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Placid-us or HEIN-ous?

Commentary on reporter Elizabeth Izzo’s “Officials set third public hearing on short-term rental regs,” Feb. 13, and the planned hearing on Feb. 25 at the Conference Center:

Short-term accommodations in residential properties, competing with commercial hostelries, cause both benefits and damages, borne by different parties within the community. Largely these benefits and costs fall to or upon the owners of residential properties unless we assume that a de facto cartel of commercial hostelry owners ought to have a monopoly on visitors’ rental receipts. I assume that is not the case.

As stated above, short-term rentals offer benefits to some homeowners and impose damages upon other homeowners. Wise policy must simultaneously seek to maximize the benefits whilst minimizing the damages. That is the policy objective.

On the supply side, the residential short-term rental market has four segments:

1. Owner in situ (on-site) during rental;

2. Owner on-site most of the year but not during short-term rental;

3. Owner largely or completely absent from the site (e.g. absentee or corporate owner);

4. Short-term rental unit is located in a non-residential zone. 

These four segments require differing policies. Most of the damages to other residential owners, and hence to the community at large, stem from market segment No. 3, absentee-corporate owners — that is, persons making a full-time business of short-term rentals, or in effect, hotel-except-in-name (HEIN). Public policy ought to minimize HEIN-ous properties and thereby avoid heinous damages to the community as well as to nearby residential owners.

Owners of residences seeking to derive rental income from their property have differing objectives that implicitly define two kinds of landlords: Owners of the first kind seek to maximize their own pleasure of living in their premises. Owners of the second kind seek to maximize their profits from not living their premises. Obviously, market segments No. 1 and 2 constitute the first kind. Whilst segments No. 3 and 4 are together of the profit-driven second kind. 

The first kind tend to improve their residential neighborhoods by doing such things as planting gardens, keeping quiet and not annoying neighbors while, perhaps, being engaged in community activities, such as the garden club. Economists call these actions positive externalities, as they benefit others free of charge. In contrast, owners in segment No. 3 of the second kind tend to degrade the residential neighborhoods wherein their premises are located by often renting out to parties that are too large, too noisy, have too many vehicles and generally run amok at any hour of the day or night. These are negative externalities, as they impose unconscionable costs on the neighbors and deprive them of the right to peacefully enjoy their homes. In short, HEIN-ous owners are parasites feeding on their neighbors.

Positive externalities increase the value of homes; negative externalities decrease the value of homes. The same goes for local property tax revenues eventually. 

The increased market penetration of HEIN-ous residential owners is largely a result of two Internet technologies:

A. computerized reservation services, such as Airbnb, Vrbo and so forth

B. Internet-enabled surveillance systems, such as RING.

The wannabe HEIN-ous owner thinks that he/she can escape hotel management responsibility by reliance on A for marketing and sales, and also control usage by B. In many cases, installing interior surveillance systems (e.g., cameras) to spy on tenants remotely. Public policy can seriously disrupt and attenuate these technologies, and thereby reduce HEIN-ous residences so that Placid remains placid, for us.

Proposed short-term rental regulation:

Define four market segments, as stated above. Market segments 1, 2 and 3 apply only to owners of properties in residential zones as defined in the local code. Market segment 4 applies to owners of properties in non-residential zones.

1. Sleep-in owner (i.e., an owner on residential premises at least eight hours between 10 o’clock in the evening and 8 the following morning): No regulations or taxation necessary — that is, “self-regulating.”

2. Resident owner (i.e., owner[s] living in residence at least 240 days [eight months] of the year): Rentals supervised by local person, selected by owner, whose name and contact information are given to any tenant and who is available on-call 24/7 to deal with any emergency situation and who is empowered to arrange for such immediate relief as warranted by said situation. No other regulation or taxation necessary.

3. Absentee owner (i.e., owners not within the definitions of market segments 1 or 2): Regulated as follows: 

a. No more than one rental per week or part thereof. 

b. No rentals to multi-parties. 

c. No rentals to parties of a size exceeding bed spaces or exceeding parking spaces. 

d. No rentals except via local agent, defined below, contracted by owner whose functions shall be those of the “local person,” defined above, and who also shall both:

¯ Have liability insurance insuring all parties and the local government against all hazards and suits that may arise related to such rentals, and

¯ Shall collect and pay to the local government all taxes due for such rental activities. 

e. Owner shall timely pay local agent such fees as may be agreed upon. 

f. Local agent shall be such persons approved by the local government or any licensed Realtor or real estate agent or Regional Office of Sustainable Tourism. 

g. The local agent shall collect taxes payable to the local government at the rate of 2% times the number of persons in the rental party (e.g., a party of six paying a rental fee to the local agent of $1,000 shall pay a tax of 12%, or $120). 

h. No person in a rental party shall commit while a tenant any felony, misdemeanor or offense at or within the rental accommodation; and furthermore, if such violations of law do occur, as a matter of law, then the owner shall be liable for the offense of “disturbance of the peace” and pay a fine of $1,000 or three times any rental price collected by said local agent, whichever is the greater amount. 

i. Neither the owner nor local agent shall install, maintain or utilize any form of interior surveillance in any part of a residence rented to short-term tenants. However, tenants may surveille themselves as they wish.

4. Owners of residential accommodations in non-residential zones: No regulations or taxation necessary — that is, “self-regulating.”

All market segments: No inspections of septic or other aspects of the accommodations are matters for local government. Common sense and state law apply. And of course, owners, renters and neighbors have access to any statute law and the common law. such as torts. and are free to access civil courts for settlements of any disputes or alleged damages.

Anthony Lawrence lives in Lake Placid.

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