Audit faults Portland's 'lax' approach to Airbnb, other short-term rentals

City's system won't guarantee safety for guests or properly evaluate the impact on the affordable housing crisis, auditors say.

City auditors issued a scathing critique Wednesday of Portland's regulatory approach to Airbnb and other short-term rental operations, faulting the city for "lax" enforcement and being clueless about how the industry is affecting Portland's housing affordability crisis.

"If the regulations were working as intended, all short-term rentals would meet permit requirements, inspections would ensure the safety and livability of the spaces rented, and all taxes would be paid," auditors wrote. "In addition, the city would analyze effects of short-term rental activity on housing affordability and availability. We found shortcomings in these areas."

The audit was released by elected City Auditor Mary Hull Caballero, and prepared by three of her staff auditors: Alexandra Fercak, Tenzin Gonta and Minh Dan Vuong.

It's well-known that Portland and other cities around the globe have had trouble getting the notoriously slippery short-term rental industry to comply with local regulations. Though Portland requires Airbnb and other operators to assure that local hosts get city inspections and permits before advertising on their listing services, none of the estimated 15 companies operating here comply, auditors found.

Short-term rental hosts have obtained 1,638 permits since Portland legalized the industry in 2014, auditors noted, but they estimated that's only about 22 percent of the market. And they found only a minuscule share of hosts who rent out three or more bedrooms — an estimated 13 out of 444 — bothered to seek the more expensive permits required for those operations.

In December 2017, 4,648 Portland properties were listed with Airbnb, the largest company operating here, according to the independent Inside Airbnb website, which auditors relied on for much of their data.

Better on collecting taxes

City officials have been largely successful collecting lodging taxes from the primary operators, such as Airbnb, HomeAway, Vacasa, and TripAdvisor affiliates.

Airbnb alone estimates it has sent $14 million in lodging taxes to the city since 2014.

However, auditors found the city is not getting lodging taxes from five of the 15 companies: Craigslist, Evolve, HomeToGo, Roomorama and Wimdu.

Several hundred properties are believed to be managed by hosts or companies with multiple sites, a violation of city rules requiring hosts to live on-site at least nine months of the year.

Airbnb says it has removed 500 properties in Portland from its website since instituting its One Host, One Home policy, which cracked down on hosts operating multiple sites.

However, auditors found it's still a common practice here.

Moving to looser regulations

City officials claim they can't crack down on those and other code violations because all the companies refuse to divulge names of their hosts or where the properties are.

As a result, the city announced a deal with HomeAway in February in which the company agreed to provide that data. In exchange, the city agreed to scrap its permitting and inspection system and allow the company to register its own hosts on-line. Hosts would merely have to attest that they are meeting city safety and other requirements.

That deal doesn't take effect until the city reaches a similar agreement with Airbnb, and those talks have dragged on for months.

Thomas Lannom, director of the city Revenue Division, said in an email that it's been complicated working out details for an "automated interface" with Airbnb. "There are no substantive disagreements about what information to share," he wrote. "We are just working out the technical details."

Airbnb first proposed registering its own hosts last year. "The city's onerous registration system is difficult to navigate and we remain committed to productive conversations with city of Portland staff about a simplified online system that provides the city the information it needs to enforce the law," wrote Airbnb's regional public affairs manager Laura Rillos in an email.

In a former written response to the audit, Mayor Ted Wheeler and Commissioner Chloe Eudaly pledged to finalize that new system, and said knowing the names of hosts and where they are based will enable the city to properly enforce its code.

"This will effectively respond to the issues brought forward by the audit," Wheeler and Eudaly wrote.

Host2Host, a newly formed Portland trade group of short-term rental hosts, also has high hopes for the new system. "We think compliance will increase and it will provide the city with the information it needs to enforce requirements of residency, business license, (short-term rental) permit, taxes and safety," the group stated in an email.

Safety problem

The audit implies the city's move toward deregulation is headed in the wrong direction.

"Safety inspections are brief, taking about 10 minutes to complete. This is because current city code includes only specific requirements, such as the presence of a smoke detector in the bedrooms, and does not require a comprehensive safety inspection of the property," auditors wrote. "The city may be exposing itself to legal risk when inspectors do not address a property's other code violations, such as an unsafe staircase or patio."

The Bureau of Development Services, which conducts the cursory inspections and issues permits, does more rigorous inspections only when there are formal complaints from neighbors. That "complaint-driven" system is similar to how the city handles other matters.

Neighbors filed 297 complaints about short-term rentals in 2017, auditors noted, finding there's been a steady increase in such complaints.

However, auditors said the city needs to adopt a more "proactive" system by doing targeted inspections that focus on high-risk properties.

"Relying on a complaint-based process means that only those with knowledge of the process will submit a complaint to the city, and increases the likelihood that compliance with regulations will remain low," auditors wrote. "As long as the city does not proactively enforce requirements and there is widespread noncompliance, it will be unable to control short-term rental activities and protect the residential nature of neighborhoods."

Affordable housing

In recognition that short-term rentals are taking rooms and full properties off the long-term rental market, the city recently imposed a new nightly fee on short-term rentals of $4 per room per night, with the proceeds going into a city fund to support affordable housing

Auditors suggest the city needs to develop actual data on the impact of short-term rentals on the housing market, and be more proactive with its findings.

Host2Host agrees that those operations where the host isn't living on the premises, and converted multiple properties into short-term rentals, is reducing the housing supply in Portland. It supports "delisting" such properties.

However, Host2Host and Airbnb argue that most of their hosts wouldn't put their rooms on the long-term rental market in any event, because they save them for guest quarters, or lack kitchens and bathrooms for long-term renters.

In another formal response to the audit, Rebecca Esau, director of the Bureau of Development Services, said the City Council will need to revise its code requirements if it wants to get tougher on regulating the industry.

Esau also said she'd need more money to inspect more properties as called-for in the audit. "Current revenue collections from registration and inspection fees are not sufficient to implement proactive, risk-based enforcement to target these hosts," Esau wrote.

To read the full audit: www.portlandoregon.gov/auditservices/article/693466

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