Regulation of vacation rentals figures to be a hot issue again in the upcoming session of the Florida Legislature, as it is across the country. Websites like Airbnb.com and Vrbo.com have popularized vacation rentals of condos and homes by creating a private rental marketplace that connects owners of condos and homes with people looking for accommodations. Airbnb and Vrbo do for vacation rentals what Uber has done for the vehicle-for-hire industry. These businesses are part of what is known as the sharing or peer economy.
In 2011, the Florida Legislature preempted cities and counties from prohibiting or regulating vacation rentals, unless such prohibition or regulations were adopted prior to June 1, 2011. The vacation rental preemption is set forth in §509.032(7), Florida Statutes. In 2014, the Florida League of Cities and Florida Association of Counties spearheaded efforts to change §509.032(7). SB 356 loosened the broad preemption on regulation of vacation rentals but left in place language that prevents cities or counties from prohibiting vacation rentals or regulating their frequency or duration.
During the 2015 legislative session, bills were introduced to allow cities and counties with existing ordinances prohibiting or regulating vacation rentals to amend those ordinances, and to allow any city or county to set a minimum stay requirement for vacation rentals of no fewer than seven days. Those bills failed, but have been re-filed for the 2016 legislative session. Another bill related to vacation rentals, HB 350, passed. HB 350 addresses problems that may arise in connection with the relationship between the owner of the property and a transient occupant (vacation renter), and serves to further vacation rentals through Airbnb.com and Vrbo.com.
So what is this fight really about? Cities and counties say they want to use their zoning authority to address several concerns regarding vacation rentals, including noise, commercial use of residential property, and parking. Cities and counties cite high profile incidences noise and parking problems stemming from huge parties thrown by vacation renters in residential neighborhoods. But these legitimate concerns can arise from parties regardless of whether they are thrown by a vacation renter, and the vast majority of cities and counties have ordinances on the books to deal with noise and illegal parking.
Some argue that much of the rhetoric against Airbnb and Vrbo is overblown. For example, the Florida League of Cities argues that the vacation rentals booked through them are inconsistent with zoning ordinances by introducing commercial activities into areas zoned residential. But does this argument stand up to scrutiny? The transaction between the property owner and the vacation renter is clearly commercial, but when one examines how, if at all, the vacation renter’s use of the property differs from the property owner’s, the argument does not stand up to scrutiny. The fact is that in the vast majority of cases, vacation renters will use the property just like the property owner. Parties, noise and traffic concerns are just as likely to be created by owners or long term renters of homes or condos.
Florida’s hospitality industry, which is one of the state’s largest industry segments and produces significant income to Florida in terms of tourism taxes, will support legislative efforts to restrict vacation rentals through Airbnb.com and Vrbo.com also. The American Hotel & Lodging Association has backed similar efforts across the country in the past, including in Florida, and the expressed goal of these efforts is to level the playing field between traditional lodging and sharing economy businesses. The food and beverage side of the hospitality industry appears not to have a dog in the fight.
Government agencies at all levels are struggling to address new relationships, transactions and problems that have arisen through the sharing economy. The fact that the sharing economy is here to stay is illustrated by Broward County’s recent showdown with Uber. Broward County attempted to regulate Uber like a traditional taxicab company. Uber turned off its App and vowed not to turn it back on in Broward County until its long list of demands was met. In response to tremendous public uproar, the County Commission was forced to accede to Uber’s demands. Broward County’s original regulatory position was more than reasonable, but the public demand for Uber outweighed public concerns for safety and unfair competition. The uproar echoes the fact that the sharing economy is a response to the failures and limitations of traditional modes of doing business.
While Uber may be best characterized as a response to the failures of the vehicle-for-hire industry, Airbnb and Vrbo are better characterized as examples of how the sharing economy has responded to pricing,availability and other limitations of the traditional lodging model. Over the years, the hotel industry has adapted to the myriad of consumer demands from different kinds of travelers; however thehotel industry may not be able to meet demands for certain types of accommodations such as a family reunion, for example. The ability to book accommodations in a large house with plenty of common area and a yard may provide a better venue for family members that have not seen each other in years to spend quality time together. Many hotels are simply not set up as well to deal with such events, because individual rooms put a premium on personal space, not common area.
The impact of Airbnb and Vrbo on Florida is unique, because they are essential to Florida’s number one industry – tourism. These sharing economy businesses add instant lodging inventory in Florida, which encourages more and more people to vacation here. More tourists equal a financial windfall to state and local governments, as well as to local businesses, which is needed in a state that lacks other traditional industries. At the same time, such windfall can be realized only if Airbnb and Vrbo are forced to compete fairly with hotels. That means requiring individual home and condo owners using the sharing economy to bear the cost of doing business, including the payment of applicable taxes (sales and use, business tax receipts, etc.), elimination of tax exemptions (homestead exemption) and obtaining regulatory approvals (certificates of use). The Legislature should enforce compliance through sharing economy hosts like Airbnb and Vrbo, and impose strict penalties for non-compliance on matters that they can control. For example, for every owner of a home or condo that uses Airbnb or Vrbo in a tax year, these businesses should send a notification to the Florida Department of Revenue (DOR), which DOR can use to advise county property appraisers of change in homestead exemption status. Failure to send such notification to DOR should result in substantial penalties.
With interagency coordination, use of technology and penalties for non-compliance, sharing economy businesses can become a legitimate part of Florida’s hospitality industry. Until that happens, they are not. The response of Florida’s policy makers to this legislative fight is critical to expanding Florida’s hospitality industry and status as a premiere tourist destination, but that response must protect the interests and investments of those that have built Florida’s existing hospitality industry.