Residents Call for a Ban on Investor Units:City Council Begins Work on Regulating Short-Term Rentals

Across the city, corporations are buying up residential units, converting them to short-term rentals through Airbnb and other similar online platforms to turn a quick profit and essentially making a residential unit into a de facto hotel room. As a result, these units have been taken off the market – squeezing the already, very tight housing market in Boston.

Categorized as investor units in Mayor Martin Walsh’s ordinance to regulate short-term rentals, these types of rentals have many residents worried, saying that investor units where the owner is not on-site creates many problems in the neighborhoods from safety to quality-of-life issues such as loud parties and trash problems.

Currently, these units are deemed illegal by the city. The majority of downtown is zoned in a way that executive suites (units that are not owner occupied and rented out for short-term stay) are not allowed. In cases where they are, many of the units have not gone through the city process to get the permits needed to run.

Since 2014, the Inspectional Services Department (ISD) has allowed this to continue with little to no enforcement to stop it.

The ordinance in its current form would effectively make these illegal units legal – worrying residents that it would fuel the fire further and make the problem worse.

During the testimony given at the Boston City Council hearing on Tuesday, Feb. 13, regarding the Mayor’s ordinance to regulate short-term rentals in the city, residents shared a clear message: Those wishing to make extra money by renting out a spare bedroom or upstairs apartment in a three-decker should be allowed to do so; those with no on-site owner should be stopped.

“We want long-term residents in Boston to stay in their homes, and Airbnb provides an extra income source to help people make those mortgage payments,” said Councilor Michelle Wu. “Neighborhoods, developers or bankers or folks in real estate brokerages have found many levels of loop holes to take advantage of Airbnb and profit commercially off long-term residents. What I would like to eradicate with the ordinance is the practice of people being able to take out multiple leases and only living in one place or purchasing entire buildings or entire floors within buildings with the intention to turn it into a de facto hotel.”

“It is happening across the city,” continued Wu. “Why should we at all have an investor classification allowed?”

Filed on Jan. 24, the ordinance establishes guidelines and regulations to better track and regulates short-term rentals. The Mayor’s resolution defines short-term rentals as anything rented through an online housing platform provider for less than 30 days.

The ordinance takes a three-tiered approach to classifying short-term rental units including: limited share unit such as a private bedroom or shared space within an owners primary residence; home-share unit or whole unit available for a short-term rental at the primary residence of the operator where the operator resides at least nine months out of a 12-month period; an investor unit or an entire unit available for a short-term rental in a whole dwelling that is non-owner and on-tenant occupied.

There is a 90-day limitation on the amount of nights per year owners can rent out as a short-term rental.

Councilor Kim Janey said that the 90-day limitation still allows owners to rent out to students for nine months and then do short-term rental all summer long – effectively keeping the unit off the market for residential use.

Councilor Wu said the 90-day limitation still allows the majority of weekends to be rented out, enough so that it might still be commercially viable to keep the unit off the market for the entire year.

Each class will be taxed a nominal fee each year that will go towards the enforcement and regulation by the Inspectional Services Department (ISD).

To assist with the enforcement of regulations, booking platforms will be required to share monthly data and information relative to the short-term listings that detail the location and occupancy numbers to the city.

Councilors questioned if the ISD has enough resources to enforce both the safety and the registration of the short-term rentals with the city.

But ISD Commissioner Buddy Christopher said that since most of the data collection will be online, he doesn’t believe they will need more resources to be able to enforce it. Many councilors noted that ISD is already overworked, and this would just add more to their plate.

Each unit will need to get an occupancy permit, and before it can be issued the residential unit will have to be up to code.

Councilor Ed Flynn also brought up concerns public safety, fire-code and life-safety issues, saying the once in five years inspection probably isn’t enough when hundreds of people will be going in and out of these apartments each year.

The ISD and DND looked at the affects of Airbnb on the housing market between January and October 2017. Key findings showed that 62 percent of the short-term rentals are entire homes or apartments. Overall there are 169,000 rental units in Boston. Of the 3,300 units being rented out as short-term rentals, 2,000 of those units were deemed high impact (listing for 235 days per year and effectively taking that unit off the market). If the high-impact units were put back in the housing stock the vacancy rate would go from 3.1 percent to 4 percent.

“The population in Boston is growing and in response all of the city departments are trying to increase the housing supply,” said Sheila Dillon, director of the Department of Neighborhood Development (DND). “The housing shortage is causing rents to rise. We can’t win the war if Boston housing is taking off the market and used for short-term rent.”

“The larger and larger the industry becomes the more impactful it will be,” she said.

The Alliance of Downtown Civic Organizations (ADCO), which represents the nine largest residents’ organizations of downtown Boston, from Fenway to Chinatown and from the North End to the South End came out in support of regulating short-term rentals, but would like to eliminate the investor-unit class.

“The Mayor’s proposed ordinance has many laudable attributes, and is most certainly a step in the right direction,” said Ford Cavallari, chairman of ADCO. “Many good, hard-working Boston residents are using AirBnB to help make the rent or pay the mortgage. This ordinance, however, overlooks the serious difference between residential owners listing their units short-term, and professional investors and speculators looking to exploit our market. Boston residents should be treated differently than investors, but they are treated exactly the same in the proposed ordinance. This needs to change.”

ADCO pointed to a number of reports that shows a large number of investor units lead to long-term resident displacement and rent rises. In their own research, ADCO looked at the affects of what Airbnb short-term rentals are doing to the housing market, and this doesn’t include other major companies, such as HomeAway and FlipKey.

Overall in Boston, 62 percent of Airbnb listings are for entire homes and apartments. Downtown that number rises to 85 percent.

Investors already dominate Boston’s short-term rental landscape. In ADCO neighborhoods, 70 percent of Airbnb units are investor-controlled, which represents investor concentration three to four times that of other major cities including Washington D.C., New York City, San Francisco and London.

Boston-wide, multi-unit Airbnb listings make up only 7 percent of owners and listers but their units make up more than 60 percent of Boston’s whole apartment Airbnb inventory.

Cities like Portland, San Francisco, Los Angeles, Nashville and Berlin – all with lower investor ownership than Boston, have already banned investor units entirely.

“If we want to save our housing stock, the formula is simple,” said Cavallari. “Fewer investor-controlled, Airbnb-type, units, means more affordable, available long-term housing.”

John Bookston of the Fenway Civic Association and a long time resident of the Fenway said this has been concern for a longtime.

“These species have a will of taking over housing in Boston and have become a concern just like any invasive species would,” said Bookston. “Yes, a few of these things might be pretty among the other plants in the area, but that’s not what happened. If they’re allowed, they will invade and choke out our normal housing. I ask that you prevent any investor from short-term rental because that takes away a unit from housing in Boston.”

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