Jersey City could gut short-term rentals

Local operators say this is about pressure from hotels, not rising rents

Short-term rentals would be cut back under new ordinances.
Short-term rentals would be cut back under new ordinances.

A political insider says it’s another example of Jersey City killing the goose that lays the golden egg. A City Council vote that could decide the fate of short-term rentals such as Airbnb in Jersey City is scheduled for a special meeting on June 25.

The council is poised to impose new restrictions. Some property owners providing rentals to tourists and others on a short-term basis fear they might be driven out of business.

The council is considering an ordinance that would allow existing larger operators to continue after the new regulations go into effect on Jan. 1, 2020. But the law would basically outlaw future entrepreneurs.

Residents and larger operators of short-term rentals claim that even if the least restrictive of two proposed ordinances is adopted, the cottage industry that started under a more moderate 2015 city ordinance would dry up.

Several council members have raised concerns about the impact that the growth of short-term rental operations have had on the cost of rents and the availability of long-term rentals. They claim the increasing availability of short-term rentals creates a shortage of housing stock and encourages landlords of long-term housing to raise rents.

However, many opponents of the impending new regulations believe the fight may only be about protecting the hotel industry in Jersey City, similar to the way New York City has protected its hotel industry.

Council will decide between two ordinances

The council introduced two competing ordinances earlier this month. One would basically shut down all large-scale, short-term operations. The other would protect short-term operations already in business but prohibit new large-scale short-term rentals.

Anything more than four units is large, according to these ordinances. But the law says that in any short-term rental, the owner of the property must occupy one of the units. This would prohibit someone from buying several buildings, even one next door to his or her existing home, and renting it out on a short-term basis.

Both ordinances would ban renters from using short-term rentals to help offset the high costs of renting in Jersey City. Previously, people who lease apartments could rent out all or a portion of their apartments in the short term with out without the property owner’s knowledge. This would be banned under both of the proposed new ordinances.

Although the city council will take public comment before the final vote, short-term rental operators are not optimistic, believing the harsher of the two ordinances will be passed.

Murat Mozso, who operates short-term rentals in Jersey City, has been trying to get the council to propose an ordinance that will avoid driving entrepreneurs out of Jersey City. “This is about the hotel industry versus a cottage industry,” he said.

Short-term rental operations such as Airbnb are competing with traditional hotels for the tourist trade. Some short-term advocates believe this may be a good thing, giving lower cost options to tourists, allowing them to spend more in other parts of the economy such as local restaurants. More important, tourists who use short-term residences have less of an impact on public services. They do not put their kids in local schools, and generally do not come by car.

Short-term rentals also better accommodate families, a model that hotels haven’t yet embraced.

Traditional hotels are still largely geared toward business travelers or couples, and haven’t completely converted to the new tourist trend that includes families. Short-term rentals often offer access to kitchens and home-like amenities that make them more attractive to tourist families.

“Jersey City doesn’t need to protect the hotels,” Mozso said, claiming there is more than enough business to go around. New York has more than 100,000 hotel rooms. Jersey City has only a few thousand.

He said the hotel industry just wants to protect its turf, even though there is more than enough business for hotels and short-term rentals.

“When Manhattan shut down the short-term rentals, the short-term rental industry went to Brooklyn and Long Island,” Mozso said. “Airbnb decided Jersey City was a good alternative.”

Mozso and other opponents of both resolutions say the financial impact of the resolutions would be devastating, not just to people who have already invested in property to operate short-term rentals, but also to the city which has, since 2015, collected hotel tax revenues based on these rentals.

One estimate puts this revenue at $4 million. But with the other financial impacts, the impact on the local economy would be many times higher.

Seeking more moderate reforms

Short-term rental advocates say other cities have successfully implemented restrictions without going overboard.

A spokesperson for Airbnb said it is not opposed to regulations. It, in fact, encourages them and has proposed to the city some of the same regulations that have been adopted in other cities.

This would include registration of those operating short-term facilities, which would inform the city of who is operating them and where they are and allow inspections for health and other issues.

The Airbnb proposal would include a three-strike policy to substantiate complaints. If there is a problem at a short-term rental Airbnb, it could remove or suspend the client from its platform.

Airbnb agrees that cities have the right to issue and limit permits, but would like to see a flexible policy, so that the number of businesses allowed to operate can be adjusted as the impact becomes clear year by year.

Fees and fines 

Under a recommendation by Airbnb, permit fees could be tied to the size of the operation. Higher permit fees can be imposed for large multi-unit operations, allowing the city to generate additional funds.

Some cities dedicate these fees to creating affordable housing or accommodations for the homeless, issues that Jersey City also faces.

Opponents of the current ordinances say that they support reasonable regulations, such as requiring short-term operators to become part of a registry that maintains records on who they rent do. But they see the current ordinances as slamming the door on a growing industry.

While some embrace the ordinance that allows some existing operations to stay in business, some believe this is unfair. But many short-term operators fear they can no longer afford to live in Jersey City because short-term rentals help pay their mortgages. For others, short-term rentals were an investment, and the stricter ordinance could result in bankruptcy.

The city is proposing limiting [Missing word? Short-term rentals?] to 60 days a year. Airbnb has proposed 180 days. If the new strict restrictions go into place, many of the landlords may not be able to make a living on the limited time imposed.

Some of the potential fines are also too high, opponents of the ordinance claim. A violation could cost as much as $2,000.

Opponents also claim the ordinances won’t stop short-term rentals, but will drive the industry underground, creating a black market that cannot be regulated at all, operated by “bad guys” who could rent to anybody.

Platforms like Airbnb run background checks on all hosts and guests. But if the market is generated through Craig’s List or some other platform, there will be no way to know who is good or bad.

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