Special City Council

CHELAN - One effective way of alleviating an issue is dealing with it before it becomes a large-scale problem. That’s the path the Chelan City Council chose to take short-term rentals after holding a special council meeting on Tuesday, March 8 to discuss - among other things - how to regulate and deal with vacation rentals in Chelan. 

“I want to see how we can create a level playing field,” councilman Ray Dobbs said in a short introduction. “One of Craig’s (Gildroy) suggestions was to let it regulate itself since we only had three complaints last year, but the other side is what is going on in Leavenworth, where lawyers are involved. So we want to do something before we get to that point.” 

To help facilitate the conversation, Dobbs invited Ulrich Binzer, CEO of Host Compliance LLC, which is a private company in Silicon Valley that helps local governments around the country and Canada manage compliance and enforce solutions for short term rentals. 

“I got an email from iCompass and they were partnering with Host Compliance in San Francisco to develop regulations and manage things from a-to-z,” Dobbs said. “From developing regulations to sending notifications out to people. They have algorithms that dive into Airbnb, VRBO and determin addresses and ownership and just get us deeper in the deal.” 

“The only thing we do is help local governments deal with challenges with the growth of short term rentals,” Binzer began in a live video conference. “We help cities like Chelan accomplish specific objectives, implement those rules and enforce them. We do that with a large number of technology rules so we don’t actually set foot in Chelan, we do everything remotely, and as a result we can do it at a much lower cost that it would cost a city of your size.” 

As of now, Host Compliance is working in about 50 cities around the country that vary in size from Vancouver, Los Angeles, Toronto and Denver to more winter resort towns in Durango, Jackson and summer resort towns in Florida and along the Pacific Northwest. 

Binzer founded the company in 2015 after being tasked by his local council to study possible solutions to the short term rental community that was blossoming in San Francisco. After researching how municipalities had approached regulating the market, it became evident that enforcing the regulations and collecting the appropriate taxes was “virtually impossible”.   

“If you look at the the nation overall, the growth of vacation rentals listed underneath websites has grown from 3,000 to more than 4 million,” Ulrich said. “In 2016 there are about 5 million now, so it is a market that has grown 13 times in eight years. What is driving this is the emergence of new players online so it makes it easier to be a part-time hotel operator. The big ones you have heard of are Airbnb, VRBO, Homeaway, vacationrentals.com, but what you may not know is there is a much longer list and about 125 different local websites that facilitate vacation rentals. Which creates a number of challenges. It used to be that you would call up the property manager firm and they would tell you the owner, but the market is becoming totally fragmented, so you don’t have local managers anymore, people just snap pictures on their cell phone and put the listing online.” 

As Ulrich pointed out, Chelan has about 258 unique properties listed on various websites - although a large portion are those already managed by Lake Chelan Shores, the Lookout, Lake House Chelan etc. 

What does this mean for Chelan? 

Aside from the changing the character of a neighborhood, vacation rentals can causes an influx of parking and traffic during the summer months, large groups of people can rent a house for a weekend and use it as a ‘party house’ and trash. 

“One thing that typically happens happens is that people don’t realize they have to pay taxes. Since most cities have a lodging tax, as a operator of a vacation rental, you are required to pay that tax and most people just don’t do that,” Ulrich stated. “Also investors are buying up properties that were long term lots, evicting the tenants and then turning them into short term rentals, and that has an impact on the availability of housing. It can also lead to situations where property owners are like hotels as they triple their rent and other people see how much money they are making and do the same thing.” 

The problem is that enforcing rules are not that easy with the expanded online market, where owners can list their house on multiple sites. 

“People get smart and realize you are only looking on a couple websites and they take them down and then put the on different sites,” Ulrich said. “Manually tracking down these addresses is hard since they don’t usually provide you with an address of the listing, they just plop a big circle that is about a mile in diameter over the neighborhood. Also traditionally the websites have not been forthcoming in giving information because it is in their best interest to just get as many properties as possible.” 

If you don’t know where the address is, that makes it difficult to collect taxes and make sure that have their proper permits and license. 

Host Compliance could help alleviate some of these problems at a few levels. 

“At the most basic level, we provide a service where we monitor the 21 largest vacation rental sites for properties within the Chelan jurisdiction, and when we find a property we take a screen-shot of it, so if we reach out to the owner we keep that smoking gun evidence, which is helpful to make sure everyone is playing fairly. We actually go out and find the address of the property and organize it in a fully up to day spreadsheet that has their address, who the owners are and their mailing address, because a lot of these properties are second homes, so by providing their second address we can make sure they are playing by the rules.” 

The second service they offer is where they send out letters to the property owners if a property is not paying their taxes or complying in another way. 

“The next service we offer is activity monitoring, where we continuously monitor cities with short term rental listings and use clues to come up with data informed estimate of that properties frequency level and rental revenue in a given time period,” Ulrich explained. “That information you can then cross reference with taxes. And the last service we offer is a 24/7 hotline service so neighbors can call in and report, come up with solutions and find evidence - like a picture or video - in order to make it easier for the city to determine the legitimacy of the incident.” 

As far as a return on investment, “it comes down to how many properties are already compliant and paying their fair share versus the ones who are not,” Ulrich said. “For example our address identification service is $25 per listing and most cities we work with have an annual data cost of $250 per month, so we don’t have to do too many to make it worthwhile. The taxes you get are vastly more.” 

As the council was pondering the service, Mayor Mike Cooney proposed having Ulrich give the city some references from towns they work with that are similar to Chelan demographically, so they can call and check how those cities like using Host Compliance. 

“The council is not driving vacation rentals our of here, we think they handle things very well, the issue are the ones that aren’t on the radar, profiting on the outside,” Cooney said. “With the potential to lose the feel of our neighborhoods, I hope we stay ahead of that curve.” 

• No See-Um 

“It has been an issue since 2004, and no one is cheering for the round-a-bout, it is not widely accepted in the region for a transportation project and that is where we are getting pushback,” Cooney explained. “It is a $9 million project with $3 million already in the ground and people are looking to sweep the project because the $280,000 short between the engineers estimate and what the bid came in at.” 

As a result, the Transportation board is looking at shifting the money to the Goodwin Bridge project in Cashmere although they are $7 million short on their project as well. 

“So we are proposing to ask the state to fund the rest of the project since it is their project and their shortfall,” Cooney said. “The second plan is to go to developers and ask them to contribute and the last is to have the city to cover the cost, with an impact fee for developers on either side of the highway. We have the money to do it, I just want to have assurance and I don't want to see it go away this close to the finish line.” 

The council approved the motion to cover the $280,000 if need be. If the project gets approved before or on March 17, construction should start almost immediately as they aim to have it complete in September.