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City finds almost 7,000 unregistered short-term rentals, with enforcement on the way

Tuesday, July 23, 2019 by Chad Swiatecki

A vendor hired by the city to determine the number of short-term rental properties active on platforms such as Airbnb and VRBO told the Austin Monitor there are close to 11,000 operators, with less than a quarter of them licensed to comply with city regulations and deliver Hotel Occupancy Tax money to local coffers.

The Austin Code Department is now in the process of sending violation notices to individual property owners who are operating without a license. A July 19 memo from Code, which also included data from the Law Department, estimated that STRs cost the city $2.9 million to regulate and enforce city rules, with nearly 36,000 staff hours needed for those efforts by the end of this year.

The city’s Code Department entered into a $49,500 contract in January for a pilot program with the Seattle-based company Host Compliance, which monitors short-term rental sites to determine the level of rental activity in more than 300 client cities.

The program was enacted in part as a response to a late November 2018 City Council resolution directing the Code Department to determine how much staff time was being used for issues related to STRs, though the request for proposals for the program was created before the Council resolution. Host Compliance was offered the contract on Nov. 5, 2018, more than three weeks ahead of the Council resolution.

Host Compliance quickly found STR activity in Austin significantly exceeded the previous estimate of 8,000 sites in the city. Ulrik Binzer, CEO of Host Compliance, said the company has reached the end of its contracted commitment to the city and is still monitoring identified sites in the event a longer-term contract is reached.

The memo distributed Friday by the Code Department said there are more than 10,000 active STR properties in the city, only 2,500 of which are registered. Of the nearly 7,000 properties operating without permits, the department has received data on 3,500 of them to move forward with enforcement, including violation notices.

Unregistered properties have come under scrutiny because they don’t remit Hotel Occupancy Tax revenue to the city and aren’t evaluated to make sure they are in compliance with the safety and quality-of-life sections of the city’s STR ordinance.

Council Member Kathie Tovo said she wants to see more data on enforcement costs to determine whether registration fees or fines need to be increased to cover the city’s tab.

Tovo said she expects the move to address unregistered properties will reduce the total amount of STRs in the city because of the likelihood that a significant portion of them are investor-owned properties operating commercially, which the city’s ordinance prohibits.

“My guess is, there’s a certain market for STR days and nights in the city and that taking aggressive action to shut down investor-owned properties will redirect that business toward homeowners who are making their homes available,” she said. “In either case, we’re missing out on hotel tax revenue and homeowners are being made to compete for business against investor-owned properties.”

The city and STR platforms are in an ongoing legal stalemate over unregistered hosts and unpaid hotel tax revenue that shows no sign of breaking. Austin’s STR ordinance doesn’t provide for city enforcement against those companies, which run online marketplaces for short-term rentals, only the owners of individual rentals.

Companies such as Airbnb and VRBO have approached the city with agreements to turn over future hotel tax revenue if the city forgives past taxes. The city has balked at that condition as well as the platforms’ desire to keep its STR providers’ data anonymous, which would prevent the Code Department from compelling the owners to register their rental properties with the city.

Tovo and other city leaders have rejected those agreements, leading to programs like the Host Compliance contract.

Code division manager Todd Wilcox said the program was necessary to conduct effective enforcement on sites that have previously avoided detection.

“The Austin Code Department entered into a contract with Host Compliance to add an additional tool in the detection of short-term rentals advertising without an operating license,” he said via email. “This will help us proactively combat the growing number of STRs that were previously unidentified due to ACD working almost exclusively in a reactive mode (complaints).”

Earlier this year, the city’s Tourism Commission asked City Council to revisit its position on STR enforcement and the legal and tax impasse with the platform companies. That request was centered on calculating how much annual hotel tax revenue the city was not collecting due to unregistered STRs that were taking business away from licensed hotels around the city.

That number has still not been determined.

Photo by Charleston’s TheDigitel made available through a Creative Commons license.

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