Home Away from Home: Short-term rentals gain footing in Springfield

Three years ago, civil engineering consultant John Horner began renting out the cottage behind his home on historic Walnut Street.

A small, two-person rental, the building had been a caretaker’s quarters when his great-grandparents owned the property. Through such short-term rental services as Airbnb Inc., HomeAway and Vacation Rentals by Owner, the cottage has caught on as a home away from home for travelers to Springfield.

Since, Horner has purchased two other homes to market as rentals and says people from around the world have utilized them for as short as a few days or as long as a month.

“I’ve never had any kind of bad experience,” said Horner, who operates John Horner Consulting out of his home office. “Every guest is very courteous and very polite. It’s very rare that a guest will leave a mess. I’ve never had a single item taken out of one of the houses that I know about.”

Similar to ride-sharing service Uber, short-term rentals have caught flak in some areas, where regulation hasn’t caught up with the technology.

In Springfield, the city’s roughly 30 short-term rentals don’t collect the 5 percent hotel-motel tax. Further, renters from out of town could, theoretically, put a damper on neighborhoods with extra noise or unwanted behavior, said Tracy Kimberlin, president and CEO of the Springfield Convention and Visitors Bureau.

The Los Angeles suburb of Santa Monica already has instituted regulations. This summer, a rule change began requiring hosts to live on the property during the renter’s stay, register for a business license and collect the city’s 14 percent occupancy tax. The move was expected to shut down 1,400 of the city’s 1,700 short-term rental listings, according to a Forbes report. While San Francisco – home to Airbnb’s headquarters – last year became one of the first cities to legalize short-term accommodations, the heavily populated area has began to tighten its rules, such as requiring liability insurance and the collection of taxes, according to a report from product reviewer CNET.

Kimberlin said the CVB would rather see short-term rentals complement hotels and other lodging facilities than go away completely.

“Our position is that it’s here, there’s probably nothing anybody could do to stop it. It’s something that the Internet has born, so to speak,” he said. “We really don’t have a problem with the short-term rentals. The cat’s out of the bag.

“What we need to do at this point is figure out how it can best work for everyone concerned.”

Springfield start
When Horner jumped into the short-term rental market a few years ago, he could count on one hand the number of available properties in Springfield. While that number has grown to 20 to 30 short-term rentals available online at any given time of the year, the fledgling industry still is emerging in the Queen City.

For Horner, it’s a solid source of income.

Horner, who maintains the properties with wife Pat, averages 60–70 percent occupancy year-round.

“Even if you had like 60 percent [at] $100 a night – do the math. That’s $2,000 for a house that would probably rent for $500 or $600 a month,” he said. “It’s awful lucrative in that sense.”

For its part as facilitator, Airbnb charges guests 12 percent of the rental and the host 3 percent, meaning the service takes 15 percent of every booking. Vacation Rentals by Owner, Horner’s preferred outlet, works on a subscription service for around $400 a year, he said, noting it allows owners to interface more directly with renters.

His cottage, nicknamed The Little House, runs $60 a night, $385 a week or $1,350 a month. His two other rental homes, The Kickapoo Place and The Weller House, are $100 a night, which he said is about the average for short-term rentals in Springfield.

At those rates, his homes are comparable options to hotels but allow renters extra space, a fully furnished experience, including a kitchen, and a taste of what Springfield has to offer in terms of real estate.

“I do think the local flavor is part of it – doing what the locals do,” Kimberlin said. “And part of it’s just out of necessity, and sometimes it’s out of cost. You can rent a whole house, and if you have a family, it may be economical to go that direction.”

Horner said his customers have traveled from as far as Ireland, Germany and Australia. But the majority of his renters come into town for training at the area’s higher education institutions or for events, such as conventions, business meetings, weddings or sporting competitions.

Rental websites have a rating system, and both customers and owners have profiles, which give each a feel for the potential business deal. It’s added security for Horner, who in addition to using the sites as facilitators, vets people who are staying in his properties.

“It’s rare that I would let somebody have it not knowing who they are. There’s certain things that are flags,” he said, noting he likely would turn down a group of college buddies who may want to use his property as a party spot. “You’re not under any kind of discriminatory ordinances.”

Future focus
The short-term rental industry may be pubescent in Springfield, but both Horner and Kimberlin said it shows no signs of slowing.

As Kimberlin points out, Airbnb has a market value exceeding Marriott International Inc. The Wall Street Journal’s examination of projections indicate Airbnb’s value hit $24 billion this year, above Marriott’s roughly $21 billion valuation.

“I think it’s going to continue to grow because our average daily rate in the city is not that high, comparatively speaking, with other communities around the country,” Kimberlin said of the city’s $79.16 average hotel rate. “I think the higher the rates get, the quicker it’s going to grow.”

However, the lack of taxing and regulations can put the short-term rental properties at an unfair advantage.

“If the city tries to stop this, they’re probably going to run into a whole lot of problems because it’s already out there,” Kimberlin said, noting the CVB and the city have had early talks concerning regulation.

Bob Hosmer, principal planner with the city of Springfield’s planning and development office, said regulation talks still are in their infancy.

“We’re trying to get our heads around what they are, how they act and what kind of regulations are out there in other communities,” he said, noting the collection of hotel-motel taxes would likely be first to hit the local rental market.

City Council has not called on the department to set rules, and no timeline has been set on bringing plans before the governing body.

Right now, city code prohibits homeowners from renting their property for less than 30 days in residential areas. However, he said that rule isn’t enforced unless a complaint is lobbied.

“We haven’t received that many complaints from neighbors,” he said.

A University of Chicago Law Review report titled, “Airbnb: A Case Study in Occupancy Regulation and Taxation,” indicates services such as short-term rental sites “operate in interstitial areas of the law because they present new and fundamentally different issues that were not foreseen when the governing statutes and regulations were enacted.”

Well-funded groups, such as landlord and hotel-industry organizations, advocate against the properties, saying they evade established systems of regulation. But according to the report, Airbnb co-founder Brian Chesky responded, “This is true only in the sense that the automobile ‘evaded’ the horse tax and saddle regulations.”