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Game Changer? Next Week, Portland Begins Issuing Permits for Home Rentals

August 27, 2014 at 10:53 AM | by | ()

Legislation that was passed at the end of July will officially go into effect this weekend in Portland, Oregon, legalizing short-term home rentals. As AirBnb has come under attack from the hotel industry and city governments across the country, Portland has decided to legally address how residents can use their house as a source of income.

Emphasis on the world "house," as the law includes individual houses, duplexes, and accessory dwelling units but excludes condos and apartments, even if the unit is owned. The reason for this, according to Oregon Live, is that "under the city's interpretation of the state building code, [apartment and condo buildings] would have to meet similar safety requirements as commercial hotels. Few apartment and condo buildings would live up to that standard." The law also does not include the renting out of the entire home - only a portion of it, such as a bedroom or two.

The law requires that the renter file for a permit from the city, which will cost $180 per year. The owners of the property must live on-site for at least nine months a year, limit the length of stays to less than 30 days, and agree to 1) inform their neighbors of their rental contracts and 2) allow for safety inspections by the city. The owners of the home get to keep the profits of their rentals, minus an 11.5% occupancy tax that is collected and paid to the city by the rental agency (AirBnb, for example).

The city of Portland has said that it will readdress the issue of apartment and condo rentals later this year, the underlying hunch being that it hopes to find a way to make it legal. One of the city's housing executives suggested that the collected lodging taxes could be put back into the city and urban renewal projects.

While the hotel industry has already shown it is very concerned about this growing trend in travel, we've said from the very beginning we think competition is a good thing. The pros-and-cons of home rentals versus hotel rooms are out there and obvious, but perhaps this gives hotels something else to think about: How can they better contribute to the benefit of the citizens of the city in which they reside?

Think about it. When a traveler rents out a room in someone's home, they hand over money to the person who owns the home. That's grocery money. When a traveler stays at a hotel, the money, minus a room tax, doesn't go to the betterment of the city or its citizens. In the case of home rentals, both the rate and the occupancy tax are benefiting citizens. That's an aspect that has, without question, been a driving force behind the growing popularity of private rooms for rent.

Permits will be issued by Portland starting next week, and we're guessing many other cities are waiting with great anticipation to see how it all plays out. If it goes smoothly, it's possible we could see other cities, such as San Francisco, pass similar legislation.

There will always be a market for hotels, but oh how this completely changes the game.

[Screengrab: HotelChatter; Photo: Oregon Live]

Archived Comments:

Oranges and Apples

I doubt anyone in the hotel industry is concerned about losing business to short-term room rentals. The market for people willing to share part of a house with a complete stranger is (probably) quite small. If this law covered full house/apartment/condo rentals, that might be a game-changer.

Also, I think that the statement that money spent in hotels "doesn't go to the betterment of the city or its citizens" is quite wrong. The vast majority of hotels are franchises that are owned by small local or region companies...not massive publically-owned corporations.

From personal experience, I know that hotels get tons of requests for free rooms from local non-profit organizations. Certainly, not all requests get fulfilled. But, many hotels do give free rooms that local non-profits use as raffle prizes or other fund-raisers. In my view, that's a far better way to improve the local community than providing "grocery money" that might actually end up leaving the city when that home-owner buys something on Amazon.

Re: Oranges and Apples

We can definitely debate the grocery money and hotels benefiting the city parts, but I think the past two years have proven without a doubt that the hotel industry is indeed very concerned and that there are many, many, many people interested in using AirBnb.