Thursday, December 8, 2011

More destinations shut the door on vacation rentals

By Laura Bly, USA TODAY
For frequent Manhattan visitor Ken Velten there's no place like (someone else's) home.

The Southern California retiree and his family of up to five have traveled to the Big Apple five times over the past five years, staying a week or two and trading the expense and anonymity of a hotel room for the space and convenience of a rented apartment in Midtown East. But after May 1, when a ban on most New York Cityapartment rentals under 30 days is scheduled to take effect, Velten probably won't be back.

"We really prefer apartments because you can set your own schedule and get a feel for what it's like to be a New Yorker," says Velten, who paid about $2,500 a week for two bedrooms, a kitchen and a living room in a town in which the average hotel rate runs upward of $210, plus taxes, a night. "We love the city, but not what we'd have to spend at a comparable hotel."

Others clamp down, too

New York isn't the only U.S. destination grappling with the booming popularity of short-term apartment and other vacation rentals, which can include anything from a mountain cabin to a high-rise penthouse.

This summer, Chicago lawmakers approved an ordinance restricting rentals under 30 days to existing properties that obtain a special-use permit and have been in business for at least a year. Teri Smith of the Chicago Vacation Rental Owners Association predicts the law could reduce the current number of options — about 700, by one estimate — by 40%-70% when it takes effect Jan. 1.

Two years ago, citing complaints of increased noise and traffic in residential areas and a negative impact on the limited supply of affordable housing, Maui's mayor stepped up enforcement of a long-ignored ban on unpermitted bed-and-breakfasts and vacation rentals beyond the Hawaiian island's major resort areas along the southern and western coastlines. The ban includes Maui's smaller, less-visited neighbors, Lanai and Molokai, as part of Maui County. As a result, only about 75 Maui properties are operating legally outside those traditional resort areas. Short-term rentals of condos and single-family homes outside the island's hotel districts remain illegal, and the number of available choices has decreased as much as 50%, says Tom Croly of the Maui Vacation Rental Association.
Dozens of other jurisdictions, ranging from Sonoma County, Calif., to New Braunfels, Texas, to Isle of Palms, S.C., are considering new restrictions on vacation rentals as well, says Alex Risser, head of the Vacation Rental Managers Association.

Laws threaten recent boom

A relative rarity in the USA a decade ago, such alternative lodging options now represent a nearly $25 billion segment of the travel business, according to PhoCusWright, a travel research firm. Among the drivers: a sour economy, a proliferation of second-home owners trying to stave off foreclosure through rental income, and a growing number of Internet-based listings and resources.

"It's gone from being a literal cottage industry to nearly a quarter of U.S. lodging revenues," says Brent Hieggelke of, a year-old site that links owners and renters through Facebook connections.

Proponents of the controversial New York law, signed by Gov. David Paterson last month and supported by the city's hotel industry and visitors bureau, say it is aimed at apartment owners who put up temporary walls and make other illegal improvements to draw penny-pinching tourists, driving out permanent residents during a city housing shortage.

The legislation exempts arrangements in which visitors rent a room while the permanent occupants are living in the apartment. Additionally, "somebody who is going away on vacation and once in a blue moon rents the apartment is probably not going to be affected by this," says state Assemblyman and bill co-sponsor Richard Gottfried, particularly since enforcement will be driven by neighbor complaints.

Rentals could go underground

But critics say the New York ban is too broad: It will hit "perfectly legitimate homeowners, but also tourists who want more space than what a hotel room has to offer," says Stephen Kaufer, founder and CEO of

While opponents continue their efforts to amend the Big Apple ban, some observers say short-term city rentals — already prohibited under many condo and co-op bylaws — will simply go further underground.

Vacation rentals in the USA and elsewhere "have been operating illegally for years, but now, it's hitting the radar," says Pauline Kenny of, a guide to European vacation rentals. "In a way, they're suffering from their own popularity."

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