Vacation Rentals: Still a Good Idea?

AskEd & AnswerEd
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Houses in San Francisco (Photo: Index Open)
Editor's Note: This story was originally published on October 4, 2010. To see the most recent SmarterTravel articles on related topics, please click on any of the following links: AskEd & AnswerEd, Ed Perkins, HomeAway, New York City, Paris, San Francisco, vacation rental.

Several recent stories recently moved an important issue from the back burner to the front. Three very popular cities actually outlaw (or will shortly outlaw) vacation rentals. And although the laws have been on the books for several years, publicity has brought new attention. A reader recently asked:

"I had planned to rent an apartment in Paris next spring, but I just read that short-term rentals there are illegal. Will I be OK if I go ahead with my plans?"

The short answer, regrettably, is a bit uncertain: "The risk is minimal—but there's still a very slight risk." I've checked with a few sources, and here's what I've found.

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The Legal Situation

Three of the world's top destination cities have laws or regulations that prohibit short-term vacation rentals:

  • Paris. Since 2005, Paris has had a law requiring that property owners limit rental agreements to a full year or more. Previously unenforced, this law is apparently now receiving at least some token enforcement actions.
  • New York City. The State of New York just recently passed a similar rule, effective next spring, and applying to "Class A" buildings in New York City.
  • San Francisco. For decades, San Francisco has had a law limiting rentals to 30 days or more, with essentially no enforcement. Instead, city officials require short-term rentals to collect the local hotel tax.

As far as I know, no other major visitor destinations have enacted similar laws or regulations. Also, as far as I know, legal problems are limited to apartment buildings, and to not apply to separate cottages or "villas."

Why the Fuss?

"Follow the money" for an answer. When in service, I was stationed at Tinker Air Force Base at a time when Oklahoma was totally dry. Whenever someone started a campaign to repeal local prohibition, opponents mounted a major effort to retain it. Those anti-repeal campaigns were fronted by the churches—and funded by the bootleggers.

I see the same sort of unholy alliance here. The high-profile public opponents of vacation rentals piously claim that those rentals deprive local residents of much-needed housing. And the real backroom political muscle comes from local hotel interests who want to suppress competition.

The Enforcement Conundrum

According to trade sources, enforcement of existing laws has ranged from minimal in Paris to nonexistent in San Francisco. And at least one New York official publicly stated he did not expect to see any enforcement against individuals or small units.

But lax enforcement creates some real uncertainties for both owners and visitors. Nobody knows whether or when a local agency might decide to single out an individual operation.

Enforcement generally targets buildings with many accommodations continuously offered for rental—in effect, apartment houses operated as rental hotels—rather than individually-owned single rental units.

Also, some rental agents suggest that where it occurs, enforcement against individual apartment units is triggered mainly by complaints from regular residents of other apartment units in the same buildings. Thus, they advise renters to maintain low profiles.

Agencies' Response: Business as Usual

Rental agency managers tell me that, as far as they're concerned, it's "business as usual." They say they stay in close contact with the properties they represent and are not worried about any glitches. And in the "unlikely" event of enforcement action, they would arrange a replacement, or at worst a refund. They say that the current "fuss" is unfounded, and that travelers should not worry about major changes. But they don't want me using their names—just in case.

A representative of the HomeAway group of online rental listing sites said basically the same: Business as usual unless and until something changes. And, at this writing, I see nothing about possible limitations on any of the big vacation rental websites.

What Should Consumers Do?

This is a tough call for me to make. I take at face value the comments from managers of the rental agencies and listing sites that they expect no problems, continue to take reservations, and will take care of any problems that might arise.

But I can't suggest that everyone else take a risk I might be willing to take. The situation is much the same as it is for other practices that violate some combination of industry rules and laws, such as buying frequent flyer awards (which I do not do) or buying a cheap round-trip ticket and throwing away the return portion rather than an expensive one-way ticket (which I do). Of course, these airline situations violate only airline rules, not government rules. And deliberately violating a government rule or law poses some special ethical problems.

Given the circumstances, I wouldn't hesitate to arrange a rental in San Francisco, knowing that the city itself would rather collect taxes than enforce an obsolete law. I would probably also accept what I view as a minimal risk of renting in Paris or New York City.

But it's your choice, not mine. If you're concerned about the ethics, you have to make a decision. If you're concerned about the financial risk, you could buy cancellation insurance. And if you want to avoid all risk, don't rent in those three areas.

Your Turn

Do you plan to continue to use vacation rentals in these cities despite the risks? Share your thoughts on these laws by adding a comment to the discussion below!

 
 
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