GNH Lumber February 2024

Short term rentals: To regulate or not? And, if so, how?



Part 2

GHENT – As Chris Brown, the Housing Development coordinator for the county, puts it: regulating short term rentals is probably necessary to address their harmful effects, discussed in Part 1 of this article (December 14). But, doing so will require carefully “balancing the costs and benefits of short-term rental hosts, our local workforce and visitors who patronize our businesses.”

In other words, regulation should be crafted to address the undesirable effects of short term rentals in driving up long term rental and home buying prices, the diminution of available rental and housing stock, noise and parking issues but it should do so without harming tourism or those homeowners who need the added revenue to retain their homes.

That’s a tricky proposition.

A handful of experts have written on the subject. The first, and most important take-away: before regulating, the town (or county or state) must clearly identify the goals it wishes to accomplish, as blanket prohibitions and over-broad regulation may do more harm than good. The second take-away: any regulation must be enforceable. The terms of the regulation must be clear and the municipality must have the resources to enforce them.

A number of approaches have been floated. A Harvard Business Review study suggests, for example, that cities like Hudson might encourage the development of STR properties in distressed neighborhoods or that communities might set aside a portion of the tax revenue raised by virtue of the higher property values generated by STRs to reinvest in affordable housing. To address gentrification concerns, the total amount of space, or number of units, available for short term rentals might be limited, thereby encouraging the development of long term rentals alongside STRs.

A Maine Law Review article surveyed regulation nationwide as of 2019. In Arizona, state law prohibits municipalities from banning STRs but allows them to regulate STRs for reasons of health and safety. The state collects occupancy taxes and remits them to municipalities. By virtue of state-wide laws, STR hosts and visitors are freed of the burden of trying to understand patchwork legislation.

At the other extreme, Santa Monica, California effectively precludes businesses or investors from operating STRs, limiting STRs to owner-occupants. Hosts are required to live on-site during a rental, must be licensed, and must pay a registration fee and an occupancy tax.

Rockland, ME, a coastal tourist town, created three types of STRs: the first, both owner-occupied single family residences renting out a single room and two-unit properties renting out one unit and occupying the other; and two classes of single or two-unit residences not occupied by their owners. A permit for the first class requires only minimal review. The other two require planning board approval and the total number of units that can be permitted is limited. This approach is consistent with the findings of several studies that the negative effects of STRs on the rental and housing markets are minimal in the case of owner-occupied properties, as distinct from investor-owned ones.

Many cities have approached regulation by limiting the number of days that a property can be listed for rental or actually rented. Others limit the number of renters allowed in a unit or the number of cars permitted to park at or near the unit.

Finally, many towns require registration and compliance with safety requirements.

A detailed study appearing in Management Science recommends against limiting the number of days a site can be rented as dampening tourism without assisting the long term rental or sale markets. The study instead proposes either a flat tax or, preferably, a “convex tax” that imposes a higher rate on expensive units. Such an approach allows less advantaged owners to benefit from rentals and disincentivizes the owners of expensive units (often, second-home or vacation home owners) from short term rentals, as these are the units that are the root cause of the cannibalization of long term rentals and home sales.

All of which brings us to the question: what is happening in New York, in the county and in our towns?

The state Senate has passed a law, as proposed by Senator Michelle Hinchey (D-41st), that would create a registry of STRs, impose basic safety requirements and subject STRs to taxation under state and local laws. The bill has languished in committee at the Assembly for most of 2023. The bill would allow municipal regulation of STRs to continue and would exempt STR operators from state registration if their towns require registration.

The county Board of Supervisors, which has been deferring action in order to see whether and what the state will legislate, is considering whether to impose county-wide regulation.

About half of the county’s towns and villages, and the City of Hudson, have enacted some form of regulation for STRs. Virtually every town and village that has not done so reported to The Columbia Paper that it is actively considering whether and how to regulate.

The regulations in place to date are all relatively new (the earliest were created in 2020) and so their effects are not yet known. They are quite varied, ranging from simple registration laws, to laws that require registration and safety measures, all the way to laws that limit the number of STRs, contain detailed permitting processes, and impose residency requirements. The chart summarizes the laws in place. Note that when a site plan or special use permit is required, a public hearing will be part of the permitting process.

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