Fate of Jersey City’s short-term rentals industry will go to referendum

Jersey City moratorium on short-term rentals

Jersey City Rentals

Jersey City has become a hotbed of controversy for the short-term rentals industry. City officials cracked down with a strict ordinance in June. Airbnb collected signatures, and now the law will go to referendum on November 5th.

Jersey City, for those that are unfamiliar, sits straight across the Hudson River from lower Manhattan’s West Side. The area has become one of the last bastions of semi-affordable and accessible living around the Big Apple; some New York dwellers have steadily migrated over as a reprieve to rising rents in Brooklyn and Manhattan.

The commute into the city is a quick connect via the PATH ( Port Authority) train - when all things are running smoothly. The need for comprehensive overhaul and expansion of the rail service is glaring and major funds have been allocated this summer to repair and increase capacity on the Newark line. In July, the port authority announced a one-billion dollar three-year investment plan for PATH overhaul.

Sharing Economy Haven

Better transit is welcome news for Jersey City homeowners and developers banking on skyrocketing costs in the boroughs to push investments outward. Perhaps not super great news for long-term renters that have built a home in the “Chilltown”; higher rents usually follow easier commutes.

The bedroom city has also become something of a sharing economy haven for those in search of deals on short-term accommodations, but also for peer-to-peer car sharing. The Airbnb for cars company Turo has a big community in Jersey and New Yorkers often take the PATH over to secure a fair-price on a set of wheels for the weekend; Turo is still banned in New York City.

Airbnb search on August 8th for August 22nd, 2019.

Airbnb search on August 8th for August 22nd, 2019.

Jersey City has also become a cheaper accommodations alternative for visiting leisure and business travelers. So much so that city officials became worried about the impacts that short-term rentals are having on rents and community. The council passed a strict ordinance in June severely limiting the industry:

The ordinance in questionwhich was passed in June, institutes an annual 60-day cap for short-term rental properties if the owner is not on site. It will also prohibit Airbnb and other short-term rentals in buildings with more than four units and phase out existing short-term rental contracts by Jan. 1, 2021. The ordinance also prohibits renters from serving as short-term rental hosts.” From NJ.com.

Shortly after the ordinance was passed, Airbnb began collecting signatures to push through a referendum that would put it to vote within the community. Yesterday, NJ.com reported that Airbnb has collected more than the necessary amount of votes needed to compel the city council to either repeal the ordinance, or put it to referendum.

And since city officials have not indicated that they would quit or revise the ordinance, the likelihood is that it will now go to vote on November 5th.

Airbnb spokeswoman Liz Debold Fusco stated that the petition sends a clear message and that… “now, we call on the City Council to respect the wishes of their constituents by throwing out this unpopular ordinance and starting over, collaborating with the short-term rental community and small business leaders to craft and implement common-sense regulations without destroying a thriving economy.”

Airbnb’s Burden

The sharing economy turned rentals marketing & distribution platform has lead the charge on working with cities and communities in setting favorable regulation for the industry at large. In another incident this week, Airbnb sued Palm Beach County, Florida claiming that a recently implemented vacation rental ordinance is unconstitutional. The company claimed that the ordinance violates the Local Option Tourist Development Act and the Florida Constitution, and that it would make Airbnb “suffer irreparable harm, the extent of which is incalculable.”

These recent and intricate legal dealings are symptomatic of a global fight now going on in cities and communities everywhere. Airbnb has shouldered the burden on behalf of the broader flexible rentals ecosystem, to push for more favorable terms in an increasingly regulated market.

This includes other online marketplaces that often list the same inventory found on Airbnb. Expedia and Booking Holdings, with their rentals apps, essentially operate the same business model as Airbnb i.e. as an aggregation engine for individual homeowners, local vacation rental property managers, and increasingly larger corporate rented real estate groups.

The other marketplaces have their share of legal battles but Airbnb has become something of the de facto lobby group for the industry. Airbnb’s push to diversify beyond owner-occupied spaces and into hotels (HotelTonight acquisition), alternative accommodations (Lyric investment) and serviced apartments (Urbandoor acquisition) is in part move to ensure scalability and part move to shore up the necessary support that it will need to take the lead on a protracted push to shape the global rentals landscape in the company’s favor.

Convergence in Hospitality

All things point to a convergent scenario where short-term rentals are treated more and more like hotels i.e. regulated and considered fully by city planning officials as a more normal part of the real estate landscape. This will change the broader short-stay landscape with mixed-use developments becoming more of the norm, and shifting investments strategies taken by the hospitality industry at large.