Seattle Plans to Put Home-Sharing Entrepreneurs Out of Business

by Christina Sandefur
July 11, 2018

One might expect Seattle—home to Amazon, Microsoft, and Expedia—to embrace HomeAway, Airbnb, and other home-sharing services, but the city’s well-earned reputation as a haven for innovation does not extend to private property rights. For over a decade, home-sharing was commonplace in Seattle and thrived under a reasonable regulatory system that included paying short-term rental taxes to the city. Entrepreneurs built successful businesses based on carefully acquiring and professionally managing short-term rental properties around the city.

Indeed, home-sharing has played an important role in smoothing the city’s growth over the past decade. In addition to accommodating tourists who come to Seattle to experience its natural beauty and vibrant lifestyle, short-term rentals help facilitate the city’s influx of new workers at large tech employers. People who are moving to Seattle—or working there for a few months at a time—need a place to stay, and short-term rentals provide an obvious solution.

Home-sharing has never really been a problem in Seattle. Reported complaints are low—about on par with long-term rentals. And short-term rentals have come to serve an important function in helping the city deal with its recent growing pains. But despite all of this, the city voted late last year to restrict short-term rentals.

Seattle’s new regulations, which go into effect in January 2019, make it difficult for someone to operate a home-sharing business, harming local entrepreneurs who have been operating in the city for years without incident. A person can only rent out their primary residence plus two additional properties; if an individual or business owns more than three properties, they will be prohibited from using them for short-term rentals. Seattle claims these restrictions are necessary to increase the supply of affordable housing in the city, but the free market is already doing that. Indeed, the Seattle Times recently reported that Seattle has a glut of new housing, which is driving rents down. All these restrictions do is unfairly and unconstitutionally punish people who have made home-sharing their livelihood.

For example, entrepreneur Andy Morris co-owns Seattle Vacation Home, LLC, a local business that operates 11 properties around the city and rents nine of them as short-term rentals through online platforms. These properties routinely receive high marks from renters, and Seattle Vacation Home take the utmost care to keep them in excellent condition. The company also works hard to keep problems at its properties to a minimum. Over the course of more than 2,500 bookings, the properties have received only 10 noise complaints, which Andy promptly dealt with, and the police have been called only once—by Andy himself when an unauthorized party got out of hand. In addition to providing a livelihood to Andy and his wife, Seattle Vacation Home provides a livelihood for the family that runs Clean Team, LLC, which cleans and maintains Andy’s properties. If the new law is allowed to stand, it threatens to put Andy, his wife, and everyone who cleans and works on their properties out of business.

These new rules are unconstitutional under the Washington Constitution. In Washington, a court evaluates a land-use restriction by looking at whether the regulation is aimed at achieving a legitimate public purpose; whether it uses means that are reasonably necessary to achieve that purpose; and whether the regulation is unduly oppressive on the landowner.

When it adopted the new home-sharing restrictions, Seattle’s stated goal was to increase the available supply of affordable housing in the city. While addressing a housing crisis may be a legitimate governmental interest, the new law fails under the second and third parts of the Washington test. Seattle introduced no evidence showing a link between short-term rentals and affordable housing. Furthermore, even if there were a link between short-term rentals and housing affordability—and there is not—the burden the law places on Seattle’s community of home-sharing entrepreneurs is grossly disproportionate to any minor public benefit that may be achieved. Indeed, the law threatens to put many home-sharing entrepreneurs out of business entirely.

That’s why the Goldwater Institute is taking the city to court—to defend the rights of Andy and other Seattle home-sharers.

Seattle is punishing responsible homeowners simply because a handful of landlords operate nuisance properties. But the government cannot ban backyard barbeques just because a few of them get out of hand. The answer is to use existing laws to crack down on bad actors, not to strip everybody of their property rights.

Click here to learn more about the Goldwater Institute’s fight to defend home-sharing coast-to-coast.

Christina Sandefur is the Executive Vice President of the Goldwater Institute.