Bellingham considering new rules for vacation rentals

By Emily Hamann

It is Bellingham’s turn to wrestle with the question: What to do about Airbnb?

Over the past 10 years, new sites like Airbnb and VRBO have popped up, making it easy for people to rent out extra space in their homes to visitors. It’s given homeowners new options, and a new income stream, but left cities searching for solutions about how to regulate these new mini-businesses. Some cities have banned them out right, while others have thrown open the doors.

Bellingham is working toward a middle ground. The planning commission finalized its recommendations last month. Now the city council will take up the issue this summer.

Current city rules don’t cover vacation rentals at all. The only process the city offers homeowners looking to rent out their home in a neighborhood is to apply for a conditional use permit to operate as a bed and breakfast.

There are eight properties that have gone through that process. But, the city estimates there are more than 200 properties listed on short-term rental sites.

“Currently, they’re unregulated,” Senior City Planner Lisa Pool said. “Our code does not include a definition for vacation rental or short-term rental.”

Last fall, the city decided to fix that, and start designing a process hosts can use to get a permit to operate their rentals legally.

“We need to get ahead of this emerging issue and get some standards and regulations in place,” Pool said.

The proposed ordinance sets out three different tiers of rentals.

For houses in the residential areas, the first tier is for people who want to rent out up to two bedrooms in their primary residence. The second tier is for people who want to rent out up to five bedrooms in their house, primary residence or not. There’s a time limit on both of those tiers. Hosts could only rent the space out 90 days per year.

The process to get those permits would be an administrative review, where someone on planning staff could approve the permit.

Pool estimated getting that type two permit could take around two months.

“Anything that’s administrative is a pretty straightforward process,” Pool said.

That 90-day cap was intended to strike a balance, Pool said.

It will allow people to rent out their homes for a few months in the winter and summer, maybe while they themselves are on vacation, but won’t let them turn hosting into a full-time job.

The third tier would be for the more commercial-type rentals — generally aimed at people looking to make a large portion of their income from hosting.

People wanting to rent out their property in residential areas beyond the constraints of the type one and type two permits would have to apply for a conditional use permit. That’s the process places like B&Bs and churches use to operate in residential areas.

The process for that is more extensive. There’s a fee of about $1,000 and a public hearing and a hearing examiner review. There would be a cap of 125 conditional-use permits for short-term rentals in the city.*

In residential areas operators could only get two** short-term rental permit of any kind.

Beyond the fees collected during the permit process, the city wouldn’t collect any money from hosts. It is still the host’s responsibility to get a business license, if necessary, and pay any applicable taxes. Some short-term rental sites take care of that automatically. Airbnb, for example, automatically charges guests sales tax and Washington’s lodging tax.

The rules would be less stringent in urban village areas and commercial zones. Hosts would just have to apply for a type 1 permit to rent out their homes, regardless of size.

“What the planning commission has recommended to City Council is really a compromise, between not allowing them at all and allowing them everywhere,” Pool said.

Not everyone is happy with this solution.

Annie Mackie is a coordinator at the Bellingham Neighborhood Coalition, a new city planning activist group. The group sent a letter to the planning commission advocating against adopting the new rules on short-term rentals.

“We think that these are commercial intrusions into single-family residential zones,” Mackie said.

She thinks regulations of this kind should be decided on a neighborhood-by-neighborhood basis. Some neighbors might welcome visitors in the short-term rental next door, while others have concerns about a different set of strangers throwing a loud party every weekend.

“I call it the conveyor belt of strangers,” Mackie said. “You lose that connectivity of a community.”

Mackie sees a paradox between the city’s concerns about affordable housing and the housing shortage and its plans to allow short-term rentals.

“We hope to convince our City Council that this needs to be tabled until the city has a better handle on its housing issues,” she said.

Peter Frazier is also unhappy with the new ordinance, but for the opposite reason — he thinks it’s too stringent. He thinks the ordinance will discourage hosts from getting into the short term rental business.

“It’s going to devastate the short-term rental market,” he said. He runs three short-term rentals in the county, one of which is in Bellingham and would be affected by the new rules. He also has experience in the more traditional hospitality industry — Frazier is a partner at The Heliotrope Hotel, which opened in May near the Fountain District. The ordinance will actually be a benefit to him and business at The Heliotrope, he said, but he’s advocating against it, because he says it will harm short-term rental hosts in Bellingham.

He says the 90-day limit will make it nearly impossible for hosts to make enough money to justify running a rental.

“It’s pretty clear that 90 days for STRs is just not going to work well for people hosting,” he said. And applying for a conditional use permit can be an extra expense and headache that discourages people, he said. If the rules are adopted, however, he said he will go that route for his own rental.

“I can actually afford the conditional use permit,” he said. “I’m more concerned, though, about the people who can’t.”

Frazier said hosts might not be able to take on the expense, or have time to go through the process of applying for a conditional use permit, Frazier said.

“Many people who are running STRs are middle class people trying to make ends meet,” he said.

He’s also skeptical of the argument that short-term rentals takes away housing from long-term residents. There are more than 36,000 housing units in the city, according to a city analysis, and just more than 200 short term rentals.

“That is a drop in the bucket,” he said. He also doesn’t think the local market will support many more rentals, anyway.

“I think we’re pretty much topping out on the number of vacation rentals that are possible.” Frazier chose to be a host because he enjoys it, and he likes promoting Bellingham.

“It’s something that is a calling almost, to be a great host,” he said.

When he travels, he also uses Airbnb to stay at people’s homes. Getting that experience, staying in a home in a residential neighborhood, living like a local, is part of the appeal of traveling with Airbnb, he said.

And when travelers are staying in a rental in a neighborhood, he says, they’re mostly going out during the day, and coming home at night to sleep — basically exactly what a long-term tenant would be doing anyway.

“What is wrong with having some visitors in our residential neighborhoods?” he said.

*This paragraph has been corrected to reflect that the cap is 125 permits, and type III-A permits are decided by a hearing examiner.

** Corrected to reflect that a person could have two permits in residential areas.

Related Stories