By Stuart Soffer
The Sharing Economy and Local Housing SupplyUploaded: Jul 2, 2016
I intended to comment about the sharing economy and housing, but this post also touches on Menlo Park’s General Plan Update (called Connect Menlo).
The term ‘Sharing Economy’ refers to the ability to seamlessly reuse idle resources in a market. The Uber ride sharing application is the poster child for this capability: drivers use their own vehicles – some picking up passengers on their own way to work. Lyft, Gett and Via followed suit with similar services. The feature I get from Uber is accountability: I can see a map of the route used, and price estimates before booking.
Vacation Rental By Owner (VRBO.COM) and AirBnB.COM emerged as forming a marketplace for short term rentals when traveling. VRBO’s are a good deal, we have used it. This is a boon for the experienced middle class traveler, offering experiences in real neighborhoods and locales, in return for forsaking the perks provided by established hotels. We have selected vacation apartments twice via VRBO. I was tentative at first, but was quickly on board when I saw the two-bedroom- two-bath apartment in Lisbon as our first booking.
Vacation rental sites are drawing criticism from several quarters (no pun). It is no surprise to see disruptive from disruptive business models.
- Unfair competition, hotel occupancy taxes
- Hotel competitors’ occupancy
- Effectively taking some housing formats off the rental housing market
Cities may protest since vacation rentals don’t collect and remit Transient Occupancy Taxes (TOT) that cities – including Palo Alto and Menlo Park – decided to enjoy. This is only true to the extent that there are vacant rooms at hotels at a comparable rate. But in high-demand areas where the occupancy rate is high it’s a tough argument.
Another alleged victim are hotels losing business to VRBO’s. The vacation rental doesn’t have the same expenses, services and overhead offered by hotels. This is a market choice. Hotels don’t offer the same experience.
There is also what I’ll call the ‘Misuse’ of housing argument. Some in San Francisco argue that an apartment – used solely as a VRBO - removes housing stock from the supply of affordable or market rate housing. This has some nuance. If I own the apartment or building, that should be up to me. If I am renting the apartment, that’s up to the scope rental terms that I have.
New York City has more complicated scenarios where many apartments are rent controlled. Rent control covers not only low-income housing projects, market rate apartment stock – even some on Park Avenue and Broadway. There’s an ethical issue of using a rent-controlled housing. One consequence of pervasive sub-rental is change in neighborhood ambiance: the New York Time describes this in Airbnb and the Battle of Suitcase Alleys.
“The twin plagues of chain commerce and luxury residential towers have eradicated much of what distinguished the two neighborhoods historically, but Mr. Quinn noticed one big difference right away — all over the East Village, and where he lived in particular, people were hauling luggage around all the time. He began referring to his block as Suitcase Alley. Airbnb guests from around the world remain always in view.”
Necessity is the mother of invention: One response to spotting rental housing in violation of the spirit of existing laws is SubletSpy (Disclosure: this is a startup started by a friend of mine). Apartment landlords subscribe to reports of potential misuse.
Menlo Park’s General Plan Update anticipates a large increase in office space which also triggers additional housing obligations. Any project should also provide a quantity of housing engendered by the project office space – avoiding the usual requirement mandates of ABAG long after the built.
In the past, we have zoned (somewhat to conform to state requirements) enhancements to ‘granny units’ on residential properties. I don’t know how many of these units actually function as intended to alleviate ‘affordable’ housing crunches.
Are granny units used as VRBO destinations? More egregious would be the use of our BMR units as VRBO’s. Menlo Park does have a history of limited unintended use of the BMR programs units
The window for review and comment on the new General Plan and Housing Element – and consequential traffic increase - is closing soon. Menlo Park City is forcing the review of complex documents over summer vacation. This is a sleight-of-hand tactic I’ve heard of being used in the past. It’s happening before our eyes. Speak up to Council.