Last week the City Council of Hillsboro passed Ordinance 6467 to create specific Code language that will allow Short Term Rentals in Residential zones in Hillsboro. Airbnb, VRBO rentals, and the like have been illegal and against our City Codes here, except for those that could get permitted under a modified Bed and Breakfast permit, which required a public hearing. By my count, as many as 400 have existed in the past; those numbers have dwindled with competition and COVID-19. While investigating this issue, the City hired consultants documenting about 170 active Short Term Rentals or STRs. Of those, only FIVE (5) owners have received permits to operate legally! I am sure most of you know of a home in your area used as a rental for people staying the weekend or a week or two. Some have had no issues, and others have seen wild parties thrown in their neighborhood- the stories vary with the property owner and operator.
Why Do People Want To Rent Their Properties Short Term?
In my professional career as a real estate broker and housing consultant, I can tell you there are three reasons in 99% of the cases:
- MONEY – The income derived by renting a home under the short-term model is usually better than long-term rent. I have clients and friends that generate more in two weeks than a normal rental home may rent for in a month. There are people and big corporations here in Hillsboro, and certainly all over the US, that utilize what is known as “Airbnb Arbitrage,” and there are hundreds of books and guides written about this Get Rich business. A person rents someone else’s home, pays them top rent with the right to sublease, and then furnishes the home and rents it as an STR. No matter a big business or a small cottage owner, STRs most often make more money!
- Upkeep and Maintenance– Keeping up a rental home or property can be arduous. People coming for a short period tend to have a smaller footprint and do less damage. Not only that but the landlord gets their credit card and will charge for damage and deep cleaning. It is just a fact that things stay nicer when people are staying short term and not settled in, and that threat of a massive upcharge on the credit card seems to help.
- Tenant Laws In Oregon – Oregon’s super restrictive Landlord Tenant laws and Rent Control have done nothing but discourage landlords from renting their properties; especially Single Resident Homes. Landlords can no longer evict a tenant without cause or special exception. Rents are limited to a specific increase each year. While these laws in Oregon did some good things to protect tenants, they pushed many homeowners into the SFR model.
According to Airbnb, one of the hottest Airbnb homes in Hillsboro is located at 7th and Main Street and rents out for $1347 Per Week. Have a look at this hot home right here:
What Does This New Hillsboro Ordinance Do?
- It amends our Codes to legalize STRs in almost all Residential, Mixed-use, and Commercial Zones in the City.
- The Ordinance is broken into two types of STRs- Units that are partially rented in cohabitation with the owner and units that are totally rented as an STR.
- The Ordinance provides for a Type 1 approval/permit for partial STR rentals– this is fairly easy and affordable to apply for and obtain.
- The Ordinance provides for a Type 2 approval/permit for a stand-alone whole house STR. This is a public hearing, will cost potentially thousands of dollars, and may be appealed by the neighbors. This is the path most STRs will have to follow to become legal and could be highly contentious.
Here is a screenshot of the new Ordinance Rules for both types mentioned above:
So What Comes Next?
We always have questions- and look at the impacts of new laws and codes. Let’s review:
- We have, let’s say, 200 STR Rentals that we know of.
- Only five rentals have been permitted in the past leading up to this.
- That leaves between 150 and 195 STRs active in Hillsboro that are now unpermitted.
- Will the City go after these rule breakers who are violating City Codes?
We asked members of the City Staff if the City would go after enforcement. After all, some 90% plus of short-term rentals are openly listed on public platforms and would be easy to target for Code Enforcement.
The answer came back a resounding NO!
Will the Planning Division seek to enforce the new regulations on STRs without a permit?
“Planning Division staff is not recommending proactive compliance measures against existing STRs. It is Hillsboro’s policy – like many cities – to react to complaints that originate from the public.”
What would happen if someone complained?
“The complaint would be generated by someone in the community. The complaint would go to Code Compliance. Code Compliance would determine whether there is a violation.”
What would happen if Code Enforcement issues a citation to the proeprty owner?
“If there is a violation, Code Compliance would give the STR owner a deadline to “get legal”. If the deadline passes, Code Compliance can start issuing fines per HMC 4.04; ” Fines can be hundrreds of dollars per day.
Left In Limbo- What Happens Next?
As of now, it is hard to say what will happen next. Because an STR owner has to spend hundreds or thousands getting a Type 2 Permit and have a public hearing, it is very unlikely many of them will apply willingly. Will neighbors complain? Maybe- but this Ordinance does nothing to increase complaints. It clarifies and offers a path forward for STR owners, which is a very good thing. The Ordinance moves this issue out of the grey zone of questionable legality.
Based on our housing shortage and the fact these rentals can eat up an important 1 to 1.5% of our housing supply, it is possible that a Housing advocacy group or warrior could hunt these STRs down and systematically call in complaints against them. That would collapse the hearings process here in Hillsboro, and Code Compliance could not handle it either. If this was Portland, I would say that could happen. But this is Hillsboro- things like that don’t happen, do they? Not yet, anyway!
WHAT ABOUT THE MONEY?
Tune in Next Week when we dive in on the Transient Lodging Tax that all STR owners must pay and how that works!
