In Austin, A Boom In Short-Term Rentals Brings A Backlash

Kristen Hotopp stands in the front yard of her well-worn East Austin home, where she has lived for the past 17 years. She points across the street at an attractive, nearly new, two-story home — by far the nicest on the block.

"There are two units on this lot," Hotopp says. "There's a house in the back that's smaller and a house upfront. We're getting investors descending upon the area and buying up a lot of these properties."

Like many fast-growing regions, the state of Texas is grappling with the growing market for short-term home and condo rentals like those listed on Airbnb and HomeAway. That has especially been true in Austin.

Even though Hotopp's working-class neighborhood is close to Sixth Street and other Austin music districts, she has lived quietly with her husband and young son. But that changed two years ago when the new house across the street turned out to be a short-term-rental property. Suddenly, the good times on Sixth Street were rolling back to her block at 2 a.m.

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"You have large groups of people there screaming in the middle of the night," Hotopp says. "They're here to party. They bring people back with them to the property when the bars close downtown and it just becomes kind of an all-night thing."

The parade of loud, inebriated, door-slamming renters got old quick. Hotopp complained to city officials more than 30 times.

Over the past five years, experiences like Hotopp's have become a rallying cry for Austin's well-organized and politically powerful neighborhood associations.

"We believe they're essentially commercial hotels embedded in our neighborhoods," says David King, president of the Austin Neighborhoods Council, which represents nearly 100 neighborhood associations.

Fifty years ago Austin was a sleepy college town flowing to the seasonal rhythm of its state university. Now, it's an economic and cultural powerhouse and burgeoning tourist destination. Austin's property values and taxes are through the roof. The city's musicians and working class are being priced out.

In 2012, the City Council moved to regulate — requiring short-term-rental owners to get a permit, pay hotel taxes and limiting density to no more than 3 percent of any given neighborhood. But Mayor Pro Tem Kathie Tovo says these regulations didn't go far enough.

"You know we have a housing shortage here in Austin," Tovo says. "We are working on issues related to affordability and then to have a policy on the books that takes available housing stock and makes it unavailable for renters, for property owners is not in the best interest of Austin residents."

So last year the council voted to ban these so-called Type 2 rentals. Current licensed operators will be phased out. And that has triggered lawsuits and legislative action in response.

"We sued because the city ordinance goes too far and tramples on the constitutional rights of our clients who both own and operate short-term rentals and also serve as guests of short-term-rental properties," says Rob Henneke, director at the Texas Public Policy Foundation, an influential conservative think tank in Austin.

The lawsuit is against the city of Austin, and the state of Texas has gotten involved. Henneke says that as suburbia exploded across the nation's landscape in the 1950s, it became an American folkway for single-family-home owners to disdain renters, with a mindset of, "If they can't afford to buy, they're not our type of people."

Henneke argues now that the attempt to discriminate involves not the renter's color or class but the duration of the rental.

"Occupying a house as a short-term renter is completely consistent as a residential activity and fits within the purpose of single-family residential zoning," he says.

Joel Rasmussen, 46, and his wife bought their duplex in the Travis Heights neighborhood after they fell in love with the midcentury modern style. They also bought the ones next to it.

The hills of South Austin are full of these modest, charming homes. On the outside, there's nothing to distinguish Rasmussen's units from the neighbors', but inside is an upscale boutique.

"Vaulted ceilings, lots of natural light coming in from the outside — people really love this textured wall," Rasmussen says. "It has a very kind of Jetsons or 1960s feel. It's actually recycled bamboo panels."

The two-bedroom, one bath goes for $195 a night and guests park under the carport, not on the street. Rasmussen says he has never had a complaint and that even the neighbors sometimes put their visitors in his rentals because the homes in the area run small.

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"In fact, the neighbors that live just on the other side of that property have two children," Rasmussen says. "When baby No. 1 was born, Mom and Dad came and stayed for three weeks, and when baby No. 2 was born the grandparents came again and stayed for three weeks to welcome the grandbabies."

In Rasmussen's unit next door, Kathy Arena sits outside reading a book on the wraparound deck in Austin's warm winter sun. She's from Cedarburg, Wis., and, along with her husband, has escaped the frozen tundra to bask for a winter's month in Austin's glow for the past three years.

"It's just been so smooth and we've stayed in the same place each time," Arena says. "So, another thing I like about Austin is all ages commingle. Everyone is so nice to everybody. We've made all sorts of new friends here."

The battle over whether these types of short-term-rental properties should be allowed is being fought in court and the Texas Legislature. A bill has been filed by Republican State Sen. Kelly Hancock that would prohibit Texas cities from banning them outright. And as the rulings in state courts have been contradictory, it's likely the Texas Supreme Court will have to have the final word.

Editor's note on Feb. 15: A photo has been removed from this page to avoid implying that the homes shown were being used as short-term rentals.