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Audit: Airbnb already has whole-house listings here illegally, even though city leaders previously promised to prohibit them.

CITY OF PORTLAND - City auditors released an unusually critical audit of the city's 'lax' enforcement of its short-term rental ordinance in August. Now city officials want to weaken the city's regulatory requirements by letting Airbnb and other listing platforms register their own hosts, skipping mandatory city safety inspections. Though Portland now hosts the headquarters of North America's largest vacation rental company — Vacasa — the city has quietly dropped the idea of legalizing vacation rentals within city limits.

Vacation rentals have been a fixture on the Oregon Coast for decades, and in July 2014 then-mayor Charlie Hales announced his intention to legalize them inside city limits for the first time. Conjuring an image from the TV show "Let's Make a Deal," Hales said the city's pending ordinance to legalize Airbnb-style rentals in private homes was akin to Door No. 1, and expanding that to allow short-term rentals in apartments and condos, planned for later that year, was akin to Door No. 2.

Door No. 3, Hales said, was vacation rentals, and that would come next, he promised, with city planners drawing up proposed regulations to be vetted the next year. Vacation rentals typically give travelers the run of a whole house, without a landlord or resident present, for several days.

But it never happened.

Mike Liefield, who runs the enforcement program for the Bureau of Development Services, said recently that the city decided not to open Door No. 3, because of the feared impact on the rental housing market from converting long-term rentals into short-term vacation rentals.

CITY OF PORTLAND - Chart from short-term rental audit.

It's hard to pinpoint when the decision was actually made, because it came with little fanfare and no public discussion. But Marshall Runkel, chief of staff to Commissioner Chloe Eudaly, said his boss determined she didn't want to allow vacation rentals during the time she oversaw the Bureau of Development Services in 2017 and early 2018.

"It was very clear that the commissioner wasn't interested in enabling whole-house rentals," Runkel said. They are the "most damaging" type of short-term rentals for a neighborhood and the most damaging to the housing market, he said.

There's been no discussion by Mayor Ted Wheeler's staff about changing the city policy on vacation rentals since he took over control of the Bureau of Development Services earlier this year, said his spokeswoman Sophia June.

"When then-Mayor Hales said that the next policy to consider was vacation rentals, Portland hadn't declared a housing emergency and we weren't in a housing crisis," she wrote in an email to explain the mayor's thinking. "We understand that there is a constituency that would like the city to allow for vacation rentals, but at this time the city's policy remains unchanged."

Back in 2014, Vacasa executives told the Tribune they'd refrain from expanding into the city if it wasn't going to legalize vacation rentals — but grumbled that if the company didn't get respect from the city, it might move its headquarters to Boise. But if the city did open Door No. 3, they envisioned a substantial operation that would require the services of 200 to 400 more employees in Portland, including housekeepers, maintenance staff, photographers and data specialists.

Vacasa has since grown exponentially, and now manages more than 10,000 vacation rentals across the U.S. and in select cities in Europe, Latin America and even Africa. But it still has only a limited inventory of properties in Portland, said Vacasa spokeswoman Anni Murphy.

"The units we manage adhere to local regulations, as our company has been advised by the city," Murphy said.

A recent search found the company was listing 68 vacation rentals in Portland, though it's unclear if those are all in city limits, and some may be in commercial zones where such rentals are not restricted.

Murphy said Vacasa would still welcome a decision to legalize vacation rentals in Portland.

"Second-home vacation rentals provide great lodging options for tourists and family members visiting Portland, thereby increasing revenue to the city and local businesses," Murphy wrote in an email statement. "At Vacasa, we support legally operated short-term vacation rentals in Portland, and believe they should be taxed equally to hotels, while redirecting the proceeds to important social causes including affordable housing."

But some wonder if the whole issue is now moot, because Airbnb and other short-term rental companies have long flouted the city ordinance, and operate vacation rentals anyway.

Saying the city won't open Door No. 3 "makes no sense to me," because they've already opened it, said Steven Unger, owner of the Lion and the Rose, a Northeast Portland bed and breakfast.

The city short-term rental ordinance allows people to rent out one or two bedrooms in their home, apartment or condo. But if they want to rent out more than two bedrooms, they must get a different permit that is much costlier and more involved, akin to the permit that regular bed and breakfasts must get.

Airbnb is widely accused of flouting the rules here and elsewhere around the world. Along the way, it has created a robust new global market for urban vacation rentals.

"If you go to Airbnb, there are about 3,000 entire-place listings" in Portland, Unger said. City auditors reached a similar conclusion in an audit released in August, when they decried the city's lax enforcement of the short-term rental ordinance, and estimated whole-house home and apartment rentals accounted for 60 percent of Airbnb's Portland listings in December 2017.

Laura Rillos, spokeswoman for Airbnb, said many of those listed whole-house units are accessory dwelling units (ADUs), which are legal under the city ordinance. Many of those would not be offered on the long-term housing market, she says, because the owners keep them for visiting family and other guests certain times of the year.

Debi Hertert, leader of a locally based trade group of short-term rental hosts, Host 2 Host, said her members don't offer whole-house rentals, but individual rooms in homes, primarily through Airbnb. Hertert said it's unfair that Airbnb gets singled out for criticism because it is the largest player in the Portland market, when other companies often are more flagrant violators of city rules.

But Hertert recently researched large homes on the market as a locale for an overnight meeting of several Host 2 Host members.

"I was shocked by how many four to five-bedroom homes were available in Portland," she said.

One of the problems with the city's short-term rental ordinance is it's hard to enforce, and easy to circumvent. For instance, the host must be on site at least three-fourths of the year. But that means someone could be out of town for three months — the entire summer — and lease their house out as a vacation rental during the prime tourist season.

And the city has no way of knowing if a family or group is using three or more bedrooms in a home instead of just two.

Though the bed and breakfast business has been severely hurt by the explosion of home-sharing and short-term rentals, Unger thinks the city should legalize vacation rentals. He reasons that they're occurring anyway, and that way the city could set its own rules for them, just as Cannon Beach, Manzanita and a host of other Oregon cities do.

"I think the city should do Door No. 3," Unger said. "I think they should regulate it in a controlled manner, that meets the strategic goals of the city."

Otherwise, he figures, they're happening anyway.

But one Portland Airbnb host, who asked that his name not be divulged to avoid retribution, predicted that if the city were to legalize vacation rentals it could lead to a "full-on free-for-all" by investors grabbing up regular homes and converting them to permanent vacation rentals.

Hertert, of Host 2 Host, agrees that legalizing vacation rentals would take even more housing off the regular rental market.

"The vacation rental industry is booming," she said. "I think the urban areas are wise to protect themselves."

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