Short-term Rentals in Minneapolis

6 Replies

Minneapolis is going to vote on adding regulations to people conducting short-term rentals in the city:

I haven't read the language but I wonder how they are going to require Airbnb, VRBO, etc to pay them an annual license fee...  Pay the fee or you can't list our name on your website???

For those with short-term rentals in St. Paul - it seems they have been waiting for Mpls to figure this all out because it was more of a pressing issue due to the super bowl.  I imagine they will add language very similar after Mpls figures it all out.

It sounded like they were planning on making the hosting websites (Airbnb, etc.) pay a $5,000/year licensing fee. No mention of the fees passed on to the actual hosts though. 

Anyone able to find a link to the full text of the proposed ordinance?

It's such a complicated issue when you look at socioeconomic factors associated with the proposal.  One the one hand the cities will of course prefer the ability to generate additional tax revenue by imposing higher fees and lodging tax to those operating their properties to this capacity.  On the other hand this taxation creates inefficiencies in the economic ecosystem that is affecting many middle class people's ability to generate additional income, which is local and would be taxed anyway.

The hotel lobbyists and smaller traditional bed and breakfast owners are of course opposed to the democratization of the hospitality business and they do have a valid point that if these vacation rentals don't have the same costs associated with them, they will have a very hard time competing due the one-sidedness of the inherent inefficiencies any sort of taxation creates in a market.

That said, hotel lobbyists are representing the interests of hotels much the same way lobbyists for the taxi industry are rallying against Lyft and Uber.  It is a pointless battle against their own obsolescence.  The existence of and profitability of these companies is enough to prove there is plenty of demand for these platforms.

The main difference with Amazon is that it appears to be much more centralized than Air BNB and ride-sharing platforms which incentivized them to build up their own force of lobbyists to represent their interests in Washington.  It may be wise to get out ahead of this and form advocacy groups etc. because the hotels are spending so much money to bury this thing and it would seem no one is fighting back.

A specific issue with getting support in Minneapolis and St. Paul, is that they tend to cater so heavily to the lower rungs of the economic ladder.  Many of these people don't own real estate and therefore cannot readily benefit from the additional income stream Air BNB creates.  From the perspective of the proletariat, any increased tax revenue can only serve to aid them so they will have a tendency to support more regulation without a sophisticated understanding of the true deadweight loss this will create from ordinary taxation etc.

I think I want to write an article about this and try and get it out there in the Twin Cities.  Does anyone have any contacts?  I think this needs to be addressed.

This has been done in Chicago, and it doesn’t seem to have slowed the market. The “people” will get what they want one way or another. Not only are Airbnb’s often cheaper, they create a more local feel and experience of the city.

One important facet of Chicago's ordinance was not only the tax revenue, but a central place for people, buildings, and guests to be registered and tracked. This way, before getting their hands dirty, every tenant can understand the law when discussing with the Landlord or HOA.

As a follow-up, the city approved these ordinances.  It sounds like they may have proposed an amendment for a reduced fee for companies who operate like Airbnb but are smaller.  The large companies contend that this ordinance violates federal law and I believe they are correct.  Just depends whether it is worth anyone taking the case - the large companies may team up against the city.

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