Daily Catch

New ordinance diminishes the rights of property owners in South Portland

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When struggling to make ends meet, conventional wisdom tells us we have few options: limit unnecessary expenditures, find ways to stretch your dollar or earn more money. For those who live on a budget, this often means less dining out, wholesale shopping or picking up a second job.

In recent years, however, more Americans have been participating in the “sharing economy,” an economic movement one Forbes contributor describes as a phenomenon “where asset owners use digital clearinghouses to capitalize the unused capacity of things they already have, and consumers rent from their peers rather than rent or buy from a company.”

Most who have participated in the sharing economy have likely used platforms such as Lyft, Uber, or Airbnb for a ride to the airport or a brief stay on business. For consumers, goods and services within the sharing economy are often cheaper, easier to use and thus more accessible than the alternatives offered by real businesses. Users can also utilize sharing economy platforms to earn supplemental forms of income – all it requires is the sharing of unused property.

By any measure, the sharing economy is, through innovation and entrepreneurship, changing traditional concepts of work and income and is noticeably impacting consumer behavior. Yet despite the efficiency and popularity of these platforms, government’s penchant for picking winners and losers – coupled with its insatiable appetite for new revenue – is beginning to curtail the success of the sharing economy. Look no further than South Portland for a dubious example.

Property owners in the city have seen their rights diminish after voters on Nov. 6 upheld local ordinances that place strict regulations on the operation of short-term rentals. After nearly a yearlong battle that featured two successful petition efforts by opponents of the restrictions, city voters had the final word on Nov. 6 when they upheld the measure 6,377 to 5,380, with 1,550 ballots left blank.

As a result of the vote, hosted and unhosted short-term rental units within city limits now face heavy-handed regulations. The move is a blow to home-sharers and users of platforms like Airbnb, as the regulations will bar some owners from sharing spare bedrooms or entire homes, depending on the location of their property and its use.

The South Portland City Council initially approved in February a ban of unhosted short-term rentals in residential zones by a 6-1 vote. Within the first iteration of the city’s ordinance were sweeping regulations of both hosted and unhosted short-term rentals. Not only were unhosted short-term rentals banned in residential zones, the ordinance required hosted units to be registered with the city, a process that includes proof of property and liability insurance and plans for parking and building layout, among other requirements. The ordinance also required registered units to be inspected and insured.

In addition, owners operating hosted short-term rentals in one- to four-unit properties were restricted to hosting just two adults and one child under the age of two in one unit or bedroom. Noncompliant owners were subject to fines of between $500 and $1.500 per day for noncompliance depending on the violation.

In April, the city council was forced to walk back these rules after a South Portland resident successfully petitioned the council to repeal the ordinance or send the issue to voters in a local referendum. Poised to impose restrictions on short-term rentals, the council repealed the first set of rules so that it could revisit the issue at a later date and pass a retooled version of the rules.

The second iteration preserved the ban on unhosted short-term rentals in residential zones, limiting the practice to detached single-family dwellings in commercial zones. It also required operators of short-term rentals to have four off-street parking spaces, a move that may bar many from operating. The Council did, however, make marginal improvements to capacity; rather than being limited to just two adults and one child, operators would be allowed to host two adult guests per bedroom for a maximum of six guests per house.

But in August, a second petition was submitted to the council requiring the body to again reconsider their short-term rental ordinance. Instead of modifying the ordinance to accommodate the interests of petitioners – who opposed the outright prohibition of unhosted short-term rentals in residential zones – the city council in September decided to send the issue to voters, where the measure was ultimately upheld by a roughly 1,000-vote margin.

“Owners aren’t opposed to being regulated,” said Jason Schlosser, a sales director for TurnKey Vacation Rentals, a company that manages and markets short-term rental units throughout the country. “But what the council has proposed and what’s been upheld by voters prevents a lot of owners from operating.”

Schlosser said many owners in South Portland who list their properties with TurnKey reside in other areas of the country (or world) for the majority of the year, but still wish to return to their homes in South Portland for a portion of the year. For some owners, their occupation requires it. Because they use the property for a portion of the year, they do not wish to rent it out to long-term tenants and instead utilize services like TurnKey to make use of the property while they’re away.

One owner, Abigail Lesneski, echoed that sentiment. Lesneski said that her and other opponents of the ordinance were not opposed to being regulated; they too understood concerns about the potential for noisy neighborhoods and parking congestion in some areas of the city. But Lesneski thinks the ordinance went too far in regulating unhosted units.

“The ordinance was promoted by proponents as ‘regulating’ short-term rentals. They were not regulated, they were banned,” Lesneski said.

Lesneski, a native of South Portland who now resides in Chicago, operates an unhosted short-term rental in the city with her family. The home, owned by her mother and managed by Lesneski and her husband, was built by Lesneski’s grandparents in the 1950s and has sentimental value to her family. Today the home is primarily used as their vacation home and is rented out for only a portion of the year to pay property tax and insurance on the building. Given its location, Lesneski and her family will no longer be able to rent out the building to short-term renters.

Another owner, John Murphy, is dissatisfied with the city council’s approach and believes proponents of the ordinance set a moving target in the debates leading up to Election Day.

“When this all started, councilors said it would be an open process and that they welcomed public input,” Murphy said. “But the city council has had an agenda from the beginning.”

“At first, proponents claimed the ordinance was about noise and preserving neighborhoods. Then it changed to affordable housing, and then available housing,” Murphy said. “We have a committee for just about everything in South Portland. Why couldn’t we have one for this issue?”

Murphy operates both hosted and unhosted short-term rental units in South Portland. He resides in a multi-family home, living in one half of the building and renting out the other portion. Murphy also owns another home in South Portland, which he said was purchased for future use by one of his children, that he can no longer rent on a short-term basis.

With the city council’s ordinance upheld by voters, there is no further recourse for operators of short-term rental units in South Portland. The enactment of the ordinance will stop many from operating both hosted and unhosted rentals in residential areas of the city. Those who operated unhosted rentals in these areas are now limited to renting to at will or long-term tenants and may be forced to sell their homes if they cannot be rented to maintain the property.

And for what? Supporters of the ordinance have claimed that short-term rentals are ruining the character of their neighborhoods, reducing the stock of housing and driving housing affordability issues in the region. South Portland Mayor Linda Cohen told the Portland Press Herald in June that the city council had to act because homeowners in residential zones “didn’t expect that the house next door would be rented out every other weekend.”

But as councilor Adrian Dowling – the lone opponent of the regulations on the city council – told Maine Public in July, operators of short-term rentals have been responsible neighbors. And, according to Lesneski, Murphy and other owners, they’ve been operating short-term rentals in the city long before today’s popular sharing economy platforms were developed.

“They’re not running party houses, they don’t have guests having big, raging parties and hanging from the chandeliers at all hours of the day and night,” Dowling said. “Their guests are respectful and quiet, and there aren’t large numbers of them.”

Dowling is right. According to multiple media reports, as of November 2017, there were 282 short-term rentals in South Portland, about 75 percent of which (211 units) were unhosted rentals for entire homes. According to the US Census Bureau, there are 11,178 housing units in South Portland.

The notion that housing is unaffordable in South Portland due to short-term rental units – which account for less than three percent of the housing stock in the city – is unfounded. If South Portland, or any other city for that matter, wanted to increase the stock and affordability of housing, it would ease regulations on developers by streamlining permitting and licensing processes and reducing fees.

Yet due to the efforts of misguided activists, the city has now painted a small handful of entrepreneurs as criminals simply for economizing their unused resources. They have blamed longtime home-sharers and users of sharing economy platforms for all of the city’s housing woes.

While naïve municipal governments across the country continue giving in to these “not in my backyard” efforts, other communities will welcome the contribution these entrepreneurs and their guests make within local communities.

Perhaps South Portland will come around when the problems that supposedly spawned the ordinance persist long after its final passage.

About Jacob Posik

Jacob Posik, of Turner, is a policy analyst for the Maine Heritage Policy Center. He can be reached at jposik@mainepolicy.org.

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