Precedent-Setting or a Footnote? Expedia and Union Reach Pact on Short-Term Rentals

5

Whether it’s short-term rentals versus hotels or ride-sharing firms versus the taxi industry, gig economy companies around the world have clashed with incumbents seeking to protect their turf.

In what the parties are characterizing as a first in North America, if not globally, Unite Here Local 30, a union representing some 6,000 hotel, airport, and restaurant workers in San Diego, California, signed a memorandum of understand with Expedia Group on how to regulate short-term rentals in the city after years of contention.

For Expedia Group and other short-term rental platforms, the compromise would go a long way toward eliminating ambiguity over the legality of short-rentals in the city. The pact would also drastically thin the ranks of whole-home vacation rentals in San Diego. For the union, the tentative agreement would protect hotel jobs, reduce real estate speculation, and generate more affordable housing.

5-Year Battle

The city and the platforms have been battling over the short-term rental issue for the last five years or so. In 2018, the city approved regulations that would have banned many vacation rentals and limited other short-term rental stays, but didn’t implement them after an Airbnb-backed coalition threatened to take the matter to a voter referendum, and the possibility of litigation loomed.

City Council member Jennifer Campbell reached out to the union and Expedia Group, and that spurred the talks, which began a month or two ago. It doesn’t appear as though Airbnb was invited to the party.

“Airbnb has never showed an interest in being a partner with anyone and has repeatedly stated that they would litigate or do a referendum previously,” said Brigette Browning, president of Unite Here Local 30.

Expedia Group officials, though, are now talking to Airbnb about signing onto or endorsing the pact. Airbnb declined to comment, but may be contemplating its next move.

“It’s time for a solution, now is the time,” Amanda Pedigo, Expedia Group’s vice president of government and corporate affairs, told Skift Monday.

Calling the memorandum of understanding “extremely unique” in the short-term rental industry, Pedigo said it takes municipality-platform relations from mere data-sharing agreements under duress with litigation as a backdrop to an era of “true compromise.”

Acknowledging that what’s appropriate for San Diego might not be appropriate for another jurisdiction, Pedigo said, “We hope this will be a model for perhaps the rest of the country,” if not the rest of the world.

The agreement, she said, reduces the number of short-term rentals in the city, and thus limits the industry’s growth prospects, but ensures they are legal, and provides a basis for meeting some community concerns.

The Union’s View

Rick Bates, research analyst at Unite Here Local 30, said the union hadn’t been opposed to the idea of short-term rentals, but wanted to mitigate the adverse impact on members’ jobs and the housing market.

“It’s a threat to our jobs because these vacation rental operators don’t have to abide by the same regulations and rules, and put hotels at a disadvantage,” Bates said.

One of the issues is that the market transitioned from individual owners of second homes renting out properties toward real estate investors buying up a “huge swath of properties,” Bates said.

He alleged that such operators would hire immigrants and undocumented workers to clean properties and perform other tasks, and this led to a “wild, wild west scenario,” ripe for exploitation.

Many of the local’s member are women and people of color, he said, and 98 percent of them were laid off when the coronavirus pandemic hit, and haven’t returned to work, Bates said.

If San Diego adopts an ordinance along the lines of the agreement, then 10,000 to 12,000 housing units would return to the market where local workers could live, he added.

“We’ve always fought for the concept that one job should be enough,” Bates said, referring to workers having to take on multiple job in order to pay rent.

The City Council

The union-online travel company compromise would only become reality if the City Council draws up and adopts an ordinance based on its provisions. The council recesses in August so it’s unclear when a potential ordinance might be on the agenda.

Airbnb, though, could be a wild card in the process. It’s unclear what stance Airbnb will take, and whether it will seek to take the matter to a referendum.

The agreement limits the footprint and the potential growth of vacation rentals in the city, which is a popular business and convention destination. Whole home short-term rentals would be limited to just 0.7 percent of the city’s total housing units. That would reduce the estimated 16,000 vacation rentals today by around 75 percent to some 3,750 permits.

The exception to this cap on whole home rentals, which is the Expedia Group and its Vrbo subsidiary’s core short-term rental offering, is in San Diego’s Mission Beach neighborhood. The town council of Mission Beach, which has long been a vacation rental stronghold, and Expedia-union agreement call for allowing another 1,086 vacation rentals there that wouldn’t count against the citywide cap.

There would be limits on real estate speculation because individuals and LLCs would be barred from holding more than one permit at a time, under the tentative agreement.

In one portion of the agreement relevant to Airbnb, short-term rentals where the permanent resident is present would have no limits on the number of days they can be rented.

But in situations where the “the lodging will be owned or sub-leased with permission of the owner and rented as a STR (short-term rental),” then the maximum number of days the unit can be rented annually is capped at 30.

Property listings would have to display a permit number, and would be deactivated without one. The city would create a registry of the permit holders. (See the memorandum of understanding embedded below for more details.)

In sum, the agreement would significantly diminish the number of short-term rentals in the city, and give communities some safeguards, such as mandating a two-night minimum for vacation rentals, but it would provide a legal framework for the sector.

Download (PDF, 231KB)