Wednesday, March 8, 2017

Short Term Rental Regulations: A Hot Topic for Maine Municipalities, But Choices and Questions Remain

Made increasingly popular by websites like AirBnB and Home Away, the availability of short term rentals have arguably been a boon to the Maine economy (to the tune of over $26 million in 2016). Not only does this model within the sharing economy allow individuals to rent out unused rooms to supplement their monthly budgets, but they increase the availability of cheaper rooms and apartments for would-be vacationers. Maine does, after all, support a nearly $6 billion tourism industry.

However, short term rentals present a bevy of problems that municipalities across Maine have only recently begun to tackle. The three most prevalent are:
1.    Zoning Violations: Seekers of short term rentals are often attracted by the opportunity to stay in a quiet, established neighborhood, rather than at a generic hotel. Therein lies the problem; short term rentals often violate  the neighborhood’s underlying zoning . Most units listed on short term rental websites are based in single-family residences, either as the rental of a single room, or more often, the rental of an entire residence — effectively converting  single family residences into a lodging houses, a use that is often prohibited in residential districts. This dynamic can also turn quiet residential streets into boisterous ones, with previously-occupied homes morphing into small hotels each and every week, prompting consistent complaints from neighbors.
2.    Code Violations and Under-regulation: When they were constructed, most short term rental units were inspected and approved as single-family or multi-family residences. Because of this, local Code Enforcement Officers almost certainly did not ensure that the homes were outfitted with the necessary life safety equipment, think smoke detectors and CO detectors, or that they had the necessary points for ingress and egress required of traditional lodging units like hotels, motels, and inns. As such, short term rental units likely create compliance issues that other lodging accommodations would not. Their owners also may not carry sufficient commercial liability insurance to protect them should any issues arise. These complaints are often brought by members of the State’s hotel industry, who do have to comply with stringent, and often costly, regulation.
3.    Housing Stock Shortages: It has been argued that the proliferation of short term rental units has harmed the year-round rental housing markets in Maine’s larger towns and cities. For example, consider a real estate investor who purchases a small house in a quiet Portland neighborhood. He or she could rent it to a local resident for $2,000 a month, or the house could be listed on AirBnB for $100 a night, leading to a much larger return. This sort of profit margin has prompted out-of-state investors to swoop in and scoop excess housing stock — and  while this approach could work for the investor, it leads to that house being taken off the year-round market, leading to a general increase in the price of rental housing. Housing advocates have connected these dots, pointing out that if unchecked, short term rental units could create negative effects for those struggling to find affordable housing.

So what is a municipality to do? Not surprisingly, those Maine towns that have tackled these issues have come up with a number of different approachesPortland, for example, has recently considered a new set of regulations that would endeavor to rein in the rapid growth in short term rentals. Included would be an annual registration and inspection requirement (to promote safety), and a city-wide cap on units that are not owner-occupied (to combat an ongoing housing shortage). Towns in York County, like Ogunquit, have also added an annual registration requirement and are ramping up enforcement against owners who don’t comply. Others, like Rockland, have required planning board approval for any short-term rental of an entire residence, rather than a single room within an owner-occupied house.

Yet not all Towns are going along for the ride. Many coastal and ski-resort towns, that rely heavily on tourism for general revenue, have decided to simply let short term rentals be, judging that a “the more the merrier” approach was best. Instead of adding new regulations, they remain content dealing with issues posed by short term rentals on a case by case basis, and using existing parking, noise, and nuisance ordinances to do the heavy lifting.

The bottom line is that municipalities have only recently begun to grapple with the opportunities and issues that short term rentals present. There is certainly no “one-size-fits-all” approach, but municipalities across Maine should give some thought to this new area of the law. Although most short-term rental issues may seem to only affect larger towns and cities, all municipalities should look at taking steps to better understand the unintended impact that this new type of property can create.

Of course, increasing regulation can also present problems for those who wish to rent their own homes. Regardless of which side of the equation a party is on, Bergen & Parkinson is eager and ready to help.

For more information, contact Ben McCall at 207-985-7000, or by email at