How far will KC bend its rules to accommodate Airbnb, VRBO, and the short-term rental movement?

How to disrupt an industry, Silicon Valley–style: Skirt existing laws, operate illegally, lure customers with convenient technology, maintain low costs by avoiding the taxes and regulation required of existing competitors, declare your business so different from those competitors that all rules must be rewritten, and cede very little ground when you finally come to the bargaining table with the government. The goal: to reach monopoly status, à la Google or Amazon — big enough that the federal government is too cowed by your success to consider breaking you up.

Ride-sharing companies Uber and Lyft charted this path. Before them, Amazon made similar maneuvers. Now Airbnb and other short-term-rental (STR) apps are waging the battle worldwide.

The debate has recently been taken up in Kansas City. Soon, we’ll have an ordinance for how to govern and regulate STRs. The only question is how far Kansas City will cram its beak into the business of STR operators.

Perhaps you are fuzzy on what an STR is? The City Plan Commission, which heard public testimony on the proposed ordinance in early June, certainly was. It pushed back a vote on whether to recommend the ordinance after it became clear that several of its members had only a vague notion of what Airbnb does. The commission is due to vote in August, following a crash course from members of city staff who spent nearly two years writing the ordinance. (The city is holding another public hearing on Wednesday, July 19, from 5 p.m. to 6:30 p.m., at 1125 Locust.)

Lance Pierce, one of the pro-STR speakers at that meeting in June, offered to show CPC members around the Airbnb properties that he rents out to visitors, so that the commission might better understand the issue. After the meeting, I tracked Pierce down and asked if I could take him up on that offer. A week later, I met him outside a top-bottom duplex he recently purchased in the Southmoreland neighborhood. He’s fixing it up and plans to rent both apartments on Airbnb. 

Pierce, 31, is a former “innovation leader” at Hallmark, and he possesses a strong entrepreneurial streak, as one might associate with such a job title. In 2010, his roommate moved out of the two-bedroom West Plaza condo that Pierce owned. Instead of finding a new roommate, Pierce set up an Airbnb account, posted photos of his apartment and put the room up for rent, aimed at people coming to Kansas City for short stays. 

“I met a ton of great people from all over the world: London, Australia, China,” Pierce says. “We’d sit and chat and drink tea for a little while in the morning. Some of the best advice I’ve ever received was from Airbnb guests who stayed in my apartment for a night or two.” 

Over the past seven years, Pierce has slowly built a small STR empire here. He now owns eight properties across the city, all of which he rents through Airbnb. Pierce’s evolution as an Airbnb host mirrors the company’s grand ambitions. What was once an app connecting wanderlust-afflicted adventurers with apartment dwellers looking to make a dent in their monthly rent payments has substantially professionalized. Airbnb now nudges its hosts — who are not employees but independent contractors — to foster a cleaner, more hotel-like experience. Coffee and travel talk on the couch are out; absent hosts and lockboxes with door codes are in. 

In many large cities, Airbnb has accelerated dire housing shortages, in effect cutting supply for residents, driving up prices and turning properties once counted as long-term housing stock for locals into miniature hotels for out-of-towners. For this reason, many cities have begun drafting their own ordinances regulating Airbnb and other STRs, such as Homeaway and VRBO. 

Kansas City is a fine town, and most would agree it is enjoying a cultural upswing. But there are no mountains here. There is no sea. There’s no Broadway, no Bourbon Street. Tourism demand for short-term rentals isn’t what it is in, say, San Francisco. And though buying a single-family house in Kansas City is tougher lately — ask anybody who has bid on a three-bedroom the past year — there’s no reason to believe that the city’s housing market will go bananas the way those in Portland or Austin or Boston have over the last decade. What works as Airbnb policy elsewhere, then, may not be what works best here. 

KC’s proposed STR ordinance has been revised a couple of times since it was released to the public this past winter. The city has taken the approach of drawing a distinction between owner-occupied permits (meaning the person renting out the space owns the property and lives there at least 270 days a year) and non–owner occupied permits (meaning the person doesn’t live full time at the residence; Pierce’s properties would fall into this camp). 

Among the new burdens on those who seek to rent out their homes on a short-term basis:

Permit fees ($100 the first year, $50 every year after that for owner-occupied; $259 the first year, $50 every year after that for non–owner occupied)

Non–owner occupied permit holders are required to obtain approval signatures of 75 percent of all adjacent property owners. If you can’t get 75 percent of your neighbors to sign off, you must pay $569 and go through the usual process of applying for a special-use permit. 

All hosts are required to install and maintain smoke and carbon-monoxide detectors, per city building codes. 

If you live in a multi-family housing unit (an apartment complex, for example), you can’t rent out your place as a short-term rental. 

Citing “strict limits on how often one can share their homes as well as the requirement to get a signed affidavit from adjacent neighbors,” Airbnb’s Midwest public-affairs manager, Benjamin Breit, says KC’s STR ordinance as written “would create one of the most restrictive and burdensome short-term rental regulatory structures in the country.” 

Breit adds: “We welcome regulations, but they should be simple and fair. Our KCMO host community encourages the city to go back to the drawing board.”

Most local Airbnb enthusiasts I spoke to aren’t taking quite such a hard line. Steve Mitchell, a lawyer who has been using Homeaway to rent out the carriage house behind his Hyde Park home since 2009, says this latest version of the ordinance comes close to meeting his satisfaction. 

“I think it’s wonderful that the city sought ideas from people like me and genuinely seems to want to find a modern, realistic, workable ordinance for regulating this new world of short-term rentals,” Mitchell says. “My main remaining problem with the ordinance is how restrictive it is about multifamily structures.” 

Pierce also takes issue with the multi-family restriction. “Most Airbnbs in town are in multi-family buildings,” he says. “I’m atypical — most Airbnb hosts I know of live in an apartment and rent out their spare room. Why should these [STRs] only be allowed in duplexes and single-family homes?”

Diane Binckley, a division manager of the city’s Planning and Development Department who helped draft the ordinance, says it’s about guarding against apartment buildings being bought and turned into de facto hotels. 

“The overriding issue is protecting our city’s neighborhoods and people’s way of life,” Binckley says. “We want to allow the sharing economy and short-term rentals to thrive here, but in a way that’s respectful of other property owners.” 

Local hoteliers and traditional bed-and-breakfast proprietors have slightly different objectives. They want to see the playing field leveled. As Southmoreland on the Plaza innkeeper Mark Reichle said at the June CPC meeting: “I’ve been in business 27 years, generating and paying money to the city. These entities [STRs] are operating as a business also. They should be paying all relevant federal taxes, local sales taxes, state sales taxes, lodging taxes. And they should have to adhere to the same fire safety, alcohol-use, food and zoning codes as well.” 

He added: “I’m operating at a disadvantage under the current structure because short-term rentals are not required to meet the same requirements I am.” 

Kurt Mayo, the executive director of the Hotel and Lodging Association of Greater Kansas City, echoes Reichle’s points. 

“We’re not concerned about somebody renting out a room in their house,” Mayo tells me. “But you’ve got people out there buying buildings and condos strictly to conduct a lodging enterprise. That’s a hotel — which, fine. But a real hotel is subject to ADA compliance, health-department inspections, fire inspections and taxes. If you’re a downtown hotel, the sales and tourism taxes right now add up to 16.975 percent, plus an arena fee for the Sprint Center of $1.50 per room. So I’d say that’s our main concern: fairness in taxes.” 

Pierce notes that, unlike many local hotels, “We [STRs] don’t get tax subsidies or abatements. We’re not at the table for those conversations.” Still, he says he has no problem with the city taking a tourism tax as it does for hotels. Neither does Mitchell. 

“Every short-term-rental person I’ve talked to in Kansas City is absolutely OK with paying a hotel-motel tax,” Mitchell says. “That’s a charge that’s easily passed on to the consumer. We have no problem paying those taxes.” 

Unfortunately for the city’s tax coffers, it’s unable to collect such a tax right now, per state law. A Missouri House bill that sought to fix this problem failed to gain adequate support in the most recent legislative session.

“We think something else will come up in next year’s session,” Binckley says. “Until then, we would still be able to regulate and manage them [STRs] but not tax them.” 

In the meantime, Binckley; city staff; CPC members; Planning, Zoning and Economic Development Committee members (who will review the CPC’s recommendations); and the City Council (who will ultimately vote on the final ordinance) will likely be hearing a lot from Mitchell, Pierce and hundreds of other local residents who have been enjoying the extra scratch brought by renting out extra rooms or entire homes. 

“There is a renaissance of housing happening here, and in a lot of ways the city is trying to take this new and different concept and shove it into the ‘hotel’ box, and then it’s surprised when it doesn’t fit,” Pierce says. “Of course it doesn’t fit. You need a new model.”

“It’s like Uber,” he adds, not incorrectly. “When you go to a city and they don’t have Uber, it’s like, What kind of backward economy is this?” 

Story tip? Email david.hudnall@pitch.com