It is generally considered a good thing if there is high demand for short-term vacation rentals in your city. And the reasons for this demand in Starkville are obvious.
From football, baseball, and basketball games at Mississippi State to events in the community throughout the year, tourism play a key role in the city’s economy. And thanks to technology, websites like Airbnb make it easier than ever for visitors to search for new options during their stay.
While short-term rentals in the past may have consisted of advertisements in newspapers that tell you very little, consumers now have pictures, location, and feedback from previous guests. And the ability to pay via an intermediary.
Why are people looking for this option? Short-term rentals provide the visitors with a different experience. It is usually more personal and accommodating. If you are visiting with a family, it is often the only, or at least most cost-effective, option.
How do you know the room or house you are renting will be acceptable? The host has an incentive to provide a positive experience. As is the case with most services in our sharing economy, your reputation – and ability to stay in business – is built on customer feedback. Reputation is everything. Airbnb and other homesharing platforms are incentivized to ensure consumers and providers are not harmed. In fact, it’s in their best interest to ensure the experience is valuable and enjoyable. This is the free market.
Such technology has benefited the state, too. Last year, Airbnb remitted $1 million in taxes to the state that hosts collected. Over 69,000 guests utilized the service during that time period. Every sign indicates that these numbers will only continue to grow. Unless government gets in the way.
Which, unfortunately, is the direction many cities have gone. Some have even been sued over it.
The city of Starkville is currently debating a short-term rental ordinance. The original proposal was draconian in nature and would have likely ended much of the short-term industry in the city. It would have limited the number of weekends and nights per year a house could be rented, imposed a $300 licensing fee, and required a homeowner to be a permanent resident to receive a permit from the city.
Essentially, you would have to live in your house to rent out your house. Many homeowners have invested in real estate. This increases property values, which is a benefit for the city. And homeowners have an obvious incentive not just in receiving positive feedback online, but in maintaining the value of their investment. That is to say, a house being trashed is not good for anyone.
Alternatives to the original proposal are much more user-friendly, placing no limits on rentals, lowering the licensing fee, and easing off the residency requirements.
When it comes to the need for these ordinances, there are a couple common complaints. Noise is a popular topic. Yet, a city can pass and enforce a noise ordinance for everyone. It doesn’t require banning short-term rentals. If trash is being left behind, again, you can have ordinances concerning trash in yards.
The truth is that the biggest opponent to Airbnb and other homesharing sites is the hotel industry. The industry naturally wants to petition government to help create a moat around their industry.
It is understandable why people working in the hotel industry are upset by this disruption and by the fact that these platforms and their users are not governed by the same regulatory burdens of the hotel industry. The same can be said of the taxi industry when Uber was launched or of virtually any business that suffers from creative disruption. The cycle is as old as capitalism.
The incumbents in these industries have paid a regulatory cost. Rather than trying to impose old regulations on new, innovative, customer-focused players, we should consider deregulating the existing industries so that competition is enhanced and innovation is incentivized. The way to achieve this is through the free market. Writing new regulations and trying to enforce old ones encourages cronyism, and only hurts local economies. Starkville should think very hard about doing anything that would limit homesharing.
At the end of the day, we have individuals who are able to earn an extra income from something they own, and tourists are able to get what they are looking for. It’s called voluntary exchange. It’s a good thing. We should encourage more of it, not try to interfere with it.
This column appeared in the Starkville Daily News on October 6, 2019.