In early 2
019, New York City cracked down on a $20 million illegal hotel scheme where the a small group of operators rented out 130 Manhattan apartments using fake or misleading Airbnb accounts. To avoid detection, the operators generated multiple email addresses, used minor variations in host names to create confusion (“Jacob Itah” as well as “Jacob Itach”, for example), provided incomplete addresses in the listings, and posted another company’s corporate address in place of their own.
The degree of deception and sophistication in this scheme is an example of what city planners may encounter when they are ready to begin the Endgame stage of their short-term rental (STR) compliance efforts. While the hard cases may take more work, the good news is that, with the right long-term strategy, the municipality will by then already have most other properties under compliance and a good system of operations in place to meet any challenge.
The Endgame is the final stage of the Three E’s of Enforcement, and you know you have entered it when your municipality has already met the goals of the previous two stages (Establishing the Rules and Enforce Compliance):
- Your city is reaping the benefits of the hard work that has gone before, with 70% or more of your STR properties in compliance
- Your ordinances are well-defined and may have already gone through a round of revisions
- Residents can easily report complaints and suspected violations through a 24/7 hotline
- There is a system in place to stay on top of current STR listings
With the Endgame, your municipality turns its attention to the last remaining STRs that are still not in compliance. These properties typically fall into two categories: new properties and difficult cases.
Keeping up with turnover
Even if you succeeded in bringing every sin
gle STR in your city into compliance, the natural process of turnover will create new properties that will require your attention. On average, 10-20% of properties change ownership every year. Beyond just the real estate buying and selling, is the high turnover with property managers. Owners switch between property managers, or fire their property managers and decide to host themselves. This leads to an additional 10% turnover on the STR listings advertised online because Property Manager A will de-list and Property Manager B will create a new listing. New operators who are proactive about compliance will need to be entered into the system, and operators who are ignorant of or resistant to the local ordinances will have to be tracked down and contacted.
Addressing these new listings is important, as even a 10% annual rate of turnover can drag a region’s compliance rate from 100% down to 65% in only 5 years. If your region has a higher annual turnover rate, you will need to plan for that much more effort to stay up to date.
The best way to spot the new listings on a platform is to require compliant properties to display their permit numbers. Then staff members can quickly sort through the listings for their region and pull out the ones without them. The listings with permit numbers can just be validated, which is a less time-consuming process.
When possible, try to reach out to real estate purchasers to let them know about the ordinances applicable to STRs. In fact, one of the easiest paths to outreach to the STR community is to engage with real estate agents, who typically meet buyers and sellers regularly. They will pass the word on that the municipality is serious about enforcement. So sending friendly reminders to real estate agents periodically is a low cost, proactive way to softly enforce the ordinance.
Uncovering the operators who don’t want to be found
There is a lot of detective work you can do in front of a computer, as detailed in part two of this series. Once you enter the Endgame however, you may have to employ active fieldwork to track down deceptive operators, such as those uncovered in New York City.
These operators can make themselves hard to find by using fake names or generic terms like “Owner/Operator.” The photos in the listing won’t include any exterior shots or views, making the location harder to identify. Straw hosts will create new identities or borrow other people’s names for each of their properties.
Sometimes the most elusive non-compliant STRs need some field work and surveillance and old-fashioned knocking on doors. To track down these tough cases out in the field, you can try the following:
- Watch the comings and goings at the property’s driveway. Run license plate numbers to see if they belong to area residents.
- Be responsive to the tips coming into your hotline, as irritated neighbors will be your best watchdogs.
- Look for lock-boxes nearby the property
- Look for keypads, or remote control lock cylinders on doors
- Contact the people in the property in person and ask if they are residents or renters. While some operators coach their renters to say they are friends of the owners, many renters resent being put into an awkward situation, and their complaints may show up in the listings.
In all your efforts, keep your actions transparent, well-documented and court-defensible so there will be no legal complications later. Clearly identify yourself as representing the municipality and not
Cross-Checking Tool
Because most of the rentals are licensed at this stage, it becomes harder and harder to “mine the gold” as compliance gets close to 100%. That is why you need to employ some cross-checking tools to automate the task of lining up STR listings with known STR licensees and/or active accounts. The difference between this is evident in the gold mining analogy if you compare panning for gold to an automated wash plant. Ideally your cross-checking tool will score each candidate by a probability of match to a licensee. The closer geographically the STR listing is to an STR licensee, the higher the score should be and the further away it is, the lower the score should be. This is a decent strategy for houses, but it doesn’t work for condos and apartments, because there will be many licensees at the same location as the other possible unlicensed operators. Your Cross-checking needs to look at other factors and metadata in the listing to line things up.
Budgeting for the Endgame Stage
The extra steps needed to track down difficult cases may seem daunting, but for many municipalities the annual cost of enforcing compliance actually drops after the second stage is completed and up to 70% of properties are in compliance. If you are outsourcing your compliance efforts, be certain that their pricing adjusts to your stage of compliance.
When you have completed the Endgame stage, and if your municipality maintains its efforts every year, you will have happier residents, a safer environment for visitors, and increased revenue.