Short Term Rental Regulation Considered For Bainbridge

City to Work with Business, Tourism, Residential Communities with Goal of Improving  Local Oversight, Lodging Connections on Bainbridge Island

In response to a presentation made by City Manager Blair King at last week’s May 16 City Council Study Session, council members began to consider whether regulation is needed around local Short Term Rental (STR) units. This would include both those units rented out by individuals and those that go through well-known platforms like Airbnb or VRBO. It may, or may not include units being rented that are on the same property occupied by their owners as their primary residence (i.e. renting out a guest house, ADU, or carriage house).

The topic is not new to council – it was first brought up in 2018 – but is now being examined further as part of recommendations made in section 7.5 of the city’s newly proposed Housing Action Plan, and in preparation for the creation of a new Subarea Plan for Winslow, and a Comprehensive plan for the whole island. The examination is also part of a much broader community conversation about the availability of homes on the island – and at various levels of either rental or purchase price – as part of discussions around the island’s lack of housing stock diversity and affordability.

 

Why Now?

Looking at Short Term Rental regulation is just one of the many ways cities begin to analyze their current housing inventories. It is often seen as an exercise to find potential available units that could either act as more traditional long-term rental or single-family housing stock.

As early as 2018, questions began in the community about short term rental units on the island. They were included in an Affordable Housing Action Plan presented to council, but that had not been re-addressed since.

The recent discussion was triggered by the presentation from city staff, which in turn was triggered by community discussions around the lack of traditional lodging options on the island, the potential for short term rental units to be owned by off-island corporations, and a better understanding of what STR’s are, and why people want to operate them on Bainbridge.

Many questions are raised, many of them in line with discussions in other Washington communities where visitor impact and spending forms a key part of the local economy and the survival of small local businesses:

1. How is the current stock of housing availability being impacted by Short Term Rentals, if at all?
2. Why are locals turning to Short Term Rentals?
3. Are Short Term Rentals licensed and paying city/state taxes?
4. What happens to the taxes that are collected?
5. Do Short Term Rentals impact hotel businesses?
6. How are neighbors and neighborhoods being impacted?
7. Are proper protocols – health, safety, aesthetic – being followed in accordance with neighborhood or city regulations?
8. Does Bainbridge Island actually need regulation of Short Term Rentals?

 

Answers To Common Short Term Rental Questions

Q. How is the current stock of housing availability being impacted by Short Term Rentals, if at all?
Answer: Unless you’re in a major visitor market like Hawaii, San Francisco or New York the answer of whether Short Term Rentals are really a problem is usually no. There’s also been a wealth of case studies from which to draw to inform how smaller communities, like Bainbridge Island or Gig Harbor, can work with the communities to avoid over saturation by Short Term Rentals, especially those owned and operated from outside the community.

In 2020, Bainbridge Island had about 11,000 household units available for a population of just under 25,000. The number of Short Term Rentals on the island varies from a low point of about 160 according to AirDNA – a service that monitors licensed short term rentals – to a summer peak of between 250 and 300 as people travel and turn on their home for availability.

Based on the high-end number of 250 Short Term Rental Units, means that only 2.2% of the island’s housing stock is dedicated to Short Term Rentals during the high season.

The variability in the number of Short Term Rentals on Bainbridge comes from that many are only available during parts of the year, often only when the owners go away for summer vacations or part-time residents who fly south for the winter.

Q. Why are locals turning to Short Term Rentals?
A: The simple answer our business, tourism and hospitality organizations have received is to balance cost of living and affordability issues. Many residents are looking for ways to maintain their homes or lifestyle, to pay for large expenses like aging in place or children’s education funds, or as a way of managing the cost of living on-island.

In part, our island’s own policies have led to this situation by impacting the balance of demand and supply for accommodations on Bainbridge.

First, partly due to community resistance to building dense housing over the past generation, Bainbridge’s housing stock has grown very slowly, and predominately through predominately rural or semi-rural single-family homes being built (with the sole exception of the Harbor Square development).

While some residents on the island have made great investments in their homes increases in cost of living expenses and new tax assessments narrows the affordability of the island, making it particularly hard for working families and people, like seniors on fixed incomes, to buy or stay here. This helps explain why 33% of all island Airbnb owners are 60 or older and 52% of them are women. The median average earned by local hosts each year is about $18,000.

Second, Short Term Rentals are ever more attractive to Bainbridge visitors because traditional hotel and inn options on the island are limited. This has been exacerbated by prior city council decisions to block the development of a new hotel in Winslow’s core in 2021 and expansion Pleasant Beach Village in 2022. Short Term Rentals have stepped into fill the gap for visitors.

Who among us hasn’t been faced a complete lack of hotel rooms to book during graduation or Fourth of July, when you’re trying to host family from out of town? We’ve even heard from residents that when they run out of room at their own home, they’ve resorted to setting up tents on their lawn, using an RV in their driveway, or sending family to neighboring communities – like Suquamish, Poulsbo or Seattle – and renting cars to get on and off the island for family functions.

Q. Are Short Term Rentals licensed and paying city and state taxes?
A: If they have a business license and/or go through a reputable organization like Airbnb or VRBO, yes they do. In addition, Short Term Rentals in Washington state are obligated to pay hotel/motel taxes – just like hotels and inns. These taxes are automatically collected from each guest staying in Washington as part of the overall bill (look for local taxes as a line item on your next bill).

At the end of the year, the state department of revenue gives the City of Bainbridge Island its share of all the lodging taxes collected for 98110. However, if a business is not licensed or does not go through a public platform like Airbnb or VRBO, there is a possibility of lodging taxes not being collected. However, there is a possibility for an unlicensed business that does not go through a nationally recognized company to get out of paying their fare share. In addition, if a Short Term Rental owner places their residence on a business license not associated with Bainbridge Island’s zip code (98110) the state may misallocate those lodging tax funds to another zip code.

Q. What happens to the taxes that are collected?
A: We’re glad you asked. Those funds are distributed into the city’s Lodging Tax Fund where any nonprofit can apply to use them for promotion of our island’s events, attractions, and businesses to visitors 50 miles away or more, and/or for the maintenance of facilities and services to serve all visitors. The grant applications to this fund are vetted by a committee comprised of citizens and city council members who ultimately decide how best to distribute each year’s funding.

Those funds are the lifeblood of our city’s economic development and the only funding deployed to continuously promote our island so that visitors come stay and spend with programs and projects created by organizations like the Chamber, Visit Bainbridge Island, the Downtown Association and our partners.

That visitor spending is vital to our island way of life and keeps our businesses locally owned. Consider the fact that our our small community of 25,000 is able to enjoy more than 50 dining options, far more than our residents alone could keep viable. Similar ripples flow out from Lodging Tax funding across creative and performing arts, organizations, facilities, and events all of which are core parts of what makes Bainbridge, Bainbridge.

Q: Do Short Term Rentals impact hotel businesses?
A: This answer varies widely from community to community, but right now our community’s Short Term Rental and Hotel/Inn operators have a working relationship that benefits the island as a whole. With accommodations of all types in short supply, those hotel/inn operators often refer over-spill to local short term rentals and vice-versa.

These two groups are also working together to advocate for more hotel/inn development to alleviate the island’s historic room inventory problem. Having more lodging availability could result in lower rates for visitors and islanders looking to host family and also generate more interest in hosting meetings, events and retreats that can help bolster local business owner’s profits year-round.

Q: How are neighbors and neighborhoods being impacted?
A: As you might imagine, there have been and always will be some bad renters that sour things for everyone. Taken as a whole, however, there have been few complaints about our short term rental visitors overall. Given that many of our Short Term Rental owners are usually island residents communication is simple and still very personal.

Q: Are proper protocols – health, safety, aesthetic – being followed in accordance with neighborhood or city regulations?
A: Short Term Rental owners on the island and following local health and safety guidance. Reputable companies like Airbnb and VRBO have a wealth of educational information to help their hosts get started in managing effective properties. There’s also a built-in rating system for visitors and for the Short Term Rental units helps to improve any gaps or deficiencies.

Q: Does Bainbridge Island actually need regulation of Short Term Rentals? 
A: While it is clear that in general the current system of loose regulation works, concerns around the potential for non-local investors to own and operate large numbers of short term rental units, of a need to set community standards of acceptable behavior by Short Term Rental guests and a desire to properly register and collect local taxes from all Short Term Rental units at least justifies consideration of creating a community and city work group to develop policy regulation. Registration could also enable Short Term Rental owners to themselves better prepare for emergency situations and also connect Bainbridge Prepares and the city’s Emergency Management team with visitors who may be here in the event of man-made or natural disaster.

 

What Might City Council Do?

All of these questions were discussed by City Council and City Staff at the May 16th Study Session, as well as potential exemptions for island residents who only rent out portions of their full-time home on Bainbridge. Ultimately, several potential solutions began to be discussed a worthy of further discussion:

1. Registration of all Short Term Rentals with the city
2. Requirement that all Short Term Rental owners must hold a valid business license
3. Creating and enforcing community standards for guest behavior (including ways to quickly contact STR owners if issues arise)
4. Creating and enforcing community guidelines on health and safety standards
5. Potential limits on the number of properties owners may use as Short Term Rentals
6. Limiting Short Term Rental ownership to local residents only

 

Why Is This A Chamber Issue?

The study session agenda prompted some initial concern from our members in the business, tourism, and lodging communities. We captured those concerns in a joint letter to Council from the Chamber, Downtown Association, and Visit Bainbridge Island. Having attended the May 16 Council Study Session in person, the Chamber was happy to see that the original agenda item was truly intended as the beginning of a community-wide conversation, one the Chamber is fully engaged in on behalf of our members. Council members discussion was wide-ranging and reflecting a desire to take a fresh look at a potential challenge.

In the Chamber’s eyes, this is not just a visitor/tourism issue and it’s not just a housing diversity issue. Short Term Rental regulation is a business issue that will impact the island in a wide variety of ways, from visitor and resident interactions, to health and safety issues, to home ownerships and property rights, and from tax collection to economic development. Those are all vital issues the Chamber and our advocacy team are already highly engaged with.

 

What Happens Next?

The study session ended with council members directing City Manager Blair King and his staff to form a working community group that best represented the varied interests of the issue and can start to form policy guidelines to bring to City Council. The Chamber was named at council as one member of this group.

To participate in that group, share your thoughts with the Chamber on Short Term Rental regulation, or on any other business issue on Bainbridge Island, please always feel free to contact our team…

You also have the chance to weigh in on potential Short Term Rental Regulation and indeed, all the elements of the new Housing Action Plan at this week’s Public Hearing within the Planning Commission meeting on Thursday, May 25 at 6pm at City Hall.

 

Learn More:

• Short Term Rentals On Bainbridge Island Presentation  – City of Bainbridge Island (05/16/2023)
• Joint Letter from Bainbridge Chamber, Downtown Association & Visit Bainbridge to City Council (05/15/2023) 
• Council Study Session Video Replay – City of Bainbridge Island (05/16/2023)

 

Note: Also included in the study session conversation was a small discussion point asking whether the city’s Lodging Tax Funds could be re-allocated to helping off-set affordable housing bonds instead of economic development. Thanks to a 2015 State Supreme Court ruling, it could, kinda, but it should be noted that it is a move not recommended by the City’s own Finance Director in a 2020 report. Changing the nature of what Lodging Tax does on Bainbridge is actually a much larger conversation and one to be covered in a separate, upcoming article.