A new Kansas City report called the city’s regulation of short-term rentals “ineffective and inefficient” — to the point where only 7% of them actually comply with city law.
The audit released Thursday confirms the frustrations of many Kansas City residents in recent months: that a majority of short-term rentals are skirting city regulations. According to the audit, short-term rental sites like Airbnb listed 4,175 residences between August 2018 and August 2022. During that time, the city only issued 296 permits, leaving 93% operating outside city law.
Kansas City residents say living near short-term rentals has caused quality of life issues, from loud parties to trash to a lack of street parking. They’ve called on city officials to take swift action against unlicensed and unregulated rentals.
But the report found the city’s own regulations are ineffective and difficult to enforce.
“With nearly all the short-term rental market operating outside the city's permit program, the city does not know where these units are operating, whether they're allowed to operate in those locations, whether they are safely operating, and, importantly, who is operating them,” City Auditor Douglas Jones told City Council on Thursday.
“If permits are effectively not required to operate a short term rental, no amount of subsequent rules or prohibitions passed by the city will matter,” Jones said.
The report found that as of this August, there were 204 active short-term rental permits filed with the city. Hosting websites like Airbnb or VRBO listed 1,894 units, for a current compliance rate of about 11%.
Since the short-term rental program opened in 2018, the report found, 95% of 311 complaints regarding short-term rentals were related to unlicensed units.
4th District Councilman Eric Bunch, whose downtown and Midtown district sees a high number of Airbnbs, said the audit’s findings were worse than he expected.
“It's a problem of enforcement, first and foremost,” Bunch said. “We have never collected high enough fees and created a penalty system that really makes it in the favor of getting licensed.”
When the city first passed its short-term rental laws in 2018, the idea was to support people who wanted to make extra money. But the short-term rental market, dominated by Airbnb, exploded in the years since.
“It's become a perfect storm of things that have led to a neighborhood problem that has been heightened over the last six months to a year,” Bunch said.
Poor enforcement from a weak law
Residents have been calling on the city to strengthen its enforcement of problematic short-term rentals and pass tougher policies restricting Airbnbs. But the audit says the city’s existing policies are not strong enough to begin with, which makes enforcement difficult.
City code does not prohibit a host from listing their unit on a site like Airbnb without a permit, and many host guests without ever filing the proper paperwork.
The City Planning and Development department currently oversees the short-term rental program. It takes investigators about 15 days to look into possible violations. If a host does not resolve the violation, they go to court and may have to pay a $150 fine. According to the audit, city prosecutors have taken on 115 short-term rental cases and found 67 guilty.
Some council members said even though problem properties aren’t licensed, the city should be able to find them because residents are reporting issues.
“The only reason we're even discussing this is because people are calling our offices and telling us about these Airbnbs,” said 1st District Councilman Kevin O’Neill. “When there is a complaint, it's generally at the time that somebody is abusing a house or an Airbnb. … We have knowledge of where these places are because people are calling them in, the night of the activity.”
But Jones contended that’s not enough.
“It's our ordinance that is the primary driver of our inability to, let's say, enforce from a desk,” he said. “We can't see somebody listed on a website and take that and say, ‘You gotta come off of there.’ Because we don't know who's out there, because we have no permits for those folks.”
Financial impact of unlicensed rentals
The audit found the city lost out on a little more than $1 million in permit fee revenue because rentals did not go through the proper permitting process.
Short-term rentals that follow the city’s permitting process must pay a number of fees, including those to register their unit, obtain a special use permit and renew their license each year. Between 2018 and 2022, the city only received $129,000 through the initial permit fees, the audit found.
The audit estimated that if 30% of active short-term rentals in August 2022 continued operation from last year, the city should have received $103,980 in annual renewal fees. Instead, the city received $17,568.
A previous report on short-term rentals found the city is also losing out on about $2.28 million in tax revenue for short-term rentals because they’re not taxed like hotels and motels.
Recommendations
The audit recommended an ordinance prohibiting hosts from listing a short-term rental without a permit. It also recommended a law that addresses how hosting sites facilitate transactions with unpermitted rentals and provides an avenue for the hosting sites to comply with city code.
“Changing city ordinances to prohibit hosts from listing and intermediaries from facilitating bookings of short-term rentals without a permit is important,” Jones said. “Effective enforcement starts with permits, all subsequent enforcement actions related to operations and nuisances flow from short-term rental units having a permit.”
Other major cities like San Francisco require hosting sites to verify that a unit is properly permitted before listing them.
Bunch said the Department of Neighborhood Services is better equipped to oversee short-term rentals, and suggested moving compliance to that office as a possible short-term fix.
Other long-term changes, such as completely overhauling the current program, would take longer.
Bunch also said he wants a moratorium on approving new permits for short-term rentals.
“We just want to be careful to not overwhelm our staff with new permits, but also be careful to not get a lot of bad actors — who've been doing this illegally for a while — to get them operating legally if they've been flaunting the law all along,” he said.
