It’s a complex issue that is reshaping neighborhoods and communities across the country. We are talking about Airbnb, a homestay rental experience that has quickly become a major disruptor in the global hospitality industry. It’s also become a major security concern in many private residential communities, with reports of “party houses” and even crime. Host Donna DiMaggio Berger looks at the consequences for residential communities with guest David Schwarte, Texas attorney and co-founder of the Texas Neighborhood Coalition, an organization that tackles the problems associated with short-term rentals.
Together, they share insights into the vacation rental trend, its impact on housing affordability, and the rise in community activism in response. David shares how he worked to persuade local government officials to exclude short-term rentals from residential neighborhoods and how he assisted community associations in using their restrictive covenants to preserve their private residential lifestyle.
Donna and David explore the legislative maze that governs these rentals in Texas and beyond, drawing parallels with the situation in Florida where state-level preemption looms large. The importance of community involvement cannot be overstated, and through tales of town hall meetings and city council persistence, they spotlight the successful grassroots victory that led to change for residential neighborhoods in Arlington, Texas. Learn about the importance of strong, interconnected communities and the efforts needed to protect and fortify them.
Conversation highlights include:
It’s a complex issue that is reshaping neighborhoods and communities across the country. We are talking about Airbnb, a homestay rental experience that has quickly become a major disruptor in the global hospitality industry. It’s also become a major security concern in many private residential communities, with reports of “party houses” and even crime. Host Donna DiMaggio Berger looks at the consequences for residential communities with guest David Schwarte, Texas attorney and co-founder of the Texas Neighborhood Coalition, an organization that tackles the problems associated with short-term rentals.
Together, they share insights into the vacation rental trend, its impact on housing affordability, and the rise in community activism in response. David shares how he worked to persuade local government officials to exclude short-term rentals from residential neighborhoods and how he assisted community associations in using their restrictive covenants to preserve their private residential lifestyle.
Donna and David explore the legislative maze that governs these rentals in Texas and beyond, drawing parallels with the situation in Florida where state-level preemption looms large. The importance of community involvement cannot be overstated, and through tales of town hall meetings and city council persistence, they spotlight the successful grassroots victory that led to change for residential neighborhoods in Arlington, Texas. Learn about the importance of strong, interconnected communities and the efforts needed to protect and fortify them.
Conversation highlights include:
Hi everyone, I'm Attorney Donna DiMaggio-Burger and this is Take it to the Board where we speak Kondo and HOA. Our topic today is one that provokes strong emotions on both sides of the aisle. Airbnb, vrbo and similar online platforms which facilitate the short-term rental of condominium units and single-family homes have become a growing problem in many private residential communities. New reports of party houses creating havoc for the neighbors, security concerns and even some documented incidents of gun violence associated with short-term rentals reinforced to many community association members that hotel-type lodgings should not be permitted in area-zoned exclusively for private residential use. On the flip side, however, there are people who greatly enjoy the revenue that they have generated under the Airbnb business model and claim that they will suffer economically if that option is no longer available to them. Now let's have a quick overview of Airbnb. The company began in 2007 when roommates Brian Chesky and Joe Gebia started Air Bed and Breakfast on the living room floor of their San Francisco apartment. In 2008, airbedandbreakfastcom was launched and the website name was shortened to airbnbcom shortly thereafter. Airbnb went public in 2020. As of April 2023, the market capitalization of Airbnb worldwide was $73.34 billion.
Speaker 1:My guest today is Texas Attorney David Schwartie, a co-founder of the Texas Neighborhood Coalition, an organization that tackles the problems associated with short-term rentals. The Texas Neighborhood Coalition has 21 chapters across the state and has worked to persuade local government officials to exclude short-term rentals from residential neighborhoods and to assist mandatory community associations in using their restrictive covenants to preserve their residential lifestyle, which is a great fit for this podcast. David is also the founder of the Arlington Texas neighborhoods ARFUR Neighbors Organization. We're very happy to have him on the podcast today sharing his thoughts and success stories. So, david, welcome to take it to the board.
Speaker 2:Well, thank you for having me. I'm by looking forward to our discussion.
Speaker 1:Well, let's start out, david, with what short-term rentals can create in a residential neighborhood.
Speaker 2:There are threefold. First of all, you have the party house problem, and we have documented over 350 shootings at Airbnb to short-term rentals since 2019. And the shootings continue after Airbnb nominally outlawed party houses. The problem is inherent in the business model. What you have are unstaffed, unsupervised hotels with no one there to curb problems before they get out of hand. But the party house problem is just the tip of the iceberg.
Speaker 2:The fundamental problem with short-term rentals in residential neighborhoods is that they destroy the residential character of the neighborhood. If you live in a residential area, you will probably recall that you moved there because you wanted to have long-term neighbors you knew and could rely on Recall. That would help you when you were traveling out of town, check your mail, etc. None of that works if a house next to you is short-term rental. What you have instead is an endless parade of transients with a different group every weekend.
Speaker 2:The other fundamental problem with short-term rentals is that they soak up the supply of available housing and we've seen this time and time again in communities where commercial buyers who operate short-term rentals will swoop in, buy up properties and those are no longer available for local residents. I work with cities across the state of Texas and in Dallas at the moment, over 5,000 homes are devoted to short-term rentals, and this in a market where they have a housing shortage of 20,000. So it drives up the prices of homes because it increases the bidding for them and if you're not someone who wants to move, it drives up your real estate taxes because the value of the properties also go up. So these problems are inherent in the business model and we're not saying that there's no place for short-term rentals. We're saying that they do not belong in residential communities and that cities and HOAs should use their powers if this is what the local residents want to exclude them from residential neighborhoods so that people can have all of the benefits of the single-family neighborhoods that they move there for.
Speaker 1:So just to be clear, David, when you're referencing short-term rentals, you're referencing rentals of 30 days or fewer, correct?
Speaker 2:Yes, that's the standard definition, Tom.
Speaker 1:Yeah, because I mean, listen, I'm speaking to you in coming from South Florida, you're in Texas. We have a lot of seasonality here in terms of residential occupation. We've got a lot of communities that do have, you know, minimum three-month lease terms and they may have that owner, may have three or four people throughout the course of the year come, but it's a minimum three months Now. Do you think that makes a huge difference?
Speaker 2:Yes, instead of having 52 sets of transients next to you over a year, every weekend you might have four, and you might just get the chance to know them.
Speaker 1:You know you had already touched on the housing. You know that this soaks up the housing. It's been kind of a theme on the podcast, david asking guests about the affordable housing crisis that we're experiencing throughout the country. It's really it's a real big problem in Florida. Since the pandemic we've got more businesses, more Fortune 500 businesses, moving in to Florida. We've got a lot of restaurants, but there seems to be no affordable housing for all the service people that are working at these companies, at these restaurants. Talk to us a little bit about what's happening with people buying up the housing for the Airbnb short-term rental model.
Speaker 2:So there's been one fairly recent empirical study. It's out of British Columbia and, yes, it's Canada, but the dynamics of the market are the same and what they found was that, because of the huge number of purchases of homes by people who devoted them to short-term rentals, rents had increased by 28%, attributable to the short-term rental phenomenon. There are also two studies from 2019 and 2020 that identified short-term rentals as a cause of the lack of affordability. One is by Harvard Business School and the other is by Forbes. I'm happy to shoot you those. I have that stuff available in our library and if you think about the dynamics of this, it's inevitable that that will happen because you have inventory that was available for renters that's taken off the market. It is instead to short-term rentals and the data show that short-term rentals will generate about three times as much revenue as a long-term rental. So that inventory, unless it's zoned out or the HOA, moves, it is not about to return to long-term rental and therefore you exacerbate the housing issues.
Speaker 1:Yeah, so it's taken off the market. You said something right out of the gate that surprised me. So as an association attorney, I deal with a lot of condominiums, a lot of homeless associations and I'm going to talk to you later about the covenants we draft to address short-term rental problem. But when I'm contacted by a client where they've got people coming and going from a unit and they say you know, we think that this is potentially a short-term rental violation of our documents, the number one problem I hear about is noise, the nuisance. You know they've got too many people, They've got the music or the TV too loud, but you're talking about gun violence and I have yet to have, thankfully, a client call with that issue. What do you think is driving that connection between, you know, this short-term rental model and gun violence?
Speaker 2:The problem is that, again, these are unsupervised hotels and therefore there was no one to keep tabs of the number of people showing up. And Airbnb has said in their IPO documents that they do not verify the identity of all of the renters and they certainly don't verify the identity of the third parties who are coming. It's mayhem, and I'm happy to shoot you the list that we've maintained, and we know that there are more than 350. These are just the ones with the news reports identified Airbnb as the renter or, alternatively, that there was a short-term rental on the property. But noise is a serious problem as well, and, again, unsupervised parties. People spill outside at all hours of the night.
Speaker 2:Parking is a problem In my neighborhood, which is what got me involved in this. We had five out of 80 homes that were being used for short-term rentals. I have the good and the bad fortune of being close to Cowboy Stadium, and when the Cowboys were in town, the parties were terrible, but they were worse when it was the college games. They choked the streets with cars. Emergency vehicles couldn't get by. Another problem is trash. The people who rent there either don't care or don't know when garbage days are, and stuff is put out days ahead of time and the neighbors had to pick up the trash out of the street. So these are the sort of nuisance type issues that are recurring because, again, there's nobody on site to ensure good behavior. But I just want to stress that the nuisance problem is just the tip of the iceberg. The more fundamental one is destroying the character of the neighborhood as complete strangers replace people I used to know and trust.
Speaker 1:The safety. There's so much to unpack here. The safety and security concerns too. I imagine the problem is greater, david, in communities that lack any sort of access control. So no guard gate, you know anybody. It's a completely open community. You can drive in. You've got people coming and going. You talk about hotels. Yeah, there is access control, because now in a hotel you either have to check in and get the key or you need the key to use the elevator to get where you're going. Yes, people occasionally sneak in, but there is some form of control and usually a very high level of control in your upscale hotels.
Speaker 1:In communities, we've got some where you're going to have a hard time. I've actually had clients turn away unauthorized guests. The problem does become owners who claim everybody is a guest or a family member, and I want to talk to you about that. What do you say to people, though, when you talk about? It destroys the sense of community. I know there are some communities and I have friends living in. Some of them have been living in a community for years who don't know their neighbors. So I don't know that every private residential community has the sense of community that maybe you grew up with, that people remember from years ago? What do you say to people who say, david, this is just an erosion of sense of community across the board. It's not short-term rentals. They may be exacerbating it, but they didn't create it.
Speaker 2:And the problem is, when you put your finger on it exacerbates it. There may be a tendency in American society to be less interactive with neighbors. We don't see that in Texas, by the way. Maybe you don't see it in much of Florida. But if you have the wish to interact with your neighbor, you'll have multiple opportunities if they're there for two months, three months, four months. But if they come and go on a weekend, absolutely no way you can make any kind of common ground with them and you probably wouldn't want to. They're going to be leaving the next day.
Speaker 1:You know you make a good point. Florida is a much more specifically. South Florida is a much more transient community overall, so you don't have as many native Floridians that grew up here. You've got a lot of people who've moved from elsewhere. As you know, we've got people listening all over the country, so you've got some communities where people were born there, their parents were born there, their grandparents were born there. So you're right, it really is dependent, I think, on your geography. I agree, though, if you've got a large percentage of people coming and going, you don't have that sense of people looking out for each other, and I've had a number of guests on. I recently had a guest on I see real-time Louis DeGioia talking about surveillance cameras. We've had a drone guest. I mean, people are trying to fix problems, but the underlying problem really is are your neighbors looking out for each other?
Speaker 2:Yes, and there's one particular terrible aspect of transency that I'll cover. First of all, there's a study by Northeastern University that documented that the greater the number of short-term rentals, the more crime rules because of the lack of social cohesion. But to put a fine point on it, if you're familiar with crime watch programs, the crime watch programs say the way you ward off crime is you get to know your neighbors. You know the cars they drive, you know their daily patterns. None of that works when you have a parade of complete strangers coming in every weekend. So it undermines the ability for neighbors to be looking out for one another, even if they may not be best buds.
Speaker 1:What do you say to the people like who say, david, they may be looking out for each other, but there may be a certain element of nosiness here of people who are sticking their noses in other people's business, always watching. There are people who live in communities who may not be keen on the idea that their neighbor is watching their car come and go and the lights go on. It really is a balancing act, don't you think?
Speaker 2:Well, when it comes to warding off crime, spotting my car on the street doesn't bother me at all, and if I park it in my driveway it's clearly visible. I'm not suggesting people should have any right to look through my windows, but rather it makes common sense if you want to know what you're, who lives next to you, to see what they drive, what time they leave for work. I'm not keeping a log on anybody, but if I see a strange car in the house next to me, I'm going to say you know, wait a minute. I've never seen that vehicle before and they've been there for two hours and, by the way, they got a U-Haul.
Speaker 1:I'm fortunate. My husband and I we've lived in our community for years. We know our neighbors, we have a really great neighborhood, we have that sense of community and when we travel and we have somebody come to house sit a family member we'll tell our neighbors this is who's going to be staying at the house. Here's the vehicle they drive, just for the reasons you mentioned. I I do think there's an element of common sense here and courtesy and being a neighbor.
Speaker 2:Yes, at my age. One of the calls we sometimes make is did I shut my garage door before I drove 200 miles?
Speaker 1:Well it's nice you have somebody you can call the check.
Speaker 2:Yeah, exactly, and if it was a short-term mental next to me, I wouldn't know who to call. So let me emphasize that what to do about short-term mental, from our view, is clearly up to the local authorities and clearly up to HOAs. We're not trying to dictate an outcome. We work with communities that come to us and say we're having a problem, can you help us? And if, at the end of the day, what they want to do is permit short-term mental for some reason let's say it's a primarily leisure destination with real, no sense of permanent we would say that's up to you.
Speaker 1:But what happens, david, when the choice is taken away from the local authorities or the homeowners associations? And I'll give you an example. That's been a movement that's been building in Florida, in the state of Florida, for a couple legislative sessions now. Every year in Florida the last few years our legislature has attempted to preempt rights to regulate short-term rentals and allow it only at the state level. Now this would have a huge impact on municipalities like Miami Beach, which is past ordinances prohibiting short-term rentals in order to safeguard and protect their hotel industry. Right now there's a bill pending. As we sit here on January 25th and take this episode, there's a bill pending that's gone through its committees of reference that would preempt rental rights what they call vacation rentals to the state. Currently that bill exempts HOA confidence but, as you know, bills can change. So what do you say if that rights taken away?
Speaker 2:I'd say what you have is untold misery in communities because all of the evils that I've talked about at the beginning of the call crammed down the throats of residents. We know about the short-term rental preemption bills that have been tried in Florida over the years. From time to time, we've actually had folks and I can't remember who, but we've had time from time to time people who reached out to us and we experienced the same threats in Texas. There's a lot of money in this. Airbnb and Verbo are big corporations. You covered Airbnb at the beginning. They have a lot of money, so they tried it in Texas in 2015, 17, 19, 21 and 23 and it would be an enormous mistake and I think legislators would find that they will be the object of a lot of voter ire if they try this. I think the problem is that most of the legislators just don't take the time to understand the impact on communities and if I step back, I'd say and I just spent three months in Austin in 2023. What do state legislators from Abilene know about short-term rental conditions and housing conditions in neighborhoods in Arlington, where I live the answer is nothing. So it is folly for the legislators to cram this stuff down the throats of residents.
Speaker 2:Here in Texas, we've made progress.
Speaker 2:One of the reasons we formed Texas Neighborhood Coalition was because of the need to beat back preemption bills, and we became statewide in 2019 and I'm happy to say that, although this sort of bill was tried again in 2023, we have educated legislators sufficiently so that the bills went no place.
Speaker 2:Now we had we had we had to show up at hearings, and one of them was a really dreadful bill. It was literally going to allow less than day rentals at any home in any neighborhood, and we appeared before the committees, we testified and when they saw the results, they backed off. What we ended up with at the end of the day in Texas is the house passed a bill that would provide for a two-year study of short-term rentals and pass the house. It got nowhere in the Senate, so we're already ready for 2025. We know the battle is coming and I think for Floridians, you simply need to be educating the legislators in advance. Now you mentioned HOAs. Here in Texas, so far, none of the attempts have been to strip this right from HOAs. It's only been an attempt to strip it from this.
Speaker 1:Well, we need a couple of things, including David Schwarty to come down to Tallahassee and testify and help us organize. I mean, I will tell you, david, one of the bills and it's not in this year's bill said that renting out your house was a constitutional right, not to mention that you'd actually have to amend our constitution. So there was a complete disconnect on that legislator's part about what they were trying to do. But that's how I mean, every year it's happened down here and I fear that this bill this year is going to pass. This bill is focusing on local government, but again, once you get that, you know what do they say? The proverbial camel's nose under the tent. You know, now you're on a, now you're on a path. What do you think is driving this? Is it these big companies that are getting to our legislators and saying we need this, we need these laws?
Speaker 2:I don't know what is exactly going on in Florida, but I can tell you, in Austin, airbnb and Verbo hired six lobbyists in January of 2023 for the purpose of pushing these bills. Now, on the other side, it was just extraordinary citizens, and I do all my work pro bono. Let me sum it up for you, and this is what I've explained to the legislators in Texas they may have the bucks, we have the ballots. So if you try this, you are going to end up turned out of office eventually because of the pure misery you're going to spread among citizens. So obviously you need to be under guard, but I think the key is to have citizens show up in person and that's what we do and then also have your chapters organized or your other groups organized so that when you tell them to call in, they can light up the telephones of the state legislators. We have thousands of phone calls made in the last session.
Speaker 1:Did you work with CAI at all? David, your groups, because CAI the Community Association Institute. They work on a lot of different legislation across the country. I would imagine this might be something that they take an interest in.
Speaker 2:I have never connected with them and instead what we really do is get the citizens to call the legislators and say are you crazy? Do you understand what you're going to do to my neighborhood? On the subject of HOAs, although there's never been a suggestion to apply this preemption rule to HOAs in the legislator, the Texas Realist State Association has it in their manifesto.
Speaker 1:So the point is, once you deal with cities, they're coming after HOAs next 100%, and that's why I will tell you that we've actually urged our associations to amend their governing documents to specifically address the short-term rental issue. Because even if the law does eventually get passed down here in Florida, if we're not able to mobilize people sufficiently, or if we do and our legislature just says we don't care, we're doing this If it's in your documents.
Speaker 1:There would be an impairment of contract argument if they tried to apply it retroactively. So we have been urging our associations take this issue seriously. Make sure you've got sufficient language in your governing documents that would prohibit this.
Speaker 2:That's a sensible solution and I think the prohibition that I'm actually suggesting to HOAs is very specific in banning rentals of less than 30 days and advertising on Verbo or Airbnb or a similar short-term rental platform, and your impairment of contract argument is right. Once you have that solidified, then you have a constitutional claim Should they try and strip that away from you.
Speaker 1:I want to talk about the drafting. You just mentioned it. A lot of times people will say look, donna, I have a minimum lease term three months, let's say and these people are violating it. What do we do? Well, now, that only gets you so far, because a lot of times the person is claiming oh, it's my family member, it's my cousin, it's my college roommate, now it's going to get costly. I like you also draft my amendment to say the violation is the listing of the property on Airbnb, VRBO, any of these short-term rental platforms, either in print or online. The bottom line is, david, if they can't advertise it, they're going to have a really hard time using that property. It's a short-term rental and, in my opinion, it's very easy to find out if it's on those sites and once we find it, that's the violation.
Speaker 2:That's the way our ordinance in Arlington, texas, is structured Advertising, and your HOAs may not be large enough to employ them, but there are some services that do a superb job of sweeping the internet daily and nightly Granicus and some others who really locate short-term rentals where they shouldn't exist, and it's an indispensable tool.
Speaker 1:I think clients even set up their own account on those sites and plug in what they're looking for and, sure enough, one of the units in their community or homes in their community comes up. But I said in the intro how big Airbnb is. And we're not just talking about Airbnb, we're talking about all of the other online providers, and you're a grassroots group. This is like David versus Goliath. How did you get into this? How did this become your crusade? I know you mentioned your own community in Arlington.
Speaker 2:Yes. So I had never, ever thought about getting involved in this before I retired. I'm an aviation lawyer. I spent my entire life doing that sort of stuff, or on the technology side again in the aviation business, but my neighborhood was at a tipping point when I got involved in this in 2018. If you ever want to stir up your passions to right or wrong, drive through a neighborhood where there are multiple parties going on when you thought it was a residential neighborhood. So my background is in the regulatory, legislative and litigation sphere and when I saw this in my neighborhood, I did what a good lawyer always does I dove into our ordinance Plain as day.
Speaker 2:We already banned rentals of less than 30 days, but the city fathers weren't doing anything about it. So I have a lot of experience with lobby campaigns and I got three or four very prominent people in the local community and we're a big city with 100,000 people and we had a town hall I thought 50 people would show up. We had 150 people in the door line, went out the door. I knew we'd hit it a nerve. We had people who showed up wearing red t-shirts saying home, not hotels, for months at every city council meeting and finally the city fathers said you know, maybe we better deal with this, and they did the right thing and that was our success in April 2019. And to put a fine point on this and I said early on that we're not against short term rentals in every instance, just in single family neighborhoods Our ordinance here in Arlington bans them in most single family neighborhoods.
Speaker 2:The only exception is for an entertainment area around Cowboy Stadium in the Texas Rangers ballpark, and the reason for that is it was an area in transition. The residents were lurking for a place to either spruce up or get out. Therefore, they supported this. They're also allowed short term rentals are in commercial, mixed use and industrial areas. So there are 80% of the city available to short term rentals and our ordinance has worked. The key is enforcement Right, and we talked about the enforcement tools before. That's absolutely indispensable for assuring that your rules aren't flouted.
Speaker 1:Well, I asked a lot. Why doesn't zoning solve this issue? I mean, if it's a hotel type lodging, why would they be permitted to operate in areas that are zoned solely for residential use?
Speaker 2:Well, logic would dictate that you're right, and one of the fundamental arguments that we have made in many cities in Dallas recently, your zoning ordinance says motels and hotels are not allowed in single family residential neighborhoods. This is transient rentals for compensation, just like a hotel, as I mentioned. It's actually worse than a hotel. But a lot of the cities, especially in the city staff level, say well, you know, we're getting threats of litigation from short term rental owners and this isn't the clarity that we need. So, to have absolute certainty, we are urging cities to adopt very explicit rules on not advertising rentals of less than 30 days and not using them for less than 30 days. So either one can be a violation. So when I first got into this, I said well, why would we need to do anything? But the problem is a lot of the city staff especially decided that it wasn't absolute clarity and therefore they were doing nothing.
Speaker 1:So is there any case law on point to your knowledge, David, in Texas, as to whether or not short term rental constitutes residential usage under a set of governing documents? For instance, in every set of governing documents I've ever seen, whether it's for a homeowner's association, condominium association or cooperative it says the units, the properties, are to be used for single family usage. Let's say Is there any case law to your knowledge in your state. There is some in my state that talks about whether or not leasing constitutes residential single family usage.
Speaker 2:Yes, and when I first got into this, this case was fresh off the presses. It's TAR T-A-R-R versus and I think that association was Timberlake's and I can shoot you the case if you'd like and the bottom line is the following they had covenants that required that the buildings on the lots be single family residential. Now we've got a line of cases here in Texas that say that doesn't talk about use, that just talks about structures. So that didn't work and it was restricted for quote residential use. And the Texas Supreme Court in 2018 said well, you know, this isn't like another business, it's not like a factory. The people are sleeping there and therefore we're going to treat this as residential because we're going to construe the covenants most strictly against the drafters. But then the court quickly said that it was available to HOA to amend the covenants to restrict rentals of less than certain periods of time, and that invitation has been taken up by innumerable HOAs here in Texas.
Speaker 2:I am a member of an HOA in the Hill Country in Texas. It's beautiful. If you've never been there Lakes it's not what you'd expect. It's beautiful, it's real hills. It's about 45 miles northwest of Austin, friendly folks, and because of what I've been doing, I looked at the covenants and said, hey guys, this is not enough. So we specifically amended the covenants to ban rentals of less than it's actually 90 now in our rules and prohibited rentals being offered on Airbnb, verbo and the other short term mental platforms. And many HOAs across the state are doing that, and the Texas Supreme Court because it does put a lot of emphasis on contracts in fact allows HOAs here in Texas to retroactively amend their covenants to ban even short term mental platforms that are already up and running.
Speaker 1:Oh, that's interesting.
Speaker 2:Yeah, jay Bryce, is the case and again, I can shoot you that if you want, so long as the rules are appropriately followed for amending the covenants, that is, get a vote of the members, as opposed to the board trying to take action on its own. That's enforceable even against people who bought before those covenants were amended.
Speaker 1:So you know there's a sentiment, an anti HOA sentiment in this country, maybe worldwide. You've seen the jokes on Saturday Night Live, the tropes. But this is one area where being in an HOA can be very helpful. Because if you're in just a regular single family home on a block, not with an HOA, and you've got short term rentals on either side of you, across from you, there's not going to be unless your city has or county has passed an ordinance, you're pretty much out of luck.
Speaker 2:That's right. Hoas are invaluable here, and I'm sure that there are some HOAs that can be absolutist and dictatorial on small things. I haven't personally experienced it, but in terms of saving single family residential neighborhoods, this may be the trump card that you ultimately need.
Speaker 1:So sometimes we have the image, david, that it's just, you know, the kindly widow or widower who needs to rent out a room in their house to keep going to make ends meet, right? And why are you trying to? Why are you, in your organization, trying to beat up on that person? But the reality is that a lot of times, your Airbnb hosts are owning multiple properties. This is big business for some of them, right? I guess what I'm asking you is how true is the image of what I just said the elderly, widower, widower who's just renting out a room to make some extra money, versus somebody who's running a big business operating all these short-term rental properties?
Speaker 2:That's pure spin, and every time there is a hearing, the short-term rental advocates trot out the most sympathetic individuals that they can, but they are far from the most prominent. I got some data from a presentation for Dallas. What we found in Dallas using inside Airbnb and if you're not familiar with the site I suggest you use it was 85.3% of the listings were for entire homes, so this isn't somebody just renting out a back room.
Speaker 1:We'd say that again. 83% was for the entire home 85.3%. Okay, so not just somebody living in the home and renting out a room Got it?
Speaker 2:In the entire home rentals. We saw similar statistics and footwork where we also did work. And another data point which goes to your multiple STR owner is in Dallas. 45% of the short-term rentals were operated by people who had five or more listings. We also found that 51% only 51% of those who were operating short-term rentals in Dallas even claimed to live in Dallas, so this was just out of towners for the most part, but many of these operators have five, ten, a whole raft of short-term rentals. This is the myth that they would like you to believe, which is Monpop earning a few extra bucks trying to make things work. Yeah, the sharing economy.
Speaker 1:They're monetizing their biggest investment. They're home. It's the sharing economy, just making a little extra money, david, yeah, but that's a little let me ask you this what could you have been to all these hearings?
Speaker 1:You've done a great job lobbying and educating your public policy makers in Texas. I'm sure you've heard the argument that, hey, this activity brings in, there's economic benefits for local business. All these people coming into these communities have to go out to eat, they go to the movies, they visit local retail. Have you heard that argument and how do you refute it?
Speaker 2:I have and I will refer you to a study by the Economic Policy Institute and again, I had that material earlier. If you want, it should be evident. We have a library.
Speaker 1:I'm going to ask you at the end, everybody's going to find everything you're referencing.
Speaker 2:What they found was that only 2% to 4% of the people who had stayed at SBR said they would not have visited the city if they couldn't have stayed at a short-term rental. They just stayed in a hotel. Do you have a hotel tax that has to be paid by short-term rentals?
Speaker 1:Yes, we do.
Speaker 2:Okay. So the other argument we heard was well, they're going to contribute SBRs will to the hotel tax bank, and the fact of the matter is they siphon off hotel taxes because so few of them actually reported. In Dallas, only 20% of the short-term rentals were registered with the city. That's sort of a common stat we see across the board. So not only do they not enhance hotel revenue taxes, they siphon them up because they don't report them.
Speaker 1:Yeah, this is dependent according to your jurisdiction. The owners of these units are supposed to be paying a bed tax, whether or not they're paying it, and then it puts the association in the uncomfortable position. Is it on the association to enforce that? Are they in any way implicated by owners and association members not paying the bed taxes that are owed for the short-term rentals?
Speaker 2:That's a good question. I have not looked at that issue here in Texas and again, my happy solution with my HOA is we excluded them, so we don't have to worry about it.
Speaker 1:So you said several times during the episode you're not against short-term rentals, but you are against the party houses. You know every weekend somebody else. Is there any sort of a middle ground for the Airbnb model and fostering a sense of community?
Speaker 2:Now let me put a fine point on my review. It's not just the party houses that we're against. I am against short-term rentals in single-family residential neighborhoods. They can be quite as a mouse, but they still bring in transients when in fact they supplant long-term residents. What I'm not against is short-term rentals in other areas, such as commercial mixed-use. Put an extra hotel if you want, and I don't think that for single-family residential neighborhoods any of the half-measures will work.
Speaker 2:I've seen suggestions of well, let's cap the percentage of units that can be used. Well, let's say 12.5%, so one out of every eight, and I see that number floated from time to time. If you're the house next to the house, that's the 12.5%, your ox is going to be gourd and you're not going to like it. And I've also seen suggestions that you cap the number of rentals per year. Well, remember, these are folks that often don't even pay hot taxes. How are you going to police that?
Speaker 2:There's one thing that's completely off the table here in Texas that other places have looked at, and I don't know what your situation is in Florida.
Speaker 2:From time to time, to deal with the mom-and-pop issue, we've had suggestions that you could short-term rent, but only if it was your homestead, that it's your primary residence and that is not an option in Texas or Louisiana or Mississippi. And the reason is there's a Fifth Circuit case, which is our Court of Appeals from August of 2022, involving the City of New Orleans, which said that that was a violation of the Commerce Clause and was dead on arrival because it forbade out-of-state entities from competing in that line of business. The City of New Orleans had a number of answers, none of which were accepted. So here in, thank goodness, we did not make this mistake in Arlington. So it's kind of a period victory for the short-term rental folks in a way, because now when they argue that you should make an exception for mom-and-pops and for people who use it as a primary residence, we say that's a non-starter, that just doesn't work. I don't know what the Eleventh Circuit has said on that.
Speaker 1:If anything, Well, you've mentioned single-family residential communities. I think it's equally important and has an equally negative impact on a multi-family building where you've got short-term rentals in the unit next door to you, you're sharing duck space, you're sharing walls, you're walking down the same corridors, you're getting in the same elevators, you're in the same parking garage. I mean you're in a single-family home. Yes, it's disturbing, but you at least have a little bit of distance. Would you agree that this is as much of, not more of, a problem in a multi-family building?
Speaker 2:You know, it makes sense to me that it would be, but to be honest, we have not had multi-family dwellers who've approached us.
Speaker 1:That surprises me, because that's the biggest problem down here. It's mostly in the condos and the cooperatives along the coast, because you know what, david? The views are great and this is where people want to stay. They want to stay on the beach, they want to be on South Beach, they want to be in Fort Lauderdale, they want to be in Sarasota or Tampa. We're having the problem down here in our multi-family buildings.
Speaker 2:It doesn't surprise me. I've been to Atlantic Coast a couple of times and it's lovely. I could just see why people want to be there. They had a similar problem in New York City in the multi-family areas and they really banned short-term rentals from much of the city, successfully been all the way up to the Second Circuit. So we would support multi-families that wanted this. In our case we had to draw a line between what we thought was achievable and not achievable, especially in light of who was asking for help.
Speaker 2:One thing I have seen in quite recent the city of Grapevine, which is just west of DFTW airport, had a ban on short-term rentals entirely in the city everywhere and to help assure themselves that if attacked in courts they could uphold it, they allowed them for the first time in multi-family. It was passed about two weeks ago but it had to be a place that had at least 50 units and you could do no more than 3%. Again, if I'm next to one, I'm unhappy, but it is some effort to accommodate multi-family short-term rentals. I'm not telling you I think this is a good idea. I think if it's residential it's a problem in Fort Worth, with whom I've also worked closely. They're short-term rental ordinance banned short-term rentals in residential areas, including single-family and multi-family, so they have done what you're suggesting be done, and this has been in the books for a long time in Fort Worth.
Speaker 1:Well, actually I agree with what you've said throughout is self-determination. So we have an office in the panhandle where the whole building wants short-term rentals.
Speaker 2:The people who own there.
Speaker 1:They should be able to rent short-term if the people in that community say we all want this. So I really think we're talking about self-determination. That would be a problem in those communities if the local county said no more short-term rentals and everybody in the community engages because it's not their home, it's their second home, so they want to be able to rent it out most of the year.
Speaker 2:I agree with you. It's self-determination and there are some communities that are more suitable for this. Areas where it's a second home only is probably a good example, but the voters should make their wishes known to the city council and, at the HOA level, the members should also make their wishes known. There are a couple of HOAs that I'm working with at the moment where it seems that if the board wants to allow short-term rentals but the residents don't, so that'll be a fight that I'm sure will be settled someday and at the end of the day, if your board isn't doing what you want, you'll always have the recall option.
Speaker 1:And this has been another running theme throughout this podcast is trying to educate potential purchasers. If this is something where you know you cannot live in a community that allows short-term rentals, make sure they have that in their documents. My husband always tells me I live in a single-family home and in an HOA and occasionally I'll say we should downsize and go to a condo and he'll say you are not well suited to live in a condo If we had a smoker next door or somebody playing loud noise. You're not well suited. I think you do need to make informed real property purchase decisions. Let's get back to the single-family home in an HOA. They've gotten you as their attorney, or me, and we've drafted a really robust short-term rental prohibition amendment and now we find out somebody's listing a home in this community, in this HOA. Does Airbnb?
Speaker 1:or VRBO these platforms do they undertake any sort of due diligence when they're agreeing to list properties? To make sure they're actually eligible for rental.
Speaker 2:I don't believe so, and in their IPO documents from December of 2020, and, as you probably know, the IPO documents are when you tell the truth, the truth and nothing but the truth they said explicitly they didn't check renters IDs, that they weren't responsible for the behavior of guests and couldn't tell you that there wouldn't be violence or crimes. I have that. It's at page 45 of that IPO document. So, unless required by an ordinance, they haven't been particularly good at verifying that they're eligible. One of the ordinances that has really worked well here is Denver. Denver had a problem with a lot of unlicensed short-term rentals, so what they did was amend the ordinance to require that the platforms have a license, that the platforms only show those STRs that had a license and that they would be fined if they showed an unlicensed short-term rental. And suddenly it worked the unlicensed short-term rental just appeared. So you know it's a business and I think they will do a risk-reward analysis and unless there's some potential exposure, I don't think you're going to get much in the way of cooperation.
Speaker 1:You just touched on it, though it's a business, so good word of mouth, the business model. I can't imagine it's not negatively impacted. If somebody has rented a property on their platform, they show up and the front desk won't allow them in because they're an unauthorized short-term renter, how does that reflect well? Sometimes I can't understand the business model because I've actually had clients turn away short-term renters who've been honest we're going to talk about the dishonest ones in a moment but who've been honest and said I rented this on Airbnb or Home Away or VRBO and the front desk says I'm sorry, we don't allow those kind of rentals here, and they're turned away. They're not permitted access to the unit. How is that good for their business model?
Speaker 2:To the extent their renters get turned away. It's terrible for their business In single-family neighborhoods remember, we don't have a luxury of having people checked in unless it's an HOA. So I've seen some of those comments that have been posted by people who got turned away or people who had a dreadful experience at a short-term rental. So I'm not making the business decisions for these folks. You would think that they would try and guard against that kind of outcome, but it happens often enough that either it just falls in between the cracks or it's not being paid attention to.
Speaker 1:Some of my clients have actually seen the guest at the pool or in the gym and said who are you? What are you doing here? Some will say I'm so-and-so's cousin, and then it'll come out the more they talk. Well, he told me to say I was his cousin. So there is an element of shadiness with some of these hosts who are coaching their guests to lie. If you're approached, I mean, you don't have those issues in a hotel. In a hotel, you check in, you pay your money, you get your room service and you don't have to be living, you know, looking over your shoulder to make sure nobody's coming out to ask you who you are. I think that's one of the negatives to the model, particularly if you're in a community and you're not so certain whether or not this activity is permitted.
Speaker 2:It is, but obviously sufficiently large number of people stay in these things that it's not a huge deterrent. And on the subject of shadiness, there is an investigator reporter out of Miami in 2019. And again, I have that as well who followed code enforcement around and what she documented was that the guest had been given a script. Oh yeah, either I'm so-and-so's nephew or cousin or I'm an unpaid guest and that person will be back. I don't know when. They went to the grocery store and the reporter did a very dogged set of reporting about this and it's in your neck of the woods. It's quite interesting. We also found the same thing in Austin through our legislative hearings. The police there was at a time when they were enforcing the primary residence requirement as to certain short-terminals, and the policemen said oh yeah, they're given a script and they read from it and it's a common script. We hear from it all the time. So is it unscrupulous? Yeah, do you see it? Yes, again, the ultimate deterrent here is finding them on the internet when they're not supposed to be advertising.
Speaker 1:So I travel for business and pleasure and I stay in more hotels than I do Airbnb. I've stayed in several Airbnb properties. Most of the properties I've stayed in are quite nice and the host will have a whole handbook with everything. You know here's where you can shop and you know here's how you turn things off and on. But I think, but I've always stayed in. I think I stayed in one place that was a condo, but I mostly stayed in homes.
Speaker 1:But I've always wondered to myself when you check into a hotel, you know on the back of the door there's that whole chart that shows you how to get out of the building and what to do in the event of a fire. And I think to myself, particularly in our multifamily buildings that may have short-term renters coming in, what if a hurricane's coming? What if the place clutches on fire? I mean, there doesn't seem to be any responsibility on the part of the owner to tell these folks how to safely get out of the 12th floor unit that they're in. And certainly, if they've done this surreptitiously, the board or manager are not going to know who's in that unit to speak to that person in an event of an emergency. Does that concern you, david?
Speaker 2:Yes, we don't have to worry about hurricanes here, but we do have tornadoes, so you're absolutely right. That is a gap in the protection of the guests. And another gap that doesn't get much attention, but it may shortly is there's no requirement that they comply with the America's Disability Act, so you may have somebody who shows up in a wheelchair and can get in the place they rent.
Speaker 1:Well, and I think there's some litigation with some of these platforms on how the hosts are screening the people that they want to rent to. Have you heard about this program that Airbnb tried to roll out and it still may be out there called I think it was called Better Communities or something like that where they were pitching to communities to say we can help you and we'll even share a percentage of the rental with the board, with the association, for other improvements you want to make in the community? Have you heard about that program?
Speaker 2:I see these sorts of maneuvers all across the state. We're your friend, we want to help enhance the tax revenue that you collect, but it doesn't happen. And in terms of the collection of hotel taxes, just as an example, what Airbnb has been offering is called a voluntary collection agreement VCA for short and the condition for the city receiving the revenues is that Airbnb will only report the data in aggregate form, without identifying who the owner was, where the property was. There's no way to audit it. So I've seen these sorts of things, especially when there's some terrible PR incident, such as a shooting with a lot of people, but I don't think that in fact, they've made much headway.
Speaker 1:I have to believe, david, that Airbnb folks know who you are. Have they contacted you? Has the CEO, brian Chesky, reached out or summoned you to his office? Or has there been any communication, any attempt on their part or any of the other providers to say, hey, we want to work with you?
Speaker 2:No, and if I were summoned, the answer would be no.
Speaker 1:Get that from you? Have you attempted to sit with them and try to educate any of their management team or sales team? Has there been any of that kind of outreach?
Speaker 2:At the local level. We tried this in Arlington. Our city fathers and city staff in 2018 and 2019 basically said can't you guys work this out? We tried over several meetings to come to terms with them and no limitation that we were ready to accept. Were they ready to accept? Outside parties couldn't be banned. Noise limits were a problem. Revoking permits were a problem. Oh my God, what if I'm not there and something bad happens? So at the end of the day, we tried to work it out with them locally and it just didn't work. There were a solution that Airbnb was ready to accept. I would have thought they would have reached out to us because we're very visible. We testified opposite them at many hearings and my suspicion therefore has to be that they're not ready to respect local zoning that excludes short-term rentals from residential neighborhoods, and I've never had one of them say to me oh, we'll protect HOAs. So I don't think at the moment there's a basis for productive dialogue.
Speaker 1:I see the problem as the fact that their inventory is mostly housed inside community associations. That's the issue. I mean they don't own these homes. The inventory is people who want to rent out their homes or their units and if you look at the statistics nationwide, more and more homes and units are inside mandatory associations. I think that's the big problem for them is that their inventory is all located inside private residential communities. It's built their models on the backs of private residential communities.
Speaker 2:And Donna, when you say private residential communities, do you mean HOAs?
Speaker 1:Yes. And even not even private residential communities outside the framework of an HOA.
Speaker 2:Yes, their inventory is targeted at residential neighborhoods in HOAs and out of HOAs.
Speaker 1:It's not as if they went and built their own structures in commercial areas and they're renting it out.
Speaker 2:Exactly right, and I think that for that reason the business model is inherently inconsistent with a single, with a residential neighborhood. Because residential neighborhoods have permanency of some nature, they have a sense of cohesion, because you get to know people we work at. We go to church together, we work at the library together, our kids go to school together. None of that happens in the case of people who were there for a couple of nights and then leave.
Speaker 1:Assign your TNC website that there are coalitions outside of Texas which have the same mission as your group, but you only have four listed. So you had Annapolis, maryland, bel Air, los Angeles, highlands, north Carolina and Santa Rosa, california. Do you see your work? Expanding David outside of Texas, working with more coalitions, encouraging other coalitions, the formation of other coalitions in other states that are experiencing this problem?
Speaker 2:Donna, we'd be happy to work with other coalitions in other states. Frankly, the problem has been bandwidth. We have been sufficiently busy here in the state of Texas that has been difficult, if not impossible, to spend a lot of time on out of state issues. But I think we all have a lot to learn from one another. We'll get a lot of emails from California, for example, and we can help people because we've been down this road now for a long time and I'm sure they have points of view that can help us as well. There hasn't been a catalyst yet for really an interstate coalition. If there were bills that were ever tried at the federal level, that would certainly prompt it. Hopefully we'll never see that, but we would be open to working with other communities across this country. I think we'd be stronger together. But it would take some fairly motivated people with spare time. I'm retired, so I've got spare time.
Speaker 1:What are your ultimate goals for this work?
Speaker 2:By the time I put my tools down. I want to be confident that what we've actually done is protected single family residential neighborhoods for neighbors and multi-family if that's what they want. Our slogan at the start was neighborhoods are for neighbors and that's what we believe. I grew up in a single family neighborhood. It positioned me well through life. I know what friendships are. I know how you can feel comfortable and safe. So I'm hopeful that by the time I'm done and that may not be for a while we have in fact hardened silos so that residential neighborhoods are not under attack. If Airbnb and Verbo want to operate in other areas that aren't residential, that's awesome. They go, do that, and if they were to accept that outcome, then we'd have basis for discussion. I'm afraid we're not there yet.
Speaker 1:You accomplish your goal and short-term rentals, either through HOA covenants or through local government ordinances. I do think you'll still have some work left to do, david, in terms of fostering a renewed sense of community, because I've been reading more and more about an epidemic of loneliness in communities. I know on one side of us we have a widow and we know her, we love her, but as I'm listening to you talk, I'm thinking I should have her over more often. So you think about? I still think that we have more work to do, even outside the issue and the problems associated with transigency. I think there needs to be more work returning a sense of community, even in those communities where it's all owner occupied.
Speaker 2:I agree with you. Just another fine point Remember our mantra is local determination. So if people in a neighborhood want short-term rentals, that's awesome. They can do that. In terms of reaching out to your fellow neighbors in my neighborhood, what we've done to try and resurrect the feeling of neighborliness again is, on National Mind Out. We have block parties and it's a great way to get to know one another. Put up the tiki torches, have people come by, at least in Texas, when it's fairly comfortable, and it's a good step. People get to know one another and you can resurrect the sense of community. But you're right, that needs to be regrown because in some ways it has atrophy.
Speaker 1:And I'm proud of our HOA because we have a lot of those social events. People open up their homes, they do a cocktail party, there's neighborhood parties for Christmas and Halloween so we do. I think my community does a pretty good job, but that's my community. I also represent a lot of communities where it's a lot more challenging, where people don't get together that often. Well before I let you go, you have an interesting background, so you retired in 2019 after 46 years working as in-house counsel for large travel companies, with your last position as general counsel for a company with over 8,000 employees doing business in 100 countries. Care to tell me which? I was trying to hazard a guess? Want to tell me which company it was?
Speaker 2:I shouldn't actually name them, and the reason down is I have never, ever gotten with them to say would it offend you if I did the following? I'll just tell you their household names. At least one of them is, and it was. I had a great run and I'm very thankful for the career, but I closed that door in 2019. And now I just do things that I think are needed to protect neighborhoods.
Speaker 1:Well, you have been your background. I got to ask you what was your favorite travel destination.
Speaker 2:Italy, handstown.
Speaker 1:I'm Italian, so, but anywhere in Italy or anywhere specific.
Speaker 2:I haven't been anywhere bad yet. So we've done Rome, of course, and before I became a productive member of society, I backpacked through Europe for about a year. This was a long time ago, but love Rome. You could peel back layers of history there per weeks. The Amalfi Coast is amazing. Yeah, With the Sorrento 10 years ago it was spectacular. We went to Tuscany, my wife and I did.
Speaker 1:Always a good choice. How do you?
Speaker 2:go wrong. Our next place on the bucket list is Lake Como, which I hear great things about.
Speaker 1:I've been there. It's gorgeous, You're going to like so all the places you've named my Ben Lake Como is just gorgeous and the food is incredible. And if you're going that far, go to Milan to see the Last Supper in the small church there, and then you've got Da Vinci's Vineyard nearby Milan's worth seeing too. It's beautiful. I haven't been to Sicily. My great grandfather was from Sicily, so that's on my list.
Speaker 2:I've got good friends. He's Italian who just came back. They love Sicily.
Speaker 1:There you go. You know what, David? I wish you all the luck with your ongoing goal to strengthen Texas communities and, like I said, we may need to send you a plane ticket to Florida at some point if you're up for it.
Speaker 2:I might be up for that. Hoas are particularly well positioned to protect your residents. You'll get threatened with litigation, and you know that even better than I do, but the bottom line is at least at the current situation, you're in a good position to defend them.
Speaker 1:With the exception, david, that our legislature over the last few sessions has not been. How shall I say this? They've not been the most generous in their sentiments towards HOAs. Ok, so they're making the jobs of some boards even harder in terms of, as you said, self-determination. So it remains to be seen, but I think this is why homeowners associations have to work with legal counsel to see what they can do within the framework of their documents. Yes, anyhow, david, thank you so much for joining us today.
Speaker 2:My pleasure. Thank you for inviting me.
Speaker 1:Thank you for joining us today. Don't forget to follow and rate us on your favorite podcast platform, or visit tickettotheboardcom for more ways to connect.