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Springfield Business Journal Articles
Sarah Delano Pavlik and Tom Pavlik write a monthly column on legal and business issues for the Springfield Business Journal.


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Airbnb has taken the travel industry by storm, and many governments and neighborhoods aren't happy about it. The story is similar to Uber. Technology is used to create a new paradigm and people invested in the old system have a lot to lose.

Airbnb is an online rental site for accommodations of all types. It encompasses couch surfing (yes, you can "rent" someone's couch), renting a room, bed and breakfast type places, renting an entire apartment or house and even renting luxury properties. As their website says, you can rent "an apartment for a night, a castle for a week, or a villa for a month."

Airbnb is easy to use. Simply go to the website, pick a city and the dates of your trip, and a vast array of properties will appear. You can filter your search by the type of property you want, such as an entire apartment, the number of beds and guests and a more precise location. For example, you can choose an entire apartment that will sleep four in central London. You can personalize your choice even further by specifying you want an elevator, parking, wi-fi, pets allowed, smoking allowed, a host who speaks English and more. Some people prefer to have the entire space to themselves, while others appreciate having their host there to give them local information such as good restaurants, transportation, etc. In making your selection, be sure to read the reviews of others who have stayed there. If the property is not clean or safe, or if there is something else of which you should be aware, it should show up in the reviews.

Although airbnb provides the website and other background services, it is really a conduit for a traveler to meet a host. Once you select a property, your request is submitted to your host who can accept or reject you. Travelers are rated by hosts on the website just as hosts are rated by travelers. If you treated a previous property or host poorly, it will show up. A host cannot break the law in selecting guests. These restrictions will vary by country, but in the United States that means a host cannot discriminate based on race, gender, religion, national origin, etc. (When I rented my first airbnb, I obviously had no rating. I emailed the host that we were two women in our forties who were too old to cause any trouble. I got the rental.) Hosts can require security deposits and minimum stay requirements. For example, some properties must be rented for at least a week.

Of course, as with all things in life, things can go wrong with airbnb. Hosts can cancel at the last minute leaving you no where to stay. The space could be much smaller than it appears or the neighborhood could be very loud. Worst case, the host could be a criminal intending to rob or harm you.

From a host perspective, the guests could be loud or destructive. According to mashable.com, in 2015 "airbnb had 540 reports of 'significant property damage,' which cost more than $1,000. It had roughly 35 million guests during that time period." One woman in Oakland, California "thought she had rented her home in the East Bay to an older man from Chicago. She was wrong. Rather, it was an 18-year-old who threw a 200-person party filled with cigarettes, booze and destructive guests." In order to mitigate these issues, airbnb offers a host guarantee for damages up to $1,000,000.

Despite the potential negatives, millions of people use airbnb each year. I have used it and have had great experiences. However, not everyone loves airbnb, particularly governments that lose hotel taxes. Springfield just increased its hotel tax from 6% to 7%, and the state imposes a 6% motel/hotel tax. In Chicago, the combined tax rate is 17.4%. Hotel owners also want airbnb rentals to pay hotel taxes so they are not at a disadvantage. Although airbnb originally did not impose hotel taxes, it began charging Illinois hotel taxes in 2016.

The other significant objection to airbnb is from residents who do not want their building or neighborhood turned into a hotel. Hotels can be loud. You can frequently hear people talking in the hallways and children running up and down. Hotel guests come and go frequently, tying up elevators. No one in the building knows who airbnb guests are (other than the host), creating security issues. For these reasons, many apartment and condominium complexes have banned short term rentals, generally meaning less than thirty days.

Residents of single family homes want regulation too. Last year, Chicago adopted regulations that, according to the Chicago Tribune. are "dizzyingly complex. . . In areas of the city with single-family homes, residents in individual precincts [can] gather signatures on petitions to either outlaw new listings in those types of houses altogether, or to allow them only in the 'primary residences' of the people listing the properties. If the petition gets signatures from 25 percent of registered voters in the precinct, the alderman for the area will be able to introduce a City Council ordinance enacting the language on the petition for four years." And, of course, since it is Chicago, there are multiple fees, including a 4 percent tax on each rental to fund services for homeless people and a $60 charge for each Chicago address listed on the website.

So what does this mean for Springfield? A quick search in airbnb showed 16 rentals in Springfield for a week in March. The rentals ranged from a room in a single family home for $37/night to an entire home on the west side with four bedrooms for $207/night. There are also cleaning fees and service fees.

Springfield has not adopted blanket regulations regarding short term rentals, however, in response to homeowner complaints, the city council passed an ordinance in 2015 prohibiting leases of lake lease properties for fewer than six months without written consent from the mayor. If the future, the city could adopt specific ordinances aimed at airbnb or it could treat airbnb rentals as bed and breakfasts, defined in the city code as "an operator-occupied residence providing accommodations for a charge to the public with no more than five guest rooms for rent, in operation for more than ten nights in a 12-month period." Bed and breakfast regulations set standards for food service, cleanliness and fire safety among other things. Forcing "regular homeowners" to comply with these regulations could put them out of the airbnb business.

Bottom line: if you're traveling, I recommend checking out airbnb. If you want to be a host, keep your eyes open for taxes and regulations. You can't stay under the radar too long. Just ask Uber.
Posted in: March, 2017
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