No Vacancy or Open for Business? Making Accommodations for Digital-Platform Short-Term Rentals in Major American Municipalities

Abstract

Technological development encourages changes in the law if new technology sufficiently reorders organizational or individual practices such that citizens, businesses, and governments encounter a new social or economic reality as a result of technological change. Internet platform companies create particular dilemmas for public officials who must try to harness the efficiency gains associated with the platform economy while minimizing the proliferation of negative externalities it encourages. In this Article, we consider the opportunities and challenges created for local governments by the rise of digital, peer-to-peer short-term rental platforms such as Airbnb by analyzing the regulatory provisions governing transient accommodations in residential zones from municipal ordinances across 219 major cities in the United States. We situate developments in land use policy related to transient accommodations alongside other instances of technologically induced changes in the law, and consider the extent to which attempts to regulate short-term rentals mirror efforts to integrate other sectors from the sharing economy into the regulated sphere. We explain the geography and function of municipal ordinances governing the short-term rental marketplace nationwide, and analyze the different purposes most likely served by each regulatory mechanism by evaluating the manner in which the various approaches to regulating short-term rentals allocate burdens and benefits in the local community. In addition to providing a full overview of the regulatory landscape governing short-term rental activity in residential zones in major American municipalities, we offer evidence from detailed case studies of the lawmaking process in three significant municipalities whose approach to regulating transient accommodations in residential neighborhoods is either especially stringent, informed by laissez faire principles, or relatively balanced in scope and nature. These case studies in regulation include an analysis of the policy process via close readings of primary sources such as city council minutes and records, and permit us to investigate how different permutations of local interests inform the regulatory processes regarding land use in municipal governments. We conclude by advocating for local officials to be permitted flexibility to regulate short-term rentals using the means most consistent with their particular community’s needs.