Express Sessions Focus on Pros and Cons of Short-Term Rental Market

Going as far back as the post-Civil War boarding house days, the East End has always attracted its share of summer visitors. But as the region has become ever more popular, tourists, who once came almost exclusively for the entire summer season, are increasingly taking advantage of websites, such as Airbnb, to book short-term rentals.

That shift, from seasonal and monthly rentals to weekly and even weekend deals, has cut into the business of the hotels and motels that formerly enjoyed a near monopoly on clients coming into town for weddings and other short visits. Real estate agents, who once counted on summer rental income as an important part of their annual business, and homeowners, who rely on the money they make renting their houses each summer, have also had to adjust to a changing marketplace.

RELATED: The effects of Airbnb on the local hotel and motel industry.

The change has affected villages and towns, too, which find themselves fending off a growing number of complaints from residents, upset about transients descending on their neighborhoods. They have begun to clamp down on the practice by requiring rental permits and imposing other restrictions.

[caption id="attachment_77175" align="alignleft" width="339"] Author Leigh Gallagher speaks during the Express Sessions on Friday.[/caption]

On Friday, a panel of six speakers, taking part in the latest Express Sessions community forum presented by The Sag Harbor Express at the American Hotel, tackled the issue.

RELATED: Watch LTV video here.

All agreed the elephant in the room is Airbnb, and other online rental services such as HomeAway and VRBO, which have emerged in the past decade and have disrupted a marketplace that had grown staid and comfortable.

“One thing they learned is that there was an appetite for this. It has exploded,” said panelist Leigh Gallagher, referring to Airbnb. “You don’t get this kind of growth — 300 million trips have been taken on this platform; 2 million people spent the night in an Airbnb this New Year’s Eve alone — without striking some kind of chord in the consumer.”

Ms. Gallagher is the assistant managing editor of Fortune magazine and the author of “The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions…and Created Plenty of Controversy.” She was joined on the panel by Sag Harbor Village Trustee Aidan Corish, Southampton Town Supervisor Jay Schneiderman, East Hampton Town Councilman Jeffrey Bragman, Southold Town Supervisor Scott Russell and Town and Country Real Estate president and CEO Judi Desiderio.

In response to the proliferation of short-term rentals, East End towns have all adopted measures to limit them. Southampton Town, which has required rental permits for a decade, prohibits any rentals under two weeks, although the town board recently amended the code to allow it to temporarily waive the restriction for major regional events such as the U.S. Open golf tournament.

[caption id="attachment_77174" align="alignright" width="339"] Southampton Town Supervisor Jay Schneiderman speaking on Friday. “We are trying to figure out a way to manage this in a way that protects communities and protects neighborhoods, but also provides some income for people who are struggling to make ends meet,” said Mr. Schneiderman.[/caption]

“We are trying to figure out a way to manage this in a way that protects communities and protects neighborhoods, but also provides some income for people who are struggling to make ends meet,” said Mr. Schneiderman.

Although the current town code requires a two-week minimum rental, Mr. Schneiderman said he would be willing to rethink that. “A lot of people have come to me and said, ‘What’s the difference between two weeks and one?’” he said. “They’re telling me the market for families is really a one-week market.”

“Two weeks is the time frame we are sort of coalescing around,” said Mr. Corish, referring to the Sag Harbor Village Board, which has yet to adopt rental restrictions, but has begun to discuss the idea. “If you’re here for two weeks, you get to shop, you get to go to the grocery store, you get to partake of village life,” he said. “You get to see a certain amount of the important rhythm of the village repeat itself as it does day after day.”

“We recognize that everybody traditionally has rented homes out here to make ends meet, to send kids to college and for a variety of other reasons, and that is something we support,” he added. “However, we are concerned about how short-term rentals change the nature of the neighborhood, and we live cheek by jowl here in Sag Harbor, … and we believe that a short-term rental situation, where you have different people in the next-door neighbor’s house, which may be feet from your door, changes the quiet enjoyment that you deserve of your home, so what we are trying to establish is a balance.”

Mr. Russell said Southold Town banned rentals of fewer than 14 days in 2015 in response to complaints from residents. “We had a great deal of discussion, community discussion, and I have to say very contentious discussion,” he said. Homeowners had “invested in residential communities and they had an anticipation they would be living in communities with other houses,” not commercial operations, he added.

“A friend is looking to spend $30,000 for one week, and I can’t help him. And guess what? We are losing that to Airbnb. I think something has to change.”

East Hampton Town requires that homeowners who want to rent out their homes sign up on a rental registry. It allows two rentals of under two weeks every six months. “It cured one of the problems we had with Airbnb, which was the anonymity and difficulty of tracking down people who weren’t complying with our limitations on short-term rentals,” Mr. Bragman said. “I think the consensus in East Hampton is pretty strong. That despite the convenience of these short-term rentals, we don’t want to go there. We think as a municipality and as elected officials we have a right to regulate this market.”

Ms. Desiderio said real estate brokers did not mind requirements like East Hampton’s rental registry, but she called for local governments to work more closely with them.

She objected to East Hampton’s requirement that brokers include a rental registry identification number in their advertisements. “I’m not the owner. I can’t make them get the permit,” she said. “By telling me I can’t advertise it, you have impeded my business.”

Southampton’s permit application is too cumbersome, she added. “Make it as simple as possible. Make it short, make it sweet, make it cheap, and everyone will do it,” she said.

[caption id="attachment_77178" align="alignright" width="339"] Brown Harris Stevens Agent Jane Holden asks a question during the Express Sessions about the local rental market on Friday.[/caption]

Jane Holden, a Brown Harris Stevens agent, said her office was a stickler for following town rules. “We will not take the listing if they do not comply and get the permits,” she said. “If you sit with them, which I have done more than once with the paperwork, they are happy to do it. But that is part of the problem. There are agents who don’t want to take the time to explain the importance of it.”

But Paulette Corsair, an agent with Nest Seekers, said municipalities needed to allow shorter rentals. “A friend is looking to spend $30,000 for one week, and I can’t help him,” she said. “And guess what? We are losing that to Airbnb. I think something has to change.”

Nathiel Egosi, the owner of the Sag Harbor Inn, said Airbnb unfairly cuts into his business without being required to collect the 12 percent in taxes that his business does. “We have all these expenses,” he said. “It’s not the same playing field at all.” Plus, he said, as a resident of Redwood, he sees his neighborhood inundated with transient visitors all summer long, which has a negative impact on the quality of life there.

“I own a hotel in Montauk, and I have long been troubled by competition from Airbnb,” agreed Mr. Schneiderman. “I collect those 12-percent taxes, I get my pool inspected, we have transient rental permits. It’s really tough.”

Mr. Russell also raised the idea that towns and villages are missing out on real estate taxes if residentially zoned properties are being illegally used for commercial uses. “I think that is a darker side of this unregulated economy, and I think that is one of the problems I have with Airbnb,” agreed Mr. Bragman.

Airbnb, which says it has 4 million listings in 65,000 different cities in 191 countries, estimates that residents living in and around Sag Harbor brought in some $4 million in 2017 by listing their homes on the site. Although the company did not participate in last week’s forum, Josh Meltzer, the company’s head of Northeast Policy, said in a statement, Airbnb clients patronize “the many restaurants, bars and museums” in the Sag Harbor area. But panelists and some audience members questioned if that were really the case.

“I think there is anecdotal evidence that with the rise of Airbnb, there has been a falloff in trade on Main Street,” said Mr. Corish. “That could be due to a number of reasons but that is no doubt a contributing factor.”

Ms. Desiderio agreed. Short-term renters, she said, “are going to bring a tray of lasagna, they are going to bring sandwiches. They are not going to the restaurants.”

Sharone Einhorn, the owner of Ruby Beets in Sag Harbor, said as the local economy transitions from a second-home economy to a tourist economy, Main Street business has been affected, as visitors buy less furniture, fewer bath towels and other supplies that more typically go with staying for an extended period. “Those businesses are really suffering,” she said. “Look at how many empty storefronts there are. I’ve never seen that in Sag Harbor before.”

But Nada Barry, an owner of the Wharf Shop in Sag Harbor, said her business was doing well. “The Airbnb people, I know, have been shopping with me, and I know the restaurants have been getting a pick-up from it, and the takeout places,” she said. “You can’t say they don’t support the community.”

Mr. Schneiderman said he doubted retail woes were caused by Airbnb. “I think a different internet enterprise, Amazon.com, is to blame for that. Retail is struggling all over the place,” he said.

David Brogna, an owner of In Home in Sag Harbor, disagreed, saying that online sales accounted for only 10 percent of all retail sales in the United States. But he said, having people in the village and in the stores did not necessarily translate to more sales for local merchants.

[caption id="attachment_77179" align="alignleft" width="339"] Russell Kratoville directs a question to the panel on Friday.[/caption]

Sag Harbor resident Russell Kratoville said if local businesses were failing they should look at how they operate. Go into Schiavoni’s IGA early on a Saturday morning when weekend visitors are shopping “and see how full their carts are,” he said. “If your business isn’t making it in Sag Harbor, take a look at your business model because the people are here.”

That opinion was echoed by village resident Charlie McCarron. “I hate the whining,” he said. “People say, ‘Oh, they are hurting my business.’ Well, do something about it.”

Ms. Gallagher said Airbnb thrives in part because “they have this idealism around what they do that they are bringing people together. It’s about humanity, it’s about belonging, it’s about community. They take this to the nth degree in their marketing.”

“I think they’ve seen something changing that they hit on,” agreed Noyac resident Ellen Stahl, who described herself as a frequent Airbnb user. “What they have hit upon is we are all looking to make connections, and when you go to a hotel or a motel you go in, you go to bed, you hang out by yourself and you leave again.” With Airbnb, hosts are often on the premises and are interested in sharing their knowledge of their community with their guests, she said.

Ms. Gallagher said she was struck by the reticence of East Enders to acknowledge it is a resort community. “It’s surprising to me as an out-of-towner who has come here for so long the resistance to calling the East End a tourism community because — Look at you. Look at the beaches here. Look at this setting,” she said. “This is an incredibly desirable place. If that is going to be a problem, that is surprising for me to hear.” 

Airbnb has allowed more people to tap into the East End’s charms, agreed Ms. Desiderio. “What they did was they gave to the general public an opportunity to experience an area or something they never would have experienced,” she said. “We cannot turn back the tide. We are an ever evolving — thanks to technology — vacation club.”

The East End's Rental Rules

East Hampton Town

To legally rent out a private house in East Hampton Town, a homeowner is required to register the property with the town and obtain a rental identification number that must be used in all advertisements. A fee of $100 is required for each two-year permit. Homeowners are allowed to rent their houses for durations of two weeks or less twice every six months; otherwise, they are allowed to rent their houses for periods longer than two weeks with no restrictions.

Southampton Town

Southampton Town requires homeowners who want to rent their houses to obtain a rental permit, which is good for two years, and costs $200.  Applicants must submit a sketch of the house’s layout, showing the location of bedrooms and agree to a safety inspection. The code prohibits transient rentals of under 14 days, although the town board recently voted to ease that restriction on a case-by-case basis for regionally significant events, such as this June’s U.S. Open golf tournament at the Shinnecock Hills Golf Club, that are expected to bring in more visitors than traditional motels and bed-and-breakfasts can handle.

Sag Harbor Village

The village currently has no restrictions on home rentals in its code, but Trustee Aidan Corish, who participated in last week’s Express Sessions discussion, said officials are planning to draft legislation would most likely impose a two-week minimum and other restrictions on short-term rentals.

Southold

Southold Town has a simple prohibition against short-term rentals of less than two weeks for any private homes, although it does not require homeowners to obtain a rental permit. Instead, the town monitors websites, such as Airbnb, to determine if residents are trying to rent their homes illegally and threatens them with hefty fines if they do not comply with the code.

Shelter Island

Shelter Island requires that residents who want to rent their homes for short-term rentals of 14 days or less obtain a town license. Among other provisions, the license limits to two the number of people who can share a bedroom. For the property to be eligible for a license, it must meet the zoning code and have no more bedrooms than listed on the current certificate of occupancy. Those who want to rent their homes for longer periods are free to do so.

Riverhead

Rental permits, which cost $300 and must be renewed every two years, are required for most private home rentals in Riverhead Town. Transient rentals, defined as those lasting 29 or fewer days, are prohibited in most cases. Applicants are required to submit floor plans and provide a list of the people living in the house.