Renting out your home may be illegal

Excerpts from a story in Washington Monthly:

For more than a year now, New York City has been enforcing a new state law that makes it illegal for homeowners like Hogan to rent out their house or apartment for less than a month. All across the city, police raids have shut down hundreds of similar informal bed-and-breakfast establishments, with nearly 1,900 different violations issued in under twelve months. Often, the fees associated with the citations stretch into tens of thousands of dollars. Hogan was threatened with a $25,000 fine—all for marketing the empty rooms in his house.

Short-term vacation rentals have existed for years with little attempt by local governments to stamp them out. But thanks to the Internet, an industry that was once small and underground has, in a few short years, exploded into a multibillion-dollar worldwide business.

But an opportunity for some can be seen as a threat by others. Short-term vacation rentals like Hogan’s cut into the bottom line of some powerful interests, and those interests are pressing local governments to put a stop to the practice. The dynamics that have led to the crackdown in New York are playing out nationally—and internationally—as governments struggle with how, or whether, to accommodate a burgeoning new vacation rental industry. While some regulation and taxation of this new market is inevitable and necessary, the danger is that we may strangle precisely the kind of small, entrepreneurial markets we should be fostering...

The crackdown in New York is similar to ones happening in several major European cities. Paris, for instance, passed a law in 2005 banning the rental of any residential property for less than a year, and began enforcing that law in 2010. London is now engaging in a wave of enforcement in the run-up to the 2012 Summer Olympics...

Crackdowns against vacation rentals are also happening in other cities across the United States, in part for fiscal reasons: municipalities need the money. Cities like Palm Desert, California, and resort communities in Colorado have recently required short-term rental owners to buy permits and pay taxes, as well as abide by parking, trash, noise, and other ordinances. But these restrictions don’t seem unreasonable. The permits aren’t prohibitively expensive (a few hundred dollars), the taxes aren’t unfair, and unruly guests can legitimately upset neighbors...

The danger of any ordinance restricting commerce is that it will wind up protecting incumbent interests at the expense of new entrants into the market. So even the more reasonable-sounding laws bear watching. But if done right, these lighter rules could ensure that necessary taxes are paid, legitimate neighborhood concerns are respected, and average citizens are free to make use of an untapped, valuable asset: their own homes.

More at the link, via The Dish.