Testimony of Claire Zippel At the Public Hearing on Bill 22-92, Short Term Rental Reg and Affordable Housing Protection Act of 2017, DC Council Committee of the Whole

Chairman Mendelson and members of the Committee, thank you for the opportunity to testify today. My name is Claire Zippel and I am a policy analyst at the DC Fiscal Policy Institute. DCFPI promotes budget and policy choices to expand economic opportunity and reduce income inequality in the District of Columbia, through independent research and policy recommendations.

I would like to focus my testimony today on a recent report about the characteristics of short-term rental listings (STRs), and the potential impact of STRs on DC’s housing supply. The report was completed last month by DC Working Families. DCFPI was pleased to be an informal consultant to the report. I would like to share some of the report’s key findings today.

In recent years, STRs have grown rapidly in the District. Between 2015 and 2016, for example, the number of listings on Airbnb rose 38 percent, to 5,300 listings. There are three main types of STR listings. A host may list a bedroom or couch in their home to earn some extra income. A host may list their entire home while they are out of town as a “vacation rental.” These first two uses are sensible and consistent with the stated purpose of STR platforms, and involve only the use of the host’s primary residence—though the DC zoning code prohibits such rentals in multi-unit buildings.[1]

The third type of STR listing is the “commercial listing,” in which one host lists multiple units on an STR platform—only one of which could possibly be the host’s primary residence. In 2016, about 2,000 of 5,300 listings on Airbnb (37 percent) were commercial listings. These commercial listings are problematic because such listings represent residential units that have been made unavailable to long-term residents, effectively reducing the supply of available housing. With the District’s recent population boom, and high and rising housing prices, DC can ill afford to lose units that would otherwise be available for long-term residents. Moreover, it is worth noting that the DC neighborhoods with a high prevalence of commercial STRs are the neighborhoods where rents are rising the fastest, suggesting that the housing units are being lost to STR conversion in the very areas where housing supply is most needed.

There is a strong financial inducement to use apartments as commercial STRs. The potential revenue of an STR unit is far larger than the revenue generated by a residential unit. In the neighborhoods where Airbnb listings are most concentrated,[2] the potential profit margin of an STR is over 100 percent on average.[3] This has undoubtedly contributed to the rise in the number of commercial STR listings: 34 percent growth in the past year. The powerful financial incentive for hosts and the continued popularity of STRs among consumers indicates that barring regulatory action, commercial STRs will continue to proliferate across DC neighborhoods.

The findings of the DC Working Families report demonstrate the need for the District to take steps to limit the commercial use of housing as STRs. The DC Fiscal Policy Institute does not have the specific expertise on STR regulations to comment on the particulars of Bill 22-92, but we strongly support its intent to eliminate commercial STRs and ensure that DC’s housing stock is available as homes for DC residents.

Thank you, and I am happy to answer any questions.

[1] DC Zoning Code, Subtitle U, 251.1(j).

[2] As measured by the ratio of commercial listings to vacant housing units.

[3] Average neighborhood rent minus average Airbnb listing amount, assuming full-time commercial use and a 79 percent (hotel average) occupancy rate.