.
Indeed, along with legal concerns, homeowners and tenants must comply with all existing HOA, co-op or condo board policies, by-laws, rental leases or other provisions that address the home sharing issue. In these cases, many associations and Strata councils are warning homeowners not to participate and fining those who don’t comply – and defiant renters may even lose their leases.
But despite legislation and building rules, short-term subletting, both legal and illegal, is a reality. Consequently, many condos, Strata corporations and other multi-family building associations have legitimate concerns about allowing access to short-term renters, such as significantly increased security and insurance risks, as well as potential decreases in property values and quality of life.
For example, unlike hotels, which are required to comply with fire and safety codes to protect short-term guests -- such as providing portable fire extinguishers, sprinkler systems and clearly marked fire exit paths – short-term sublets may not follow these safety precautions. Consequently, in the event of fire, a temporary paying guest may not know the safest evacuation route, increasing their risk of injury or death – and increasing the building’s liability.
“Most New York City laws put the burden of compliance on the ‘owner’ of the building, whether that’s the landlord of a rental property, the board of directors of a cooperative or the board of managers of a condominium,” said Dan Wurtzel, president of FirstService Residential in New York.
Additional security concerns involve the lack of criminal background checks and verification for clients of sharing services like Airbnb. While legal subletters are subject to proper screening, temporary guests bypass this critical layer of security, allowing them access to the building and its shared amenities – and that poses a safety risk for everyone.
In addition to security concerns, short-term guests with an “I’m on vacation” mindset may improperly use or damage the building’s amenities or common areas, thereby decreasing residents’ quality of life.
Adds Wurtzel, “a building’s sense of community may also be threatened, with guests showing a lack of concern for neighboring apartments with regard to noise, odors, cigarette smoke and more. All of this can harm a building’s reputation, and may devalue an apartment as a real estate investment.”
FirstService Residential is helping its clients stay ahead of the curve. For example, several months ago, the company’s British Columbia office held a seminar in Vancouver on short-term rentals attended by more than 150 Strata council members.
“Everybody is very interested in this issue. We hosted members from buildings we manage, as well as those we don’t,” said Sean Ingraham, director of business development at FirstService Residential in British Columbia. “Many people are concerned as this issue continues to develop and change.”
So what can your building do? If your building is currently grappling with this issue, consult with a good property management or Strata management company for guidance. Read our Part 2 article Airbnb & Short-Term Rentals: How to Reduce Risks to Multi-Family Buildings and Residents for more on creating a workable game plan to help your building proactively address this trend, including guidelines and action plans. In the meantime, if you’d like more information on how short-term rentals can impact your building, contact FirstService Residential.
Interested in learning more about how the sharing economy can affect your community? Fill out the form below to download our comprehensive white paper to learn how your association can craft a short-term rental policy and receive information about how working with a professional property management company can add value to your association.