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Tourist Trap: Rental Property No Vacation for Owners

August 18, 2015

Last weekend, I attended the annual Montana Property Rights Conference, where I spoke about ways the so-called “sharing economy” is helping homeowners open their doors to vacationers seeking affordable lodging and local character – and how regulations are jeopardizing this trend.

The growing popularity of online rental services like Airbnb and VRBO is spelling an end to an era where expensive commercial hotels are the only options for travelers, bringing tourists to cities they otherwise might not visit. It’s also encouraged entrepreneurs to invest in their communities.

But regulations cropping up nationwide are destroying property rights and putting entrepreneurs out of business – all at the expense of homeowners who have invested in the sharing economy.

Take Glenn Odegard, who bought a home in the tourist town of Jerome, Arizona. Glenn’s home sat vacant for sixty years, dilapidated and filled with rocks and mud. But Glenn saw an opportunity – if he put time and money into restoring the house, it could earn income as a vacation rental. So Glenn invested time, expense, and effort into getting his permits and transforming the home from a health hazard into a historic beauty that earned a featured spot in Arizona Highways Magazine.

Glenn’s “reward” for investing in the community? Town officials suddenly changed the rules and told Glenn he could no longer use his home as a rental, even though that is the only reason he bought and restored the property.

Unfortunately, this is part of a broader, nationwide trend.

From New York City to Santa Monica to Hawaii, cities and states with bustling tourism economies are rushing to ban private homes from being used as vacation rentals, leaving property owners to pay the mortgage and taxes while taking away their ability to earn rental income.

Changing the rules in the middle of the game unfairly prevents property owners from pursuing the purpose for which they bought the property. Fortunately, there’s a solution that’s both principled and practical.

The Goldwater Institute has developed an initiative to protect property owners from bearing the brunt of overregulation. The Private Property Rights Protection Act is simple – it requires government to pay you when regulations take away your right to use your property and reduce the value of your property.

PPRPA respects the rule of law and people’s property investments while recognizing and accommodating community desires. It does not stop the government from regulating – it just says that if government changes the rules in the middle of the game, the regulatory costs are borne by the government imposing the restrictions.

Arizona voters overwhelmingly enacted the Private Property Rights Protection Act, by far the nation’s strongest protection for property rights. In its decade of operation, the Act’s success has sent a message to officials in Arizona that they can’t expect to take property from people without paying for it. And it’s encouraged entrepreneurs to contribute to the sharing economy without fearing that government will rob them of their investments.

PPRPA is an excellent model for states that want to enact meaningful security for property rights. We are looking forward to 2016 – the Tenth Anniversary of the Private Property Rights Protection Act – as ushering in a new era of protections for property rights, fairness, and the rule of law.

 

 

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