Who's Right? Airbnb, Private Property and the Party House Next Door

Life, liberty and the pursuit of happiness...JL

Ron Lieber reports in the New York Times:

Where do the rights of property owners to rent out their homes end, and where do those of quiet-loving neighbors begin?

The houses are often among the nicest on the block, or at least the biggest. They may be new construction where a smaller structure once stood, or an extensively renovated home with cheery paint in shades of yellow or blue.But then the telltale signs appear, including an electronic touch pad on the door that makes it easy for people to get in without a key. The ads on HomeAway or Airbnb eventually confirm it: A party house has come to the neighborhood.

Some neighbors have warmed in recent years to travelers dragging suitcases through their residential neighborhoods, and they are happy that the visitors spread their money around. But when profit-seeking entrepreneurs furnish homes they do not live in to make them attractive to big groups and then rent out those houses as much as possible, parties and noise are nearly inevitable.

And so it goes here in Austin, where a group of enraged and occasionally sleepless residents have taken their complaints to the city. Austin made rules in 2012 that were meant to keep short-term rentals under control, but the neighbors argue that many of the rules are unenforceable.This week, I rented one of the most notorious party houses in Austin and invited some of the neighbors over for a chat to ask a few questions. Where do the rights of property owners to rent out their homes end, and where do those of quiet-loving neighbors begin? Do all home shoppers now need to be on the lookout for nearby problem properties? And if so, what might happen to home values when revelers can bunk up next door on any given night?

These are not new questions. In resort areas in particular, people have been renting out investment properties for ages. What’s new is how easy it has become for people to make money by listing rooms or homes and for visitors to save money by staying there. This is particularly true in good-time destinations like Austin, Nashville, New Orleans and other bigger cities.

When Austin tried to bring some order to the proceedings three years ago, it limited the number of unrelated people who could stay in one place at one time to six. (It also capped the number of certain listings in many neighborhoods, albeit with a loophole that has allowed many unregistered properties to hit the market.)

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Nevertheless, listings began appearing all over the city advertising beds for 10 or 15 people, or more. Austin has become a popular bachelor party destination, and the website Thrillist described one Airbnb listing as “the perfect place to bed down for a bonkers bachelor party, as it’s a short bike ride from downtown, just the right blend of weird & huge, and not at all unaccustomed to rowdy entertainment.”

Emmy Jodoin lives next door to that house with her family. “It is loud, and there is live music and karaoke stuff, and it’s all done outside because of the pool,” she said. “They’re out in front at 4 in the afternoon waiting for their Uber to come, drunk on the front lawn.”

Homeowners had other complaints about guests, including trash bins overflowing with beer cans, public urination, catcalling, foul language, racist remarks, companies throwing events and the appearance of a rainbow-colored painted pony. “Sometimes, when they are outside, they’re playing beer pong just wearing their underwear,” said Hazel Oldt, age 11, who can see them next door from the third-floor rooftop garden of her house.

Many of the complaints result when there are well over six people staying at these houses. So how do owners get away with renting to more people than city rules allow? “Determining how many are occupying versus just visiting is almost impossible,” Carl Smart, who is the director of Austin’s code department, said, chuckling as he did so.

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The home, which has strict rules against parties, includes a game foyer on the second-floor landing.

What was so funny? Had some of the guests been coached to say that they were related? “I think so,” he said. “There is no way for us to disprove or to prove it. We could ask them to, but they don’t have to, so we have to take their word for it.” KVUE, a local television station, tagged along with code enforcement officers who heard from guests at one house that there were triplets inside and that someone else was related to a fifth guest by marriage.

The neighbors would prefer that the city simply cap guests at six people — or, better yet, stop allowing what they describe as rogue hotels to operate in residential neighborhoods. (They have no problem with people renting out their entire homes occasionally or renting rooms more frequently, while the owners themselves are in residence.)

At HomeAway, which is based in Austin and also owns Vrbo.com, executives did not want a ban and said that renting out one’s home on a short-term basis was a fundamental right. Nor do they think that it is a commercial activity. “It’s a residential use of the property,” said Matt Curtis, who runs its governmental relations efforts. “It’s no more a business than someone renting it out long-term would be a business.”

Even if no one, in this instance, is doing any actual residing? HomeAway’s contention is that the visitors coming for the weekend are the residents in this context.

Mr. Curtis questioned how widespread the problem was. Airbnb provided some statistics about its customers, noting that from Oct. 1, 2014, to Oct. 1 this year, 87 percent of trips to Austin involved four or fewer people and 97 percent involved eight or fewer. The average age of Airbnb guests in Austin is 36. According to the research company Airdna, of the 1,414 Airbnb listings in Austin as of Aug. 31 with three or more bedrooms, 33 offer lodging for four or more people per bedroom while 618 sleep over two per bedroom.

Airbnb offers a hotline for neighbors having problems with hosts anywhere it operates and is building tools that will try to recognize parties before they happen, say when someone books a large house and that listing is immediately viewed by many other site visitors.

Since October 2012, Austin has received 266 complaints about the type of registered properties where the homeowner is generally not present. Twenty percent of the properties have at least one complaint, with an average of 2.4 complaints among those. Seventeen percent of the complaints were about over-occupancy.

The house where I stayed has received 15 complaints, and the city has suspended its license once. The walls have “Dumb and Dumber” and “Anchorman” movie posters, and the three bedrooms are full of bunk beds and futons. “Our neighbors understand that your group is here to have a good time,” the listing says.But not too good a time. Each door to the outside has a framed copy of Austin’s noise ordinance nearby, and Jason Martin, a limited partner with partial ownership in the property, sends an extensive list of house rules to guests urging them not to disturb the neighbors. “It is extremely professionally run,” he said. “Any word of a bachelor party or fraternities is an immediate no-go.”

In fact, house parties and “organized social events” are not allowed on the premises, a rule I thought I was not breaking when I invited the neighbors over. There’s another rule noting that “all persons entering the premises are counted as chargeable guests.” I should have reread the rules and reviewed my original communications with Mr. Martin once I decided to hold the gathering in the days after I made the booking.

Those visitors were especially concerned about their property values. For many of them, their homes are their largest asset. Jessie Neufeld, who bought her home right before the local rules changed in 2012 and now has a 2-year-old child, put it most bluntly. “We did not buy our house to be living next to

a hotel,” she said. “Would you buy a home if you knew a hotel like this was operating next door, if you wanted to set your life up and raise a family?”

I put the question to two real estate professionals whose names I saw on for-sale signs for homes that were next to or close to some of the party houses. Were the properties going to sell for less because of the problem properties nearby, and did they have a duty to disclose these houses to any and all buyers?

Katie Brigmon of Dash Realty did not want to answer many questions about her listing, a house that is very close to one problem property, and my call to her quickly went dead.

Jeff Grant from Saddle Realty said that he wasn’t aware of the short-term rental several homes down from the house he’s trying to sell on Hidalgo Street. “But my philosophy has always been disclose, disclose, disclose,” he said. “I don’t think it affects property value in the least.”

It probably won’t if the buyer simply wants to rent out the home every weekend. But every other home buyer ought to be searching Airbnb, HomeAway and similar sites for listings that are close to a home that they’re considering buying.

Ms. Neufeld said she resented the fact that people making a living from renting out homes for the weekend have put her own home’s value at risk. “They are leveraging our neighborhood for their profit, telling people to come stay in this beautiful place where you would like to pretend that you live,” she said. “And they are making people miserable.”