Sharing Economy

Anaheim Targets People Using Homes as Short-Term Rentals

Defender of property rights finds himself on the opposite side.


I first got to know Anaheim Mayor Tom Tait in the early 2000s, when we were battling a perverse city ordinance that forced low-income people—typically, folks one step ahead of homelessness—to move out of grubby old motels every 30 days. Local residents were upset that one-time tourist lodging had become permanent homes and were seeking to use the government to force the motels to remain devoted to tourism.

Tait and I are now on different sides of an issue in which many Anaheim residents want to use government to do the opposite. Instead of stopping people from residing in buildings designed for vacationers, they want to stop tourists from staying in buildings designed for residents. 

This is an example of the kind of economic change ushered in by the "sharing economy." When I moved to Orange County in the 1990s, many neighborhoods surrounding Disneyland battled blight. That explains why neighbors were upset about poor folks living in nearby motels. These days, home values are soaring, as tourists rent rooms through room-booking apps such as Airbnb and HomeAway.

This innovation is a great way to house a family vacationing at the Happiest Place on Earth. It's a great way for owners to cover their mortgage payments. It has led to the renovation of many 1960s-era ranch houses. But it's also upset neighbors. They have legitimate complaints about noise, traffic and parties. Obviously, vacationers live differently than people who need to get up at 5 a.m. and commute to work.

The hotel industry isn't too pleased, either.

Anaheim has more than 200 permitted short-term rentals and many more that operate in the shadows. To deal with complaints, the City Council last year approved a moratorium on new permits. City staff created a 12-page memorandum offering suggestions. Tait—a self-described fan of the sharing economy and someone with real property-rights credentials—has nevertheless proposed a ban on this type of operation.

It's pretty extreme. He would allow people to rent out rooms in their homes, provided it is their primary residence. They could operate, say, a bed-and-breakfast—or rent out the house while they take an extended vacation. But he would put the kibosh on rental houses that cater to vacationers. He would provide an 18-month period for existing short-term rentals to phase out.

The latter sounds too much like the kind of regulatory "taking" that Tait has opposed in the past. I appreciate concerns about noise and traffic, but those issues often are a proxy for the real issue: People don't like it when their neighborhoods change.

"It's the nature of what they are," Tait told me. "They are bringing in 1,000 different people a year, and it's no longer a neighborhood." He says these houses are "essentially full-throttle minihotel businesses."

City staff are trying to craft a middle way between the current system and a ban, but they have floated the idea of grandfathering in existing permit holders. That could mean the worst of all worlds. Now, if you can't stand living in a neighborhood with vacation houses, you can sell out to someone who wants to operate a vacation home, pocket the cash (the Register reports room-sharing has pushed up property values by 25 percent) and move someplace more to your liking.

Under such staff proposals, you'd instead be stuck with a rental next door— and you'd only be able to sell your property as a residence. You'd also potentially have a neighborhood disclosure issue on your hands.

Tait believes this middle ground might do more harm than good. But instead of opting for a ban, he should opt for the traditional free-market approach: Letting people live their lives as they please—but cracking down on bad behavior.

My R Street Institute colleague Andrew Moylan recently released a report that gives Anaheim a good "Roomscore" grade of "B" for its current regulations. "Cities nearly always have ordinances to address traffic and noise complaints, whether a property is rented or not," he wrote. "Where new problems arise related to congestion or noise, they are best addressed holistically, rather than a piecemeal approach that targets only short-term rentals."

Exactly. I also like the suggestion from Anaheim Councilman James Vanderbilt: "I would have hoped the short-term-rental owners would have formed a self-policing group of some sort." There's still time for the city to work with owners and come up with a system that improves self-policing.

It's not the government's place to enforce the character of a neighborhood, whether we're talking about old motels or rental houses. Let's hope Tait and officials in other cities come to recognize that reality.