AgentInvesting

Will other states follow Arizona in passing Airbnb laws?

How short-term rental regulations are impacting various businesses
  • Arizona recently passed a bill that outlaws cities from prohibiting short-term rentals.
  • There is a question if Airbnb will become “totally legal” in the U.S.
  • If short-term rentals become illegal, the effect would go beyond inhibiting travelers and hosts.

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

Arizona recently passed a bill that outlaws cities and municipalities from prohibiting short-term rentals, such as Airbnb rentals. The Airbnb platform allows anyone to rent out a room or an entire home to travelers as a way to make additional income.

Some see the potential this bill offers to the tourism industry, while others aren’t happy about having to deal with different neighbors regularly.

This brings up the question of whether other states will follow Arizona’s lead and if Airbnb become “totally legal” in the U.S.

The main underlying legal issues with Airbnb is the government’s lack of tax collection from short-term rental businesses and the threat to hotels.

Neighbors, however, are more concerned with being disrupted by partying travelers and the disregard for zoning laws. Efforts have been made by Airbnb to resolve these issues by collecting a tax and verifying guests before accepting reservations.

Why demand for luxury hotel residences is growing
White-glove service, a trusted brand, top-notch amenities -- a look inside a new LA hotel residence project READ MORE

How other areas are dealing with Airbnb

Arizona is not the only state that has attempted regulating Airbnb. In February 2016, Chicago adopted a 4.5 percent hotel tax that is included in the price of a Chicago Airbnb listing.

Although this addition was made in an attempt to be fair to hotels, it clarified matters for Airbnb hosts and helped Chicago continue to have a high Airbnb occupancy rate compared to other cities.

In 2014, Airbnb’s hometown San Francisco, also made short-term rentals legal, with certain restrictions such as limiting spaces to be rented up to 90 days per year if the owner is not present.

In 2015, another amendment was proposed to reduce the limit to 75 days but was not passed. In June 2016, a new law was endorsed that holds platforms accountable for not verifying if hosts are registered with the city, which is a requirement for short-term rentals.

The battle between San Francisco and Airbnb has dragged on, but Airbnb has persisted in compromising with these proposals and will likely continue to do so.

Cities generally have regulations about licensing and paying taxes, but it’s a question of how significant strictly enforced the rules are. Cities without significant restrictions include Savannah, Louisville and San Diego. Airbnb has listed on regulations and rules for certain cities on its website to encourage responsible hosting.

What happens with Airbnb will have a far-reaching impact

The issue of legalizing Airbnb is an international topic.

The European Union (EU) recently expressed its support for technology services such as Airbnb and Uber. In its non-legally binding guidelines, it explains restrictions made on such services should commensurate with public interest such as safety or social policy, and banning such services should be the last resort. Perhaps this will encourage the U.S. to show similar support.

If short-term rentals were to become illegal in the U.S., the effect would go beyond inhibiting travelers and hosts — it would also affect many businesses. Pricing companies and consulting websites are based on the existence of short-term rentals.

Property management and cleaning companies have gained Airbnb rentals as a major source of revenue. Other companies (including my Mashvisor) have helped investors find investment properties to list exclusively on Airbnb as the lucrativeness of Airbnb properties has become more apparent.

Being an Airbnb host and in accordance with the law can be very tricky, with confusing and varying laws. Arizona’s bill has at least relieved hosts who now know they can run their rental business without getting in trouble, even if it requires paying taxes or applying for a license.

It doesn’t look like Airbnb is going anywhere, so perhaps more states will pass similar bills to rid of peoples’ fears of being penalized and encourage them to follow regulations.

Peter Abualzolof is the co-founder and CEO of Mashvisor. Follow Mashvisor on Twitter or LinkedIn.

Email Peter Abualzolof.