Airbnb: A Potential Challenge for Affordable Housing Properties
Airbnb is a website for people to list, find, and rent lodging. It has over 1.5 million listings in 190 countries.
Users of the system must register and create an online profile before using the site. Every property is associated with a host whose profile includes recommendations by other users, reviews by previous guests, as well as a response rating and private messaging system.
Users have full control over who books their home. When a potential guest puts in a reservation request, the host has at least 24 hours to accept or decline the request. After the user accepts the reservation, they can coordinate meeting times and contact information with guests.
Implications for LIHTC properties
- Transient use: if a low-income housing tax credit resident subleases a LIHTC unit using the service, the unit will be used on a “transient” basis – a use prohibited by §42 rules. Discovery by the state could result in a loss of credits for the unit.
2.Continuous Residency Requirement: In order to qualify as a low-income unit when under tenancy, a unit must be ‘continuously occupied.’ This does not mean that the resident may never leave the unit, but it does mean that the unit must be in the possession of the resident at all times. Once the unit is subleased under the Airbnb program, the question of ‘continuous use’ could be raised by the HFA.
- Lease Violations: If the LIHTC lease has been properly prepared, the Airbnb use would constitute lease violations based on unauthorized occupants and subletting – both should be lease violations for a §42 lease.
- Fair Housing Implications: if a tenant violates fair housing law in the process of subleasing the apartment, it is possible that the owner of the property could be deemed liable for the violation, especially if they knew – or should have known – that the practice was occurring.
- Incidents & Renters Security: There have been cases where Airbnb guests stole from the host home. In most of these cases, Airbnb was not responsive to the claims of the lessor. There is also the possibility that the unit could be rented for illegal purposes. In 2012, two prostitutes rented an apartment in Sweden that the police raided. In July 2014 in California, a guest refused to leave the apartment of an Airbnb host after paying a month’s rent. Under CA law, once someone rents an apartment for up to a month, that person is considered a tenant on a month-to-month lease.
The host had to hire a lawyer and initiate a legal eviction process.
- Financial, tax, and legal liabilities: A 2011 New York State law prohibits renting residential units for less than 29 days, with certain exceptions. Airbnb has asked the state legislature for legalization in return for the collection of hotel taxes. Airbnb style rentals create legal issues in many cities, including Airbnb’s home city, San Francisco until a recent change in the law permitted the use.
While there have been no widespread reports of LIHTC residents renting out their apartments under the Airbnb program, it is just a matter of time before it happens. Owners and managers of LIHTC properties should be proactive in the prevention of this practice. Steps that can be taken include:
- Review the lease terms. Make sure the lease includes prohibitions on subletting and a requirement that notification of all new occupants – including any overnight guests staying multiple nights (e.g., three nights or more) – be required.
- Send letter to all current residents reminding them of the residency rules and specifically note that subletting of any type and for any length of time is a lease violation and will result in lease termination.
- The holidays are the most popular time for Airbnb users, so be particularly aware of strangers at the property during these periods.
- Owners in areas where Airbnbs are a common form of short-term rental (e.g., resorts, urban areas, etc.) may consider being even more proactive by establishing an Airbnb account and scanning the site occasionally to see if any of the property’s units are being offered for rent.
While this is certainly not a major issue for LIHTC (and other affordable housing properties) at this time, it is just one more thing for owners and managers to be aware of and take steps to prevent.