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Charleston task force preps to study short-term rentals

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Rashaunda Grant rents two of three units in her childhood home on James Island, as well as a neighboring home, to guests via Airbnb. (Photo/Liz Segrist)

After graduating from college in Florida, Rashaunda Grant returned to the Lowcountry to open a bed-and-breakfast in the James Island home she grew up in, on land her family has owned for generations.

Her house met all of the city’s bed-and-breakfast requirements except one: It was not on the peninsula. So Grant, instead, started renting to 12-month tenants to earn extra money while searching for full-time, nonprofit work. But problems ensued. Neighbors complained that the home was not cared for and that the tenants were often loud.

Grant decided to divide her home into units by adding doors, readying it for short-term rentals. In March 2014, she began renting out two of those suites, along with an adjacent home on the property, via Airbnb, a website that enables person-to-person home rentals. She lives in one of the units full time.

Rental income from all of the suites earns Grant about $36,000 each year. Airbnb takes a 3% fee, or about $1,080 of Grant’s gross profits. She said much of her revenue goes toward replacing linens, paying for utilities and updating the home, which was built in 1965.

Rental income from Rashaunda Grant's suites earns her about $36,000 annually. She said much of that goes toward replacing linens, paying for utilities and updating the home, which was built in 1965. (Photo/Liz Segrist)

“For me, this has been my dream,” Grant said. “I want to welcome people to Charleston. I’m from Charleston. My family has been on James Island for seven generations. We are very much a part of the Gullah-Geechee culture. ... For me, a huge part of this is being able to share that culture when guests come.”

Renting out rooms or entire homes on Airbnb, VRBO or HomeAway is currently illegal in Charleston, yet more than 300 homes in the area are listed for rent on these sites.

Grant is one of hundreds of residents waiting to see whether short-term rentals — the center of a controversial debate that’s been ongoing in the city for at least two years — will eventually become legal in Charleston.

An 18-member task force, comprising six members appointed by Mayor John Tecklenburg and 12 picked by City Council members, will soon begin studying the impact short-term rentals might have on the city.

The task force will make a recommendation to Charleston City Council, which will vote on the legality of short-term rentals — defined as rentals of fewer than 30 days. Jacob Lindsey, Charleston’s planning director, said the process is on no particular timeline.

“We don’t want to rush this very important topic that affects the whole city,” Lindsey said. “We want to be thorough and get it right. ... Many people feel very strongly on both sides of the issues. It’s controversial. This is a big money maker for a lot of folks. We have to have a very level headed, very thorough study to come up with recommendations.”

Many residents and neighborhood association leaders are worried about impediments to livability in their communities. They also said it is unfair that short-term rentals do not have to pay accommodations taxes. In an effort to alleviate some concerns, Airbnb began collecting those taxes from guests when they pay online for each stay in South Carolina as of June 1. Those taxes are then remitted to the state.

Airbnb spokesman Christopher Nulty said the San Francisco-based company is working to craft short-term rental regulations in some S.C. communities where they are illegal. Company representatives met with Airbnb hosts and officials earlier this summer in Mount Pleasant and Charleston, although such rentals are legal in most of Mount Pleasant.

Grant said she is frustrated that housing affordability debates often surround short-term rentals. Some have said short-term rentals actually worsen housing shortages in tight markets, eventually increasing the cost of housing in an area.

But Grant said Airbnb hosting enables her to afford her home and continue working as an outreach specialist with the United Way Association of S.C. She wants affordability discussions to influence housing development and hotel project approvals as well, not just short-term rental debates.

“No one ever asks about housing affordability when city departments are approving new developments, but when it comes to short-term rentals: ‘Oh, it’s going to cause the market to crash; it’s going to be horrible,’” Grant said. “You can’t put that on private homeowners when you just approved a 50-home development that no one in that neighborhood can afford.”

The controversy

Short-term rental hosts say they need the extra income to afford the rising cost of living and housing in the Charleston region. Many also say that they enjoy hosting and that it boosts the tourism sector. They have pleaded with city officials during numerous City Council meetings to make short-term rentals legal.

Denise Holtz, founder of the S.C. Vacation Rental Management Association, has pushed for the city to pass such an ordinance, saying Charleston could reap the benefits of more accommodations taxes coming in and more tourists spending money at area businesses.

The association sponsored a study by TXP Inc., a consulting firm in Austin, Texas, which found that short-term rental guests in 2014 accounted for about $238 million in economic activity in Charleston County. The study took into account any residential properties that can be rented out for less than 30 days, including those on sites like VRBO, as well as vacation rentals on other websites.

“I believe it’s good for neighborhoods and good for cities from a tax revenue standpoint, particularly for a city like Charleston. ... Travelers aren’t going to stop coming here, and now they want to experience the place like a local,” Holtz said.

Many opponents say short-term rentals can impact neighborhoods, bringing unwanted visitors who might make too much noise, take up parking spaces or leave trash behind. Some have said it could hurt home values.

Ginny Bush, the president of Charlestowne Neighborhood Association, said her community is worried short-term rentals will erode the stability of residential neighborhoods and hurt residents’ ability to find affordable housing near workplaces.

Others in the accommodations industry — some hoteliers, bed-and-breakfast owners and those in the short-term rental overlay zone in Cannonborough/Elliotborough — say it creates unfair competition because short-term rental hosts do not have to pay accommodations taxes. Paying those taxes is not currently required by the city because short-term rentals are illegal, although Airbnb is now collecting those taxes voluntarily.

“I can sympathize with a homeowner who wants to rent a room to send a kid to college or offset the cost of a mortgage. I can see how that’s valuable for a city,” Lindsey said. “But when we have individuals who begin to operate hotels under the guise of homeowning, that’s skirting the intent of the present ordinance. ... We really want to be rational by how we regulate this. ... We want to go into it with an open mind.”

Regulating rentals

Short-term rentals do not come without risks. Nearly 100 residents have been sued by an unnamed Charleston resident who filed as Global Real Property Trust. The lawsuit alleges unfair competition. The case is ongoing.

Additionally, since May 2014, 80 residents have been given citations by the city with fines ranging from $200 to $1,092, according to Dan Riccio, the director of Charleston’s Department of Livability and Tourism.

“For me, this has been my dream. I want to welcome people to Charleston. I’m from Charleston. My family has been on James Island for seven generations. We are very much a part of the Gullah-Geechee culture. ... For me, a huge part of this is being able to share that culture when guests come.”

Rashaunda Grant

Hosts are required to pay these fines, but Riccio said the judge instead typically has the violator submit financial invoices from the rental company, such as Airbnb or VRBO, meet with the city’s Revenue Collections Department and pay back taxes for as long as they have been renting illegally. No one has been sentenced to jail for violating the ordinance, which reads that violators risk up to $1,092 in fines or 30 days in jail.

Grant said she fears fines but decided to join the dozens of other hosts who have openly advocated for short-term rental legalization because she wants to see “sensible legislation.” She said that the same rules that would apply to a homeowner leasing a room for 12 months should also apply to short-term rental hosts.

“There are lots of ways it can be done,” Grant said of potential regulations. “I think it’s just deciding what’s best for Charleston and what makes the most sense for this area. I think it’s also important to remember that different parts of Charleston are so vastly different. ... While parking might be an issue for downtown Charleston, parking has never been an issue here.”

This story originally appeared in the July 25, 2016, print edition of the Charleston Regional Business Journal.

Reach Liz Segrist at 843-849-3119.

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