Short-Term Rentals are Disrupting the Housing Market in Downtown

October 21, 2017
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By Beth Treffeisen

Tucked away in all of the neighborhoods in Boston, short-term rental units like Airbnb are spreading – unregulated by the city or state – crunching the housing market and disrupting the communities that make up the city’s neighborhoods.

In a collection of research done over the past two years by the Alliance of Downtown Civic Associations (ADCO), along with research by UMass researcher Mark Merante, it shows how short-term units in Boston are constricting the supply of rental units, keeping rents in existing rental units artificially higher, and displacing residents.

“It cuts across all the neighborhoods from Fenway to Chinatown,” said Ford Cavallari from ADCO, which represents the nine largest residents’ organizations of downtown Boston, from Fenway to Chinatown and from the North End to the South end.  “There are some questions we need to address across all of downtown.”

According to the study “Is Home Sharing Driving Up Rents?” by Merante in 2015, which includes only Airbnb listings, the highest density of units are located in downtown neighborhoods including Beacon Hill, West End, South Boston waterfront, South End, North End, Back Bay and more.

It eventually teeters out the further you get away from downtown in neighborhoods like Roxbury and Dorchester.

The research done by ADCO, which also includes other short-term rental sites such as Home Away, Flipkey, VRBO, and VacationRentals.com, showed a clear difference between whole home, where an entire home or apartment is rented out versus a room for rent, where an individual rents out a room in their home or apartment.

“It is important for folks to understand that we’ve identified early on that the whole home rentals –the entire apartment versus room rentals – are the bulk of the market,” said Cavallari.

The room market dominates outer neighborhoods, but whole home dominates downtown. In addition, downtown whole-home listings are three to four times more likely to be owned by multi-unit businesses than by individual homeowners.

Only 38 percent of Boston-wide Airbnb listings are for room rentals, representing 22 percent of citywide Airbnb revenues. In ADCO downtown neighborhoods it’s just 16 percent of listings.

In Boston 62 percent of Airbnb listings are for entire homes and apartments, representing 77 percent of Airbnb Boston revenues. In downtown neighborhoods it’s 84 percent of listings.

There is a trend towards chain ownership with multi-unit owned listings making up 80 percent of what is shown on Airbnb in many neighborhoods. Concentration of multi-unit owned listings has increased consistently, up over 25 percent in less than two years downtown wide, and over 50 percent in some neighborhoods like Chinatown.

Merante’s report showed that commercial operators are leasing out whole home/ apartments, taking away properties that would otherwise, presumably, be occupied by renters.

The analysis showed that home sharing is increasing rents by decreasing the supply of units available to potential residents. In 2015, Airbnb decreased the number of homes for rent by as much as 5.9 percent or 4.5 units.

Using census data, Merante tracked how the presence of Airbnb increased rents in the surrounding areas. In 2015, the presence of Airbnb increased the asking rents from 1.3 percent to 3.1 percent, which equates at the citywide mean monthly asking rent to increase as much as $93.

Airbnb’s growth rate since 2015 has more than quadrupled in Boston from 1,200 listings to 5,000, meaning that the monthly increase of rent has increased close to $200 as a result of Airbnb listings.

“Inflation in the market is alarming,” said Steve Fox, representing ADCO.

Most Airbnb entire-apartment listings in downtown Boston are high availability, or listed for more than 60 days per year as of Sept. 16 according to ADCO data. Over 40 percent of listings in the same time period qualified as high activity or rented for more than 60 days per year. A third of the listings were both high availability and high activity.

Many traditional corporate housing companies such as Post Hospitality Group, Stay Alfred and Swank Properties, also run hotel-like, high-availability Airbnb businesses. Of the top 20 downtown Boston corporate listers (each with 10 or more units), all but six are also on the high activity, renting out more than 60 nights per year.

“They are clearly running hotels – that’s pretty much what it is,” said Cavallari.

Behind what is driving this movement is the lack of zoning. Boston zoning requires variances for short-term rentals in most residential areas but usually corporations don’t seek them out by the city.

In 2014, William Christopher, commissioner of the Inspectional Services Department (ISD) called for the suspension of regulation in order to figure out how short-term rental services fit within the existing zoning and permitting definitions.

“The elephant in the room is zoning,” said Cavallari. “We are now dealing with the suspension of regulation and the outcome of it over three and half years that you would expect. It’s not irreputable, but it should be controlled.”

Richard Giordano, director of policy and community planning for the Fenway Community Development Corporation, said that as many as several thousand rental apartments have been taken off the Boston rental market by major landlords and subleased out to companies who book them for short stay corporate housing.

“Most are approved, permitted, constructed or rehabbed as rental projects and not corporate short stays,” said Giordano. “It’s a bait and switch.”

With an increasing market of short-term rentals, residents of the downtown neighborhoods have expressed some deep concerns including a decrease in the neighborhood feel, making abutters uncomfortable or unsafe.

There have also been concerns about sanitation. Residents have observed an uptick in rat problems because guests in short-term rentals put the trash out when they leave as opposed to when trash day is.

Other problems have been loud parties or the lack of shoveling the sidewalk during the harsh winter storms.

One major concern is that owners of buildings or apartments are often unaware that their tenants are listing their units, putting owners under hidden risks and liabilities.

“Owners need to be in the game and know what is happening to their properties,” said Cavallari.

In an effort to help reverse what is happening, State Rep. Aaron Michlewitz has filed “An Act Regulating and Insuring Short-Term Rentals” with the State Legislature aimed to establish a statewide framework to regulate and tax short-term rentals that are initiated through online portals.

The bill proposes baseline regulations to protect consumers, ensure transparency, and collect taxes while also giving local communities the flexibility to further tailor the regulations to their needs.

“We’re trying to find the right appropriate balance to allow this to exist, but in a regulatory framework that balances the needs of the communities they are affecting,” said Michlewitz. “I’m tinkering with it, and we are still working on ironing out the issues.”

Under the bill, the Department of Revenue will be charged with maintaining a registry for these types of listings, just as they currently do for traditional hotels.

Hosts will be divided into three separate categories depending on the amount of days and number of units they offer for rent on the short-term marketplace. The rate of tax assessed per rental will depend upon which category the host falls under.

The bill would earmark a portion of the tax revenue towards local affordable-housing initiatives. It also calls for some basic health and safety standards to be met along with liability insurance, provided by either the homeowner or the online platform.

Michlewitz said he is confident that the state legislature will get something done this session, which will be by end of June of next year.

Karen Chen from the Chinese Progressive Association said, “We really, really need to get this passed before neighborhoods are destroyed.”

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