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  • Writer's pictureAJ Shepard

The Short Term Rental Market In Portland


All right. I'm here to talk to you guys about the short term rentals market in Portland. They've recently done some stuff that has made it a little more difficult for short-term hosts to lease their property. They're starting to crack down some stuff, so let's take a look. Go to the next slide, please.

So Portland, they are now requiring all short-term rentals to acquire a mandatory permit for people who rent out their homes for less than 30 days. It's considered a short-term rental if you are leasing it for less than 30 days. And they originally had tried to pass this permit law in 2014, which we'll take a look at. It didn't work out.

Why are they trying to make the permit necessary? There's an affordable housing deficit in Portland. Basically, I'll get into this later, but short-term housing is... You can get a lot higher rates. It's a lot less maintenance, less property management. Why wouldn't you do that as opposed to just leasing? Why would you rent out your house for a year or your property when you could just do a short-term rental for days on end and make a ton of money?

There's a negotiation standstill. Airbnb and other companies when faced by the government do try and follow the mandatory permitting process. They were quick to potentially litigate and get into a legal battle with the cities. Also, another reason why the mandatory permit is important is public safety. They need to make sure that these rentals are safe to the public, which it's probably 50% yes. It's just one of the reasons that they provide.

In 2014 city of Portland passed an ordinance requiring short-term rental hosts to obtain permits through the Bureau of City Development Services. The requirements for the permit of 2014, which are still the same requirements today, is you have to prove the safety standards of the dwelling. You have to pay a permit fee, and you sent out a letter to neighbors. However, when they tried to do this in 2014 as I told you, the city could only show 30% of the short-term rentals that were operating with a permit, which is a huge problem because that means there's 70% out there that they have no idea of what. And it increased interest.

Why, why would they not comply? Companies like Airbnb didn't require the permit. They let people go permanent. Some companies complained that they incurred costs. Hosts weren't following rules. Hosts weren't following rule number one, which was that they had to occupy the short-term rental for nine months, which is three quarters of the year. Needing affordable housing prices, the city required hosts to occupy the residence for nine months out of the year and the city's interest to protect the affordable rental homes from turning into your round short-term rental pads. Like I described before, people were just doing short-term Airbnb rentals to lease out their apartment for whatever, for a year. And this is why, because short-term rentals can be rented for much higher rates than regular rentals. They also require a lot less maintenance management. Overall cash-on-cash yield is a lot higher for the owner.


But on June 12th of this last year, the city has to vote to change the permitting process. The city's going to require these two things from rental companies and charge permitting for all short-term rentals. And short-term rental companies will provide information on all rentals that fall under the. And like I said in the past, some rental companies, when they were forced with this decision would come back to the city and tell them that "We're going to leave," or threaten them with litigation. But in March of 2019, a similar clause it was attempted to pass or did pass in Santa Monica. Santa Monica, the city, required that all short for rentals have the permit, and otherwise they would have to share their information. And it was approved. This came to Portland as a discussion type of battle. And so now starting in December if you rent your bedroom, you'll have to get type A permit. If you rent a few bedrooms in your residence, you have to get a type B. If you plan to rent three or more rooms, type C will be required to go to the city's process.


You also have to still inform your neighbors, and they give you a letter to send out to your neighbors. The inspection of the city will have to come through and inspect. One of the biggest things is each room has to have a smoke detector or CO2 detector [inaudible 00:06:12]. And the nine-month thing still holds true. This is my does my understanding. Residential zoning and I think the house, the dwelling, the will have to occupy the space nine months a year. But one way around this, as I mentioned, and this is my understanding, I asked a good friend of mine, I'm not entirely sure this is true, let me look for more information on it. But commercial land, one way to completely avoid the permitting process is to find a home on commercial land. Obviously, ideally, you want it to be hospitality. You could probably go general commercial or general commercial two and try and get them changed over because that's a lot easier said than done.


Before I left my last office, we were in the process of getting a conditional use permit over an IG one industrial zone. We were trying to get a building that basically you can only put industrial office building in industrial. They wouldn't let us put a typical office user in the industrial building because it was like a design overlay. It wasn't and we got the lease signed. But it's still going to take six months and it's still in the process of getting transferred over to that very general commercial zone.


Yeah. And it would be considered once it's hospitality, it would be a hotel and not a residence. Also starting in December, during registration for your Airbnb or whatever, you'll have to agree to share the information with the city in order to get your short-term rental permit and publish the listing online. Taxes, hosts are going to be required to submit transient lodging. That's a type of registration form to the city, used almost exclusively with Airbnb. The Portland Multnomah County and the state of Oregon, all transient lodging taxes hotels, motels, and short-term rentals. And business rental hosts may also register their businesses.

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