This afternoon the City Council voted to approve the third piece of the short-term rental (i.e. AirBnB) regulatory structure, completing the Council’s work on regulating the nascent but quickly growing market.

In the last few weeks, the Council passed the first two pieces: a tax on short-term rentals, and changes to the land-use code to explicitly make short-term rentals a legal use. The third piece passed today sets limits on the number of short-term rental units an individual can own.

In most cases, an individual is restricted to owning two units: his or her primary residence, and one additional property. However, there are some exemptions granted to those owning and operating a larger number of units as of September 30, 2017. The bill as brought before the Council this afternoon exempted an area downtown, including South Lake Union, Belltown, Uptown, and South Lake Union, from that limit. Outside of the exempted zone, an existing owner could continue to operate two units that are not his or her primary residence — and would have an opportunity to add a primary residence in the future.

The Council passed two amendments to the ordinance today (Amendments 1 and 3 in this document). The first narrowed the exemption area to the downtown “core” that makes up the main hotel and hospitality district, removing Belltown, Uptown and South Lake Union. This passed by a 5-2 vote (Juarez and Sawant were absent today; Johnson and Gonzalez voted no). Johnson argued against the change, stating that he wasn’t sure it would add units back to the long-term housing pool and it would reduce the revenues from the short-term rentals tax that would be directed to the Equitable Development Initiative.

The second amendment was intended to let the Director of Financial and Administrative Services (FAS) set licensing fees by rule, as an alternative to having the Council do so by ordinance, so as to achieve cost recovery on the expense of administration and enforcement of the ordinance — but no more. The amendment requires FAS to re-evaluate and adjust the fees annually. I also requires FAS to look at several potential structures for the fees, including a per-night fee and a tiered fee for platforms based upon the number of listings. This amendment was put forward by Council members Herbold and O’Brien as an alternative to a separate amendment (Amendment 2 in the document above) that would simply have established a $2 per-night fee for platform operators. The amendment was adopted by a 7-0 vote.

With those two changes, the ordinance pas passed into law with a 7-0 vote. Johnson, the sponsor of the legislation (who inherited it from former Council member Tim Burgess when he was appointed Mayor by his Council colleagues), recounted the long and twisted 2-year history of the legislation, and how they ended up with a compromise intended to achieve “a diverse set of objectives with a diverse set of stakeholders.”

Council member Herbold noted that this legislation is actually more generous than the limits many other cities are enacting; several restrict short-term rentals to just an owner’s primary residence.

Council member O’Brien noted the hard work that several parties, including Puget Sound Sage, did to help bring light to the racial equity issues surrounding the short-term rental industry and how the racial disparity in property ownership leads to a racial disparity in who benefits from the industry.

The legislation becomes effective January 1, 2019. FAS is required to give an implementation status report to the Council by June 1, 2018.

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