There’s been a lot of handwringing lately over the way services such as Airbnb are regulated. The CEO of HomeAway—an Austin-based Airbnb competitor that was recently acquired by Expedia—lamented new laws in the capital city that, when they go into effect in 2022, will prevent people from using houses they don’t live in as full-time short-term rentals. In the rest of the state, the regulations vary from basically non-existent to making short-term rentals nearly impossible. In Galveston, for example, the regulatory framework the city passed last year requires short-term rental owners to pay a $50 annual fee and to give renters a brochure that tells them not to be too loud—and that’s about it. In Fort Worth, meanwhile, the regulations require anybody who’s going to host guests in their home to register as an official bed-and-breakfast, a license with limited availability that can only be obtained for properties built before 1993—and anybody who wants to rent out their entire home has to have a house in an area that’s zoned commercially, rather than residentially, effectively making Airbnb and similar services illegal in Fort Worth.
But if you look for a rental in Fort Worth on Airbnb for a random weekend in April, you’ll get over one hundred options. You can enjoy a hosted stay in a new-build condo that’s clearly in violation of city ordinances, or rent an entire house in a residential neighborhood. The law may say one thing, but local property owners who want to make money off of their space aren’t necessarily listening.
In Austin, the code enforcement division in charge of short-term rentals recently tripled in size: from two people alllllllll the way up to six, who are tasked with regulating every property in a city of 900,000. Austin recently got a “D” in the short-term rental report card compiled at Roomscore.org that looked at the regulations in 59 U.S. cities, including seven in Texas.
Austin, Fort Worth, and Houston all got D or F grades for their regulations. Dallas, San Antonio, El Paso, and Galveston all got at least an A-. Yet searching Airbnb for a place to stay during an April weekend in Austin finds over 300 rentals, while the same search in San Antonio yields fewer than 250—even though Roomscore explains that “Austin has a tightly regulatory environment for short-term rentals. Non-hosted stays are effectively banned, while hosted stays are legal only under specific conditions.” And Austin’s population is half a million people smaller than San Antonio’s.
In other words, there’s no real correlation between the regulations imposed by cities on short-term rentals and the availability of those rentals themselves. People seem content to engage in a form of self-interested civil disobedience when it comes to disregarding laws that they don’t like—and companies like Airbnb are happy to help them do it. “In most cities and states, homeowners have the obligation to ensure that their rental is in compliance with the city’s laws,” R Street’s Andrew Moylan, who authored the Roomscore study, explained in an email to Texas Monthly. “Short-term rental platforms generally provide information to participants about what those legal obligations are and how to go about complying with them, but the responsibility ultimately falls to the homeowner to maintain fidelity with the law.” Which means that HomeAway can weep over Austin’s regulations that make their prime product “basically illegal” in their hometown—but HomeAway and Airbnb themselves aren’t actually facing these regulations, it’s the people who want to list their properties on the sites.
With all of that in mind, the stakes right now seem to be a lot lower than the ones that have been laid out. Yeah, it’s mostly illegal to list your property on Airbnb in Fort Worth, but nobody is actually paying attention, and the city can scarcely afford to devote the resources it would need to enforce the law more stringently. Moylan imagines a future where Airbnb, HomeAway, and other rental platforms themselves are tasked with “policing” properties. “Governments love outsourcing the job of complying with the law to private entities because they get to have their cake and eat it too,” he says. And in cities like San Francisco, certain aspects of the regulatory framework are the responsibility of the site: the Hotel Occupancy Tax that every short-term rental in Texas is required by law to pay, but which there’s no mechanism to actually collect except the honor system, is actually added to the rental price on the site itself. But for the time being, nobody in Texas, and few municipalities around the country, actually burden the companies that list short-term rentals themselves with enforcement.
That leads to a curious hole in the marketplace. Jordan French—who last made headlines in Austin for demolishing the piñata shop Jumpolin without proper warning, and comparing the owners to “cockroaches”*—recently started a new enterprise. That company, called BNB Shield, monitors short-term rental sites to identify people who are in violation of the law. French’s new company tracks the properties that are illegally listed on Airbnb and other sites, then offers to sell that information to condo and apartment management companies whose tenants are breaking the law and violating lease agreements.
The ultimate takeaway of the fight surrounding regulations of Airbnb, HomeAway, and the rest of the short-term rental platforms may not be a battle between government regulation and the free market, but one in which the real stakes of breaking the law are that you could be caught by a private company, working on behalf of a private property owner, and booted out of your apartment for participating in the free-market frenzy endorsed by folks like R Street. That’s not hyperbole—in January, a Dallas woman found herself receiving an eviction notice after her apartment building spotted her place on Airbnb. The issues here aren’t just complicated, they’re downright messy. It turns out that the free market is more effective than the government at going after people who want to make Airbnb cash.
(Update: *Shortly after this article was published, French wrote to Texas Monthly to say that his latest headlines were actually for a company he works with called BeeHex, which received some good press out of SXSW. French also claims his quote was misinterpreted.)