City leaders delay review of some Airbnb permits pending taxation and affordable housing concerns

photo by: Nick Krug

Lawrence City Hall, 6 E. Sixth St., is pictured on May 3, 2016.

City leaders are hitting pause on the consideration of permits for some Airbnb rental properties to ask major questions about how the properties should be regulated.

The commission recently created regulations for Airbnbs and other short-term rentals, but at its most recent meeting voted 3-2 to defer considering permits for three whole-home short-term rentals, where the property owner resides elsewhere, so it could get responses to questions posed by Commissioner Stuart Boley.

Boley submitted questions to city staff about several issues, including tax rates, affordable housing and the possibility of creating a time limit on the permits, which currently could remain in place permanently. Boley later told the Journal-World that he thinks the commission needs more information about the impact of whole-home Airbnb rentals.

“Before we institutionalize this and make it permanent, I think we need to have a much better understanding of the effects on the community itself,” Boley said. “And I’m really concerned about the impact on affordable housing.”

However, applicants who had their permits deferred think the action was unfair, as do some of Boley’s fellow commissioners.

Big questions

There are approximately 250 Lawrence-area properties currently listed on Airbnb, one of the more popular online platforms for short-term rentals. So far, the commission has approved permits for three whole-home short-term rentals, and 21 applications are in the process, according to a memo to the commission. The city has licensed 49 rentals where the owner lives in the property, and another 48 are pending.

Boley said the whole-home Airbnbs, as opposed to those where the live-in owner just rents out a room or a portion of the home, take away from the city’s stock of housing. He said that’s important to consider as the city prepares to allocate around $1 million annually to address the city’s affordable housing shortage.

“Just as we’re beginning to receive the tax increment that we’re going to be using to work on our affordable housing issues, are we creating a problem with the other side where we are taking residential properties out of use and making them transient accommodations?” Boley said. “And I don’t know, but I think we need to consider this before we do it on a widespread level.”

Regarding taxation, Boley said he thinks that when the entirety of a home is being rented, it would qualify as a commercial use. Boley, who is a retired accountant, likened the situation to the ability to use his house as a home office but not being allowed to convert the entire house into an office.

Boley is asking whether property owners of whole-house Airbnbs, some of which are LLCs that own multiple properties, should pay the commercial tax rate or remit the difference to the city annually as a requirement of the permit.

Such a change could make a significant difference. For residential properties, taxes are levied based on 11.5 percent of a property’s appraised value, but for commercial and industrial properties, they’re levied at 25 percent of the value.

Lawrence resident Barbara Jones, who has applied for a permit for a house at 1500 Rhode Island St., was one of those whose applications were deferred. Jones said she bought the two-bedroom house on Rhode Island to make it a short-term rental. She said she doesn’t think the deferral was fair because she had been following the city’s application process and the Planning Commission recently voted unanimously to recommend that the permit be approved.

“We were doing everything exactly the way that it was supposed to be done,” Jones said. “And these are all the rules that they decided in the previous meetings, so I was just expecting to get my (permit).”

The house on Rhode Island rents for $109 per night, according to its Airbnb listing. Jones said she is retired and is hosting the Airbnb because it’s fun and she loves Lawrence. Jones said she has another rental property that she leases long-term, and she doesn’t think that the short-term rental should be taxed any differently.

Commissioner Matthew Herbert, who voted against the deferral along with Vice Mayor Jennifer Ananda, said that he thinks increasing the taxes paid by whole-home Airbnb rentals would keep those properties from being economically viable. Herbert, who owns a property management company, also said he didn’t see the difference between an Airbnb and a long-term rental in that regard.

“They are both run for the same purpose: to put people into housing for a profit,” Herbert said. “And whether you stay at my house for the weekend or a year-long lease, you’re ultimately paying me money to stay in a property. It’s a business for me, and I don’t see why one would be commercial and the other not.”

Process

In September, the commission voted to begin regulating Airbnb properties and other short-term rentals, including the process that requires commission approval before a property owner who resides elsewhere can operate such a business. The special-use permit application triggers a notification of neighbors and must be reviewed by the Planning Commission and approved by the City Commission. For property owners who live at the property, the short-term rental use is a right but requires a license.

City staff has been advising applicants that enforcement was being stayed for those short-term rental units in existence as long as efforts were being made to bring the units into compliance.

Herbert said he thinks the deferral of the permits in order to answer the questions posed by Boley seems like a stall tactic. He said he didn’t think the commission should be making changes to the permitting process without letting the current regulations play out.

“We went through a very lengthy discussion about this and frankly a pretty good compromise,” Herbert said. “I felt like short-term rentals was one of those areas where we have commissioners on both sides of the issue, and we were able to find some middle ground.”

Area resident Rayna Burkhart, who has applied for a permit for a house at 1321 New Hampshire St., was another of those to have their applications deferred. Burkhart said if the commission decides to make changes to the short-term rental regulations, the amendment process can be followed but it shouldn’t affect the applications currently being processed.

“I think there was a time and season for these types of questions and that season was prior to them creating the ordinance in the first place and deciding how they were going to handle these things,” Burkhart said. “And so now that they’ve done that, I think the time for bringing up these issues really has passed.”

Burkhart said that she eventually plans on moving into the house on New Hampshire Street but is now living with her 82-year-old mother at a house outside of town and does not want to move at this time. She said she also has rental properties that she leases long-term and that she doesn’t think long-term tenants would take care of the house, which she said is important to her because of the house’s plaster walls and original hardwood floors. She noted that people who rent Airbnb properties are publicly rated by the owners of the properties they stay at, and she said Airbnb guests tend to take better care of properties because of that.

The commission denied its first whole-home short-term rental permit earlier this month after receiving a protest petition from neighbors related to a house on Holiday Drive. When asked why he was bringing up his concerns at this point in the process, Boley said the questions arose for him after the process began as neighbors who had experienced living next to Airbnb properties brought their concerns to the commission. Boley said he’d learned from those comments and that he thinks the commission needs to address the questions before more permanent permits are issued.

“I think it would have been better if we’d had those conversations as we developed the ordinance, but we did not have those conversations then,” Boley said.

Currently, Planning Manager Jeff Crick said that once the commission approves a special-use permit for a whole-home short-term rental, the permit runs with the land and can continue as a use unless the owner lets the permit lapse for more than a year. In addition to the taxing and affordable housing considerations, Boley said he thinks a time limit should be placed on the permit so that it must be re-evaluated every few years.

Crick said that the three short-term rental special use permits removed from Tuesday’s consent agenda will go back to the Planning Commission for reconsideration in April along with information related to Boley’s request.

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