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As DC’s Airbnb Economy Thrives, Legal Issues Remain

by Lark Turner

As DC's Airbnb Economy Thrives, Legal Issues Remain: Figure 1
A DC rental that fetches $150 a night when cherry blossoms are in bloom.

If you host renters using Airbnb, the temporary room/apartment-renting website phenomenon, you’re not alone. The site offered 3,300 listings to DC area travelers at the end of 2013, 1,240 more rentals than the year before.

Airbnb’s rising popularity means entrepreneurial residents can make a killing using the site to host visitors. But as the service and others like it grow, budget-minded travelers aren’t the only ones paying attention; regulatory agencies, condo associations and others are taking notice. And DC’s Department of Consumer and Regulatory Affairs recently told UrbanTurf that while regulations are in place, they haven’t really caught up to Airbnb, which is just one of many such services helping define the so-called sharing economy.

That’s not news to those who have followed the service’s international growth, but most of the legality issues in the U.S. have been focused on New York City.

Airbnb recently provided UrbanTurf with numbers that demonstrate the site’s notable growth in the DC area: in 2013, listings increased 60 percent and the number of guests rose 130 percent. The spokeswoman wouldn’t give raw numbers regarding the actual number of guests who booked stays last year, or provide context to compare those numbers to other cities. Airbnb is careful about press given the controversy surrounding the service’s legality, among other issues.

But it’s safe to say the past few years have been very good to the San Francisco-based service, which started in 2008 and moved into these fully renovated 72,000 square foot offices in 2013. In the company’s most recent annual report, it notes that it began 2012 with 120,000 listings. At the end of that year, the number jumped to 300,000. Now the site claims it connects people to more than 500,000 rooms and apartments to rent all over the world.

As DC's Airbnb Economy Thrives, Legal Issues Remain: Figure 2
A Shaw carriage house that was one of DC’s first Airbnb listings.

For hosts and budget travelers, Airbnb is a revelation. Instead of staying in a hotel and paying a premium to be in a great location (or else staying far from the city), the site offers attractive rentals in nice parts of town for a better rate. Plus, users often get access to a host who’s knowledgable about the area in a way many hotels aren’t.

And the arrangement works out even better for hosts. Take Charlotte Romero, who spent $12,000 at the beginning of 2013 to rent out her Capitol Hill home’s English basement on Airbnb. The revamped lower level brings in much more income than if Romero rented it on a long-term basis, and and she now has the flexibility to black out dates when friends or relatives come to stay. In her first year, she hosted almost 60 different travelers for stays lasting an average of 3-4 days. Based on how much her unit typically rents for — between $99 and $135 a night, and $150 during cherry blossom season — UrbanTurf estimates Romero made a good return on her investment, bringing in anywhere from $20,000 to $50,000 last year. That figure is based on pure revenue and doesn’t account for maintenance, cleaning, overhead costs or the 3 percent service fee Airbnb takes in on a rental. Still, it’s the prospect of that significant chunk of money that prompted the influx of Airbnb rentals in the DC area over the last year.

By all accounts (including a perfect five-star review record), Romero takes great care of her guests. She’s also confident she operates the short-term rental legally; for the basement unit, she obtained both a certificate of occupancy and a business license. She’s the kind of host Airbnb likes to market to renters, but she’s also unusually savvy to the legal requirements of operating a miniature bed-and-breakfast in her basement. Given the relative newness of Airbnb, it is tough to know who is operating legally and who isn’t.

DCRA provided UrbanTurf with the typical requirements Airbnb hosts need to fulfill to be in the city’s good graces, but admitted that the regulations currently governing short-term rentals are outdated.

As DC's Airbnb Economy Thrives, Legal Issues Remain: Figure 3
Chart is not comprehensive.

“The process was developed before the advent of services like Airbnb, so some updating to account for emerging business models may be warranted,” said Matt Orlins, a DCRA spokesman, in a statement. “An individual who wishes to rent out a space using a service like Airbnb would need to comply with applicable zoning and licensing requirements.”

The chart is not a full accounting of what hosts on the site might need to make sure their dwelling is licensed and legal. For example, the office’s position “does not contemplate limitations from private agreements such as leases or condo rules. Those could, of course, impose additional obligations and/or restrictions upon individuals who would like to participate.” UrbanTurf called a few condo associations in Dupont and Logan Circle, where many clearly illicit listings are located. Of those we spoke to, not all knew what Airbnb was, but once it was described, everybody knew it was against the regulations.

That’s not stopping hosts: any search on the site will bring up dozens and dozens of city rentals clearly marked as “condos”. At one, a reviewer gushed about the fancy exercise facility, but several others pointed out the “con” of being told to lie to the doorman about who they were and why they were there. Condos rarely allow for short-term rentals.

UrbanTurf talked to a person who found that out the hard way while renting out a place in Eckington last year using Airbnb. After a year of operating (without permits, needless to say) — and raking in $4,000 a month doing it — the building’s condo association shut down the rental. The person complied under threat of legal action or eviction.

“There are certain rules in the condo bylaws in terms of minimum months on the lease,” said the person, who asked to remain anonymous because the place wasn’t properly permitted. “It rubbed people the wrong way in the building.”

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See other articles related to: short-term rental, editors choice, airbnb illegal, airbnb dc, airbnb

This article originally published at http://dc.urbanturf.com/articles/blog/the_growing_airbnb_economy_and_what_it_might_mean_for_dc/8069

11 Comments

  1. Rell said at 3:42 pm on Friday January 31, 2014:
    Thanks for such a comprehensive article. I rent out my place via Airbnb and have gone to great lengths with the city to make sure that I am operating it legally. Given the popularity of the site and service, I am kind of shocked that others aren’t doing the same thing.
  1. Bee said at 6:51 pm on Friday January 31, 2014:
    Does anyone here know just how difficult it is to get a HOP and a business license for a B&B? Is this something a typical homeowner would struggle to get?
  1. Operating legally said at 11:25 pm on Saturday February 1, 2014:
    your property has to be zoned for this commerical use if you are in business you can figure the other things stuff out
  1. James said at 12:13 pm on Sunday February 2, 2014:
    If your Airbnb tenant decides to stay and not to pay rent, eviction proceedings will take over a year to complete.
  1. Judith said at 4:56 pm on Sunday February 2, 2014:
    Some owners who live in coops in the city have tried to make money during inaugurals, holidays, but it is against rules.
  1. Bigger Picture said at 3:49 pm on Monday February 3, 2014:
    I suspect this grey market for rooms is a net positive for the city's economy. These sharing sites allow people to stay in the District that would otherwise stay in a cheaper motel outside the city, or not come here at all in some cases. Clamping down on the practice could very well do more financial harm than good. Safety doesn't appear to be an issue - these type sharing sites rely on guest reviews to weed out bad actors. Thoughts?
  1. AirBnB said at 12:57 pm on Tuesday February 4, 2014:
    What about renting out for longer than 29 days?
  1. OTR will want to know.... said at 2:46 pm on Tuesday February 4, 2014:
    Does anyone wonder whether Charlotte Romero declared the estimated $20,000 to $50,000 in rental income on her DC and Federal taxes? Hope she did for when this article comes to OTR's attention, they'll come calling and will be asking her a few questions.
  1. Operating legally said at 3:19 pm on Wednesday February 5, 2014:
    Urban Turf's main focus on its obsession with Airbnb seems to be the gross income people can earn using this short hotel rental business model Urban turf & Airbnb users gloss over , are unaware of or ignore the following: Homeowner's insurance policies do not cover business activities in your home unless you declare it and your insurance company issues an addendum to your policy landlord & tenants laws may apply All zoning laws apply some zoning laws prohibit this use for homes in D.C Serving people is labor intensive it does not run Itself It is inconsiderate to your neighbors to use your property for this purpose if you are illegally running a bread and breakfast. An owner running an illegal bed and breakfast and not declaring the income is violating City & Federal. Tax laws and is committing tax fraud If you don't have liability insurance what will happen if a temporary tenant gets hurt and sues the owner if you are operating it in your own name the liability can wipe all your individual assets
  1. Lark Turner said at 3:28 pm on Wednesday February 5, 2014:
    Hi 'OTR will want to know...': Just wanted to let you know that Airbnb provides its users with a 1099 if they make over a certain amount on the site (an IRS-required ceiling). Romero specifically discussed this and told us she reports her taxes. Lark
  1. Compromise said at 6:09 pm on Wednesday February 5, 2014:
    I think there is an easy solution here for the city govt. They should set a threshold of rental nights per year, something like 30-60. If your airbnb nights are below the threshold, you need to carry proper insurance but don't need to worry about zoning, B&B license, landlord tenant law etc (DC should allow easy eviction for this, in contrast to the usual LL-tenant law here). But if you rent over the threshold then you need to apply for all the permits and be zoned. This allows people to rent their place for a weekend here and there, which is sensible, but prevents people from doing airbnb the whole year, which is unfair when ordinary B&B operators have to jump through all the hoops. It's also more fair to neighbors because someone renting their place a few weekends a year is really no big deal, but a constant hotel operation is not what people signed up for in residential neighborhoods and condo buildings.

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