There Goes the Neighborhood

City split over the latest in urban living options: short-term rentals

The Zilker Neighborhood Association's Andrew Elder – pictured with his children Ani, 5; Madoc, 3; and Bevan, 14­ months – opposes allowing commercial short-term rentals in the neighborhood.
The Zilker Neighborhood Association's Andrew Elder – pictured with his children Ani, 5; Madoc, 3; and Bevan, 14­ months – opposes allowing "commercial" short-term rentals in the neighborhood. (Photo by Jana Birchum)

Four times a year, Sheila Fabrizio travels to Austin from her home in Allentown, Penn­sylvania, with her 20-year-old son, Derek Strunk. Derek is nonverbal and has autism, and his mother brings him to Aus­tin for weeklong, one-on-one communication therapy sessions at Helping Autism Through Learning and Outreach, a nonprofit started by Soma Mukhopadh­yay to spread the gospel of her Rapid Prompt­ing Method. Proponents of Rapid Prompt­ing say it enhances the learning and communication performance of people with autism, and Sheila Fabrizio says the sessions have "made my son's life better."

While Derek gets treatment, she and her son stay for a week in a short-term rental home on Mt. Bonnell Road. STRs have been a godsend, she says, because hotels are both cost-prohibitive and impossible for her son to stay in; Derek needs to be moving constantly. She's worried that the attempts by some to rid the city of so-called "commercial" – non-owner-occupied – STRs in residential neighborhoods will mean she and other "outsiders" will be "shut out" of Austin, making it harder, perhaps impossible, for her to improve her son's quality of life.

Austin­ite Andrew Elder, meanwhile, is president of the Zilker Neighborhood Assoc­i­a­tion and father to a 5-year-old girl, Ani, who suffers from Prader-Willi syndrome and who, like Derek, is on the autism spectrum. Ani started going to Zilker Elementary School at age 3 as part of the Preschool Program for Children With Dis­abilities. Under that program, Elder says, she's blossomed, so much so that she'll be matriculating into kindergarten with her peers next year. But Elder is worried that if something isn't done to curb the number of STRs in his neighborhood, the number of families with children in 78704 will continue to decline and its schools, already underenrolled, will be shut down. School closure, he says, would be a "supreme hardship" for his daughter and his family.

So, when short-term rentals have the power to both bring comfort to the families of sick kids and cause them severe hardship, how is a City Council member to vote?

Meet the Invisible Neighbors

Laura Morrison
Laura Morrison (Photo by John Anderson)

"That was one of the worst decisions this council has ever made."

Council Member Laura Morrison is sitting in her office at City Hall. It's Tuesday, five days after City Council approved on first reading a proposal that would give the official OK to short-term rentals. Morrison had presented her own substitute motion that would have made non-owner-occupied STRs illegal, but it was rejected, 5-2. Instead, council approved Council Member Chris Riley's plan, which would allow non-owner-occupied STRs in areas zoned residential, with a cap (proposed at 3%) on the number of those properties in any particular ZIP code.

In Morrison's view, allowing non-owner-occupied STRs in residential areas would be an unprecedented shift in the way the city regards its residential neighborhoods. Non-owner-occupied STRs are no different than hotels, she says; their increased presence in single-family neighborhoods will reduce the housing stock available for permanent residents, drive up prices, and drive out families, in turn driving down enrollment at schools that are already facing potential closure.

"It comes down to people having a vested interest, being anchors, caring about schools and libraries, being 'the people next door': These things make up a neighborhood," Morrison says. "I started out thinking like Council Member Riley does, that we should find a limit for the number of non-owner-occupied STRs, and that would be a good compromise. But when I started thinking about why we separate single-family neighborhoods from other zoning categories, why we think it's important, then I realized you need people living there, not just people passing through."

Up to this point, STRs have been essentially unregulated, even uncounted. A recent report published by the City Auditor's Office determined that there are approximately 1,500 short-term rentals in the city. Of those, there is owner information available for 900, 563 of which are owner-occupied and 337 of which aren't. By state law, the owners of these properties – defined by the city as any single-family home that is rented for less than 30 days at a time – must pay hotel occupancy taxes, but studies have shown that few of them do, especially owners who rent out their homes only for specific occasions, like South by Southwest or the Austin City Limits Music Festival. Locals willing to rent out a room or an entire house during those peak times can make hundreds, even thousands, of dollars a night. By law, they are required to pay 15% of that in hotel taxes: 6% to the state, 9% to the city. Under city code, 15% of HOT revenue goes to the Cultural Arts Fund, which last year distributed money to hundreds of groups, including Arthouse at the Jones Center, the Austin Film Festival, Mexic-Arte Museum, and the Texas Juggling Society (which, we presume, spends its $1,000 in annual grant money on chainsaws, flaming bowling pins, and insurance).

A short-term rental home in the Zilker neighborhood
A short-term rental home in the Zilker neighborhood (Photo by Jana Birchum)

Supporters say that if STRs are restricted (or banned outright), millions of dollars in tax revenue will be lost. Bob Easter, a founding member of the STR owner organization the Austin Rental Alliance, guesses that the city lost between $5 million and $10 million in unpaid HOT revenue last year because it does not systematically verify that STR owners are paying their taxes. Rather than getting rid of STRs, ARA wants the city to get them all registered.

Registration appears to be the only policy proposal on which the opposing sides agree. As the issue has heated up, so has the rhetoric, with STR supporters accusing opponents of xenophobia and some STR opponents engaging in it. In the April 2011 edition of the Allandale Neighbor, Rob Robin­son, a member of the Allandale Short Term Rental Committee, wrote that the committee had come to the conclusion that STRs are a "significant problem in Allan­dale," both in terms of safety ("People living near STRs are subjected to a flow of strangers on their street and past their front doors, strangers about whom they know nothing") and the neighborhood's "sense of community" ("Renters of STRs will never be our friends, and we do not want them to be friends with our children"). ARA's Easter, meanwhile, thinks opponents are damaging Austin's welcoming reputation by trying to drive away longer-stay travelers. "Why wouldn't you want people coming to Aus­tin?" he asks.

One real problem with getting rid of STRs, or even just "commercial" STRs ("commercial" is a loaded term in the STR debate), might be not the damage to Austin's reputation as a "friendly city," nor even the lost HOT revenue, but the potential loss of cultural business – which would result in diminished sales tax revenue and retail activity. In letters sent recently to City Coun­cil members, Alamo Drafthouse and Fantastic Fest founder Tim League, Fun Fun Fun Fest and Transmission Entertain­ment partner James Moody, and film location managers John Crowley, Steve White, and Robbie Friedman wrote, "Short-term rentals are used by a variety of Austin businesses to house temporary employees and project-based workers. This is especially true for film, gaming, and other creative industries. ... The effort to effectively ban these types of rentals would harm our tax base, our residents, our businesses and our City." With Austin's once-thriving film industry already losing much of its business to neighboring states offering far more generous tax incentives, advocates are concerned that getting rid of non-owner-occupied STRs will give out-of-town film, TV, and video game productions one more reason to take their business to New Mexico or Louisiana.

In a December letter to council members from the Austin Film Society, Chris Jackson, production coordinator for the television show The Lying Game (one of the city's increasingly rare film-industry success stories) was quoted as saying: "We rely heavily on short-term rentals. We have approximately 15 short-term rentals at the moment." Sources say that number is expected to rise when the show returns later this summer to shoot its second season. In a similar letter sent to Council in April, Austin Gay & Lesbian International Film Festival Board President Kodi E. Sawin wrote that the festival "regularly [relies] on rental homes ... to host guests from out of town." Some in the film world worry that if STRs go away, their industry will take a hit, both to its finances and its reputation.

Suspicions vs. Statistics

Council Member Kathie Tovo doesn't share that concern. She believes the city won't lose tax revenue if non-owner-occupied STRs are banned, because several new hotels are being built and proposed and because, well, people will always want to come to Austin. "Those visitors and industries will come to Austin regardless," she says. "We have lots of places for them now, several major hotels are under construction, and more are on the way. I believe we will still get that tax revenue." At the June 7 council meeting, Tovo added a friendly amendment to Laura Mor­ri­son's motion that would have granted commercial STR owners a three-year amnesty period to come into compliance with a ban. That proposal failed, also by a vote of 5-2.

Kathie Tovo
Kathie Tovo (Photo by John Anderson)

Tovo says her primary concern when it comes to short-term rentals is the way they're clustered in certain ZIP codes. According to the auditor's report released at the end of April, 492 of the city's 1,500 STRs are located in 78704 (Central South Austin, from Lady Bird Lake to Ben White). That includes 127 non-owner-occupied properties and 194 whose ownership is unknown. According to city demographer Ryan Robinson, there are 23,000 total housing units in 78704, including 7,200 detached, single-family units, and 1.76% of those 7,200 are confirmed non-owner-occupied STRs. Add in half of the 194 properties whose ownership is unknown (as Riley did to come up with his proposal), and you've got just about 3%. Numbers that high, Tovo argues, are bound to have a negative impact on neighborhoods, from school enrollment numbers and the number of families with children, to affordability, crime statistics, and civic participation.

"Short-term rental occupants aren't going to get involved with their neighborhood associations, volunteer for park cleanup days, or sign up for campus advisory committees at neighborhood schools," Tovo says. "There are all kinds of ways we participate as a member of a neighborhood that you're not going to have."

And a lack of participation, opponents argue, will mean neighborhoods are less safe because there will be fewer people who recognize their neighbors and, more importantly, fewer people who recognize when someone is not a neighbor. As Zilker's Andrew Elder puts it: STRs "remove eyes on the street" and "create blind spots where we don't expect our friends and neighbors to be going" and situations where there is "no neighbor sitting on the front lawn watching out for my interests, my children."

This is where the language of the anti-STR arguments gets a little soft. Tovo says STRs "degrade the fabric of our communities," that neighborhoods rely on active neighbors. Morrison talks about "anchors" and the need for families and schools to "stay vibrant." Even Riley, who wrote the first draft of the resolution that will allow non-owner-occupied STRs in residential areas, is worried that too many of the properties will lead to a "hollowing-out of our neighborhoods."

Yet even setting aside the small citywide percentage of commercial STRs, the numbers don't seem to bear out opponents' claims about the relationship between those properties and rising housing costs, declining family numbers, and increases in crime and code violations. The City Auditor's April report, first requested by council in January on a motion from Council Member Bill Spelman, shows that STRs result in no more 911 or 311 calls than do other residential properties. Ryan Robinson says the auditor's map – showing STR clustering in 78704 – and 2010 Census reports of a trend toward fewer families with children in that ZIP code may reflect a cause-and-effect relationship, but he acknowledges that's just his "professional opinion" based on what he calls "lumpy" data. And a report commissioned by the National Association of Real­tors does indeed show that STRs can drive up real estate prices, but we have no local studies to the same effect. And it's a rather nebulous thing to attempt to legislate anyway: the "feeling" you should get from a neighborhood.

"That's why we're swimming through the molasses, because there's no way to quantify the effect these things are having," says Spelman, who, as a longtime professor at the LBJ School of Public Affairs at UT, prays at the altar of statistics rather than sentiment. "The hard edge of the argument – that STRs are causing more 911 and 311 complaints – was proven wrong by the auditor's report, so we're left with the soft edge of the argument." Spelman voted in favor of the Riley proposal, largely on the assumption that making STRs illegal (like bars in the 1920s) will only drive them underground and make them even harder to regulate. "We know what happens when we ban things," he reminded his colleagues before their vote two weeks ago. So the important thing, he argues, is to drag these properties into the light of legality so the city can regulate them. Anyway, he says that's what he'll be pushing for when the issue returns to council on June 28.

"The real question is: How do we get the STRs out there to come into compliance?" Spelman says. "Right now we have a stick, which is we can take away your permit. I think it would be nice if we could find some sort of a carrot as well: 'If you do this then there's some cookie the city can give you.' I don't know what that looks like yet, but I'm sure that if the stick is actually applied to some of the few bad actors out there – the 'party houses' or homes with too many code complaints – it will encourage everyone to come into compliance."

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short-term rentals, Zilker Neighborhood Association, City Council, Laura Morrison, Kathie Tovo, Austin Independent School District, AISD, school closure, taxes, film industry, music industry, tax incentives, Bill Spelman, 78704

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