Published on: July 27, 2018
By Patrick Brady
Boston has joined a growing list of cities and towns nationwide moving to regulate and/or restrict the short-term rental of single-family residences.
Like other initiatives, the newly enacted Boston ordinance attempts to balance the competing concerns of homeowners, who want or need the revenue generated by renting their homes; vacationers, who want an affordable alternative to hotels; the hotel industry, which objects to what it deems to be unfair competition from properties that aren’t subject to the same taxes and regulations; housing advocates, concerned that investors purchasing single-family properties for short-term rental are removing a much-needed source of housing and contributing to the pressure on home prices; and neighborhood residents, including condominium owners, who say the influx of tourists is disruptive, creates security concerns and undermines the residential character of their communities.
Boston Mayor Marty Walsh highlighted that balancing act when he signed the ordinance. The new regulations, he said, reflect “the shared goal of providing economic opportunities for residents and temporary accommodations for visitors, while preserving Boston’s housing stock.” The regulations also “provide a standardized [regulatory] framework that meets the needs of this evolving industry, provides protections for occupants, and minimizes the impact on surrounding neighbors,” Walsh noted.
The ordinance, which takes effect in January of 2019, permits the short-term rental of single-family residences owned and occupied by “natural persons.” This specifically precludes rentals by corporate entities, which would prevent an owner from creating a corporate structure – an LLC, for example – to manage otherwise permissible short-term rentals.
A short-term rental is defined as a period of less than 28 days; a primary residence is one the owner occupies for at least 9 of the 12 months preceding the rental, which means that (with some exceptions), owners will be able to rent their primary residences for a maximum of three months every year.
Three Rental Options
The ordinance establishes three categories of allowable short-term rental arrangements:
- Home-share units – the owner offers the entire residence to renters and moves out while they are there. Owners can rent these units for a maximum of 120 days in a year.
- Limited-share units – the owner rents a bedroom or other space in the residence but does not leave during the tenancy. Properties in this category are not subject to the 120-day rental cap and there is no limit on the number of days these units can be rented.
- Owner-adjacent units – the owner-occupant of a two- or three-family dwelling can offer one of the secondary units for short-term rental. In a three-family property, only one of the two secondary units could be rented on this basis, and the 120-day rental cap applies.
Owners renting their homes, or rooms in their homes, under any of these arrangements must register the property annually with the Inspectional Services Department and pay an annual fee: $25 for limited-share rentals; $200 for home-share and owner-adjacent units. Owners must also notify abutters living within 300 feet of the property that they plan to offer it for short-term rental and (addressing ‘unfair competition’ concerns of the hotel industry) they must collect and pay a “room occupancy fee,” unless a “booking agent” such as Airbnb, has agreed to do that. A proposed state law would tax the income owners derive from from short-term rentals and impose a state licensing requirement on them as well.
Cambridge: Similar but Different
A Cambridge ordinance that took effect in April of this year imposes requirements similar to those in the Boston ordinance, but differs in some key respects, among them: The Cambridge ordinance requires “hosts” renting their residences to live in the same building or a building adjacent to the one in which they are offering a short-term rental unit, which the Boston ordinance does not require. It also allows tenants who are renting a unit to offer it for short-term rental, with the permission of t
heir landlord. The Boston ordinance allows rentals by owners only.
The Cambridge ordinance establishes two rental categories:
- Operator-occupied: Owners can rent up to three individual bedrooms in their primary residence to different renters, as long as the owners occupy the property continuously, vacating it for no more than seven consecutive days. If their absence exceeds that limit, they must rent the entire unit and can rent it to only one set of renters in each rental period.
- Owner-adjacent: Owners can rent a single unit in a dwelling they own containing up to four units, one of which is the owner’s primary residence. The continuous occupancy requirement does not apply here.
Like the Boston Ordinance, the Cambridge measure requires owners to register their short-term rental units. But the Cambridge registration is renewable every five years rather than annually and requires an inspection to confirm compliance with the building code. The Boston ordinance has no inspection requirement. Where the Cambridge ordinance requires condo owners to obtain the permission of their condominium association in order to rent their units under short-term arrangements, the Boston ordinance requires only that owners verify that the rentals comply with ”applicable condominium documents, bylaws, or other governing documents.”
Condo owners in Boston and Cambridge who offer their units for short-term rental would have to comply with the ordinances in those communities, but the ordinances don’t preclude condo associations from amending their bylaws, as many have done, to restrict short-term rentals or to prohibit them entirely. My firm has drafted dozens of these amendments for association clients. Most establish minimum lease terms of six months or a year, effectively barring the short-term rentals facilitated by on-line listing services such as Airbnb.
Targeting Listing Services
The Boston ordinance targets these services by imposing reporting and enforcement requirements on them. The ordinance requires booking agents to submit monthly reports to the city detailing their listings for the reporting period, identifying the location, the nature of the rental (an entire residence or rooms in it) and the number of days the rental units were occupied. Agents must also agree to remove from their listing platform any unit that is not properly registered, is rented for more than the maximum number of days allowed, or otherwise fails to meet the eligibility requirements for short-term rentals. Booking agents that refuse to accept these enforcement obligations won’t be allowed to operate in the city.
Agents that list ineligible rental units on their site will be fined $300 per day per violation. A New York City ordinance that imposes similar reporting and data-sharing obligations on on-line booking platforms is even more punitive: Failure to report listings will cost agents $1,500 per day per violation – reduced from the $25,000 per violation originally proposed. Paris is fining listing platforms $1,200 per day for non-compliant listings.
Officials in New York and Paris have acknowledged that one of their goals is to reduce the number of units in the short-term rental pool. The experience in other cities suggests that may be the result. A registration requirement in San Francisco that took effect earlier this year has erased 5,000 listings – about half the total – from Airbnb’s platform in that city.