Regulation of Short-Term and Transient Rentals in Residential Districts
The emergence of short-term rentals and home sharing through online platforms such as Airbnb, Vacation Rental By Owner (“VRBO”), HomeAway, and Luxury Stay, among others, have presented municipalities with new challenges in their regulation of uses in traditional residential neighborhoods. These online home-sharing websites provide travelers with the option of staying in facilities having all the comforts of home living for short periods of time but often at a much lower cost than in a commercial hotel or motel. Their popularity is particularly prevalent in locations that are popular tourist and vacation destinations such as the Pocono Mountains, the Gettysburg Battlefield, the Amish communities surrounding Lancaster, and the cities of Philadelphia, Pittsburgh, and Harrisburg.
The regulation of short-term rentals and other forms of transient housing occur primarily through local municipal zoning regulations. Until recently, a number of courts had held that short-term rentals were not prohibited in residential districts unless they were expressly excluded as permissible uses in the municipal ordinances. However, in April 2019, the Pennsylvania Supreme Court issued its seminal decision in the case of Slice of Life, LLC v. Hamilton Township Zoning Hearing Board, which held that a zoning ordinance permitting single family detached dwellings to be used by “families,” defined as requiring a “single housekeeping unit”, clearly and unambiguously excluded purely transient uses of property, including short-term rental uses. In the wake of that decision, many municipalities promptly passed short-term rental ordinances. Examples include the Borough of Gettysburg, (Adams County), Monroe County, Chestnuthill Township (Monroe County) (permit required), Hamilton Township (Monroe County), among others.
Typically, the ordinances define a “short-term rental” (“STR”) as “any dwelling unit owned or managed by a person which is rented or leased for a period of less than 30 days.” The ordinances frequently require licensing and inspection by the municipal code official and require that the STR properties be either owner-occupied or have a local person in charge. The ordinances prohibit marketing of STR properties in excess of the stated occupancy limits and allow for limits on the number of STR properties within a given geographical area and within a given density. The City of Lancaster adopted regulations for “visitor house rentals” limiting such rentals to districts in which traditional “bed and breakfast” uses are permitted. Many ordinances require registration and inspection, the designation of a property manager, limit stays to a maximum of 30 consecutive days, and contain occupancy limits. These types of regulations bear similarities to local regulation of “student homes” in college towns, which have been upheld by the Pennsylvania courts.
Vacation travelers and those traveling to attend special events such as weddings, family reunions, graduations and the like have increasingly looked to the internet and the various online home-sharing websites to secure accommodations for such events. The emergence of the “sharing economy” has greatly impacted on traditional zoning concepts, such as low density residential zoning. The “sharing economy” is premised upon individuals renting or borrowing, as opposed to purchasing and owning. One of the key attributes is the ability to monetize assets, including houses and vehicles, which otherwise would not be utilized to their full potential.
The internet offers property owners the ability to effectively offer goods and services without limitation. These services have high visibility and flexibility. Municipalities have struggled to control and regulate such home-sharing services. A common complaint about short-term rental uses is that they detract from the sense of “community” often prevalent in residential districts. Users typically have no permanent ties to the community and thus do not participate in or contribute to community-based organizations or events such as community fairs, picnics, youth sporting events and similar recreational activities. Because these individuals have no “ties” to the community, they are viewed as having less interest in maintaining the aesthetic appearance of the properties, the character of the neighborhoods and the peace and quiet of the community. In popular vacation destinations, the prevalence of large parties, with the attendant noise, trash, and even potential for criminal activity becomes a much greater concern.
The use of the online marketplace for short-term rental accommodations does not come without risk. The scope of service of such online rental platforms, as described in their Terms of Service, make clear that the companies provide few guarantees or protections to visitors and hosts. In many cases, the maxim, “Buyer Beware” is particularly apt. The users must rely upon the accuracy of photographs of the premises and the honesty and candor of the owners and the reviewers. Typically, the online rental platform has no control over and does not guarantee: (1) the existence, quality, safety, suitability, or legality of any listings or host services, (2) the truth or accuracy of any listing, descriptions, ratings, reviews, or other member content, or (3) the conduct or performance of any member or third party. The user thus loses the assurance of quality that frequently accompanies a particular brand image such as that which is embodied in the major hotel chains.
Local governments have few guarantees that they will receive income from occupancy taxes which are typically collected and remitted as a percentage of the rental or listing fees set by hosts, a specified amount per day, or other variations thereof. Thus, short-term rentals do not provide a significant source of revenue to the local municipalities.
As the sharing economy grows, local governments are challenged in their efforts to provide user safety and combating diminishing tax revenue. Local municipalities would be well-advised to adopt a short-term rental ordinance, and to require registration and inspection of such properties. The registration requirements enable the local governments to identify and track the use of the units and any attendant risks to the health, welfare and safety of residents in the community. The attorneys in Nauman Smith’s municipal law practice group are prepared to assist municipal officials and zoning officers with tailoring ordinances to fit each municipality’s specific circumstances and needs.