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City cracking down on short-term rental companies and hosts for failing to pay taxes, get inspections

TRIBUNE FILE PHOTO - At one point, an Airbnb host named John was offering six different homes and apartments for nightly rentals in this pocket of the Sellwood neighborhood.The city of Portland is cracking down on a leading short-term rental company, HomeAway.com and its affiliated VRBO.com, for failing to comply with city taxation, permitting and inspection requirements.

The city filed a $2.5 million lawsuit Wednesday in U.S. District Court against the Austin, Texas-based company, a day after ordering the company to cease and desist listing its short-term rental properties within the city.

The city charges HomeAway.com with failing to collect and pay lodging taxes to the city and Multnomah County, as required under the city’s short-term rental ordinance. Nor, the city alleges, is HomeAway providing the names and addresses of local hosts as required, or assuring they display permit numbers in their ads. Posting permit numbers demonstrates that owners of short-term rental properties have had their homes or apartments inspected for basic health and safety measures.

“We offered to work with, and later repeatedly warned HomeAway.com about its obligations under Portland City Code,” stated Thomas Lannom, city Revenue Division director, in a press release. “We now find ourselves in the position of needing to take more forceful action.”

HomeAway’s legal staff is evaluating its options in response to the lawsuit, Jordan Hoefar, corporate communications manager, said in an email.

“HomeAway has repeatedly offered to assist the city of Portland, and other cities, in collecting taxes that have been properly assessed and is disappointed that the city has chosen not to engage us to find a solution,” stated

Matt Curtis, HomeAway’s director of government relations, in a follow-up email.

In addition to the actions against HomeAway/VRBO, the city has sent warning letters and assessed fines totaling more than $1 million to eight other short-term rental websites, Lannom said.

The city also has warned more than 130 individual hosts that they need to get their properties inspected and obtain permits, or both. More than 50 of those hosts face penalties of $500.

“One hundred and thirty is just the start,” Lannom said in an interview Wednesday.

There are an estimated 3,500 Portland properties listed for short-term rentals on various sites, Lannom said.

So far, only 448 of those local hosts have applied for permits to offer their dwellings up for short-term rentals, according to Mike Liefeld, enforcement manager for the city Bureau of Development Services.

Airbnb, the largest company offering short-term rentals in Portland, has been collecting lodging taxes since July 1, 2014. But that company still isn’t requiring all its hosts to obtain permits before advertising them on its website. “In terms of their compliance, it’s still much less than we’d like to see,” Lannom said. But Airbnb, which operates an administrative office in Portland, did submit a written enforcement plan to the city and hired a dedicated staffer to do outreach to its local hosts to encourage them to comply with the ordinance, he said.

Roughly 15 companies or websites are offering short-term rentals in the city, Lannom said.

Only one of those companies, Vacasa, appears “fully compliant” with the city’s rules, he said.

Vacasa, a fast-growing company based in Portland, has only one listing inside the city, said Cliff Johnson, the company’s cofounder and chief development officer.

Vacasa specializes in marketing and managing full-house vacation rentals, such as those up and down the Oregon Coast. It has declined to operate in Portland, because most vacation rentals are not legal under the city ordinances. In contrast, Airbnb, VRBO (which stands for Vacation Rental By Owner) and other companies have openly advertised vacation rentals inside the city.

“The difference between us and other companies is that the other companies are just doing it and asking for forgiveness later,” Johnson said.

The City Council has promised to revisit the idea of legalizing full-house vacation rentals, and Vacasa has offered to work with city staff to help shape a revised ordinance.

Some affordable housing advocates have raised concerns that many Portland hosts are taking long-term rental properties off the market, or rooms in homes available for rent, and shifting them to nightly rentals under Airbnb and other services, because it’s often much more lucrative. That has taken an undetermined number of rooms for rent and other affordable lodgings off the market, exacerbating Portland’s housing crisis.

If Portland were to legalize vacation rentals, Johnson suggested, that wouldn’t affect the housing affordability shortage, because they would mostly be in neighborhoods like Laurelhurst that aren’t known for offering affordable rentals. The city’s lodging taxes would then increase, Johnson said, and those could be dedicated to affordable housing, as city commissioners Nick Fish and Dan Saltzman have urged.

In the fiscal year ending June 30, the city collected $1,232,920 in lodging taxes from short-term rentals, Lannom said.

That is mostly from Airbnb, the dominant player in the short-term rental market here, and the first in Portland — and the nation — agreeing to collect lodging taxes on behalf of the city.

Total lodging tax collections from short-term rentals are likely to rise this year, as more companies come into compliance with the law.

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COMPANY COOPERATION WITH CITY A MIXED BAG

Companies receiving warnings they may be fined for violating Portland's short-term rental ordinance:

• Airbnb

• Craigslist

• FlipKey

• OnlineVacationRental

• Rentalo

• StayAlfred

• TripAdvisor

• VacationHomeRentals

• VRBO

Civil penalties or presumptive taxes already assessed by the city:

• VacationHomeRentals, $3,000

• HomeAway/VRBO, $2,540,106 Revised Notice

•TripAdvisor/FlipKey, $70,000

Services that are collecting lodging taxes for the city:

• Airbnb

• StayAlfred

• TripAdvisor

• FlipKey

• Misterbnb

Source: Portland Revenue Division