2017 Jan 8th

AirBnB in Hoboken? Welcome, or Not?

There are debates about the pros and cons of AirBnB that take up pages and pages of the internet.  My opinion is that it is a bad thing for communities because the municipality misses out on rightfully deserved tax revenues (such as hotel and licensed B&B’s must pay), bad for building and inhabitants (a constant stream of unknown people coming and going does not make for safe surroundings) and bad for the neighbors (who wants to live next to an apartment full of frat boys throwing a bachelor party every weekend?).  I saw this billboard at the Exchange Place PATH platform yesterday:

dharma

 

To my mind, this takes AirBnB to a whole new level.  Oh – they actually advertise these spaces right on AirBnB.  The Hoboken location is at 1414 Grand Street in a new construction building called the Novia.  What’s really interesting, is that along with these short-term AirBnB style rental, there are long term rentals in the building, as well.  What comes to my mind is the following:

Is this not actually a hotel?

Does the entity profiting from this business pay taxes to Hoboken, Hudson County, the State of NJ or the Feds as a business?

Does homeowner’s insurance cover commercial endeavors like this?  What would happen, for example, if a daily guest were to start a fire?  Would the loss be covered?

What do the annual tenants living in the building think of the idea of temporary daily visitors having access to their building?

Do the annual rents reflect a discount to take into account the added risks and potential annoyances?

Does this conflict with local zoning rules?  Is this type of commercial use in a residential zone permitted?

What happens when entire blocks or neighborhoods are no longer comprised of long term occupants with a vested interest in the safety and stability of the neighborhood but become nothing more than a row of short term properties run by out-of-town investors?  It’s happening right now in parts of New Orleans.

Finally, does the City of Hoboken care about any of this?  Especially the potentially missing revenue stream?

I know many people say they enjoy staying at an AirBnB because it feels more like you are a part of the neighborhood.  Plus, you often get use of a kitchen and a whole apartment.  I have friends who have turned their properties into AirBnBs because they make a hefty buck doing so.  In Hoboken, it is a great way to get around the rent control laws!  A condo that could only legally fetch $1,200 a month, can easily get $120 a day – or three times the legal rent!

Proponents say one should be able to do with one’s property what they like.  But that is a specious argument as zoning and other laws have existed forever and limit what an owner can and cannot do with your own home.  Taking residential properties off the market for residents and using them as hotel units reduces the supply of long term housing, thereby causing long term rents to rise.  Most condo association master deeds and bylaws address short term rentals and prohibit them but many condo associations look the other way allowing owners to reap short term profits at the expense of the neighbors.  Almost all rental buildings prohibit any subletting, let alone short term subletting.

Many other cities have begun to address the issue and regulate short term rentals (San Fransisco, New Orleans).  This example, however, is the most blatant blurring of the line between a private home and a hotel.  My prediction is that this is going to become a real issue in Hoboken and Jersey City in the not-too-distant future.

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  1. Anthony Townsend

    You make a bunch of good points. However, these rentals are serving an intense demand for convenient, flexible short- and medium-term housing that the traditional real estate brokerage business has done a -terrible- job serving. Sites like Airbnb have created a much more fair marketplace for these kinds of renters, better prices, more options, with more transparency.

  2. Lori Turoff

    Anthony,

    I don’t deny that they serve a purpose or they would not be financially successful. Clearly, they are targeting the many foreign parents who often come from India or China to visit their grown children and often grandchildren for a few weeks every year. No one is saying there is not a need for short-term, furnished housing in Hoboken and JC.

    The point it that hotels pay taxes and are regulated as such. These properties do not and are not.

    As to the real estate brokerage business doing a “terrible job” of serving this need, I don’t know of any brokerages that even deal with short-term rentals. It’s rare to have any real estate agency even have 6 month rental listings. The vast majority are for a year. How would a real estate agent handle nightly rentals? We would become travel agents, essentially, booking hotel-like rooms. That’s not our business model and never has been. Brokerages do a bad job in many legitimate ways but this is not one of them as we are not even in that business.

    Thanks for your thoughts.

  3. Meagan

    I admittedly use AirBnB all the time when I travel– hotels are often expensive, don’t accommodate groups well, and eliminate any possibility of cooking your own food. I see why there’s such a demand. And I see why there’s a supply, too, when it is so lucrative and you’ve got to pay for your home anyway whether you’re there or not. Why not rent it out when you’re going to be out of town for a weekend?

    But, I think the debate can be boiled down to one simple question: “Would you want to live next to an AirBnB?”. Almost anyone I ask says no. Call me a NIMBY but I don’t want to deal with it in my own building and don’t think anyone else should have to either.

  4. Joe Federici

    My in-laws stayed at the Dharma Suites, but they didn’t get it through Air BNB. They had a nice one bedroom plus den. It is a really nice building. I would buy one of those apartments if I could.

  5. Lori Turoff

    Joe – This issue is not whether they are nice or not nice, or whether they fill a need. Would you buy one of those Dharma apartments if all your neighbors in the building were transient “by-the-night” occupants?

    As Meagan pointed out, most people don’t want to live next to an AirBnB, much less in a building full of them.

  6. Carrie

    I’ve stayed at AirBnBs in Europe and they were great from a vacationer’s point of view but I would be very upset if the other people in my condo building were to rent out their units to different people every night. Who knows who they are, if they are going to be coming and going late at night, making noise, leaving beer bottles in the hallways, having 6 adults staying in a 2BR apartment, etc. No thank you!

  7. Joe Federici

    Hi Lori, when we arrived at Dharma we didn’t know which apartment was the airbnb. So we had to knock on each door on each floor until we found it!

    We walked in on some people who didn’t keep their door locked!

    I can understand that they don’t appreciate living amongst AirBNB.

    -Joe

  8. Lori Turoff

    http://www.latimes.com/business/la-fi-airbnb-20150610-story.html

    http://www.salemnews.com/news/in-west-newbury-controversy-over-airbnb-rentals/article_6296f7bd-a71c-5fdf-8945-a563aaa1b00a.html

    http://www.tureklaw.com/blog/2016/08/controversy-over-new-york-city-airbnb-rentals-heats-up.shtml

    http://www.vocativ.com/314041/why-the-new-orleans-fight-against-airbnb-matters/

    http://fortune.com/2016/10/21/airbnb-new-york-2/

    Just a few of the google results for “AirBnB controversy”. This is a growing problem.

  9. hobokeninc.com

    Hi Lori, we’ve thought a lot about AirBnB.

    I think the most important point, which is a subtle one – is to think about which entity (public v. private) is specifically allowing or prohibiting AirBnB from operating? For example, I live in a large condo building in uptown Hoboken. Our condo bylaws, which we agreed upon together as owners, prohibits AirBnB-type rentals in our building. I was 100% for that ban, as we didn’t want the transiency to affect long term owners in our building.

    However, I also be vehemently against what Union City did, which is the government telling property owners that they cannot utilize AirBnB: http://hudsoncountyview.com/airbnb-ban-leads-resident-to-compare-stack-to-castro-at-commissioners-meeting/

    Essentially, this needs to be decided by private property owners, not municipalities (unless some exigent or atypical situation arises requiring government intervention). And to answer your question, yes, an AirBnB owner is paying taxes to the state of NJ – as NJ has a state income tax, and this would revenue would be treated as income. Hoboken doesn’t have a city tax, but as a property owner they are paying property taxes to Hoboken and Hudson County.

    Your article doesn’t mention it, but actually, Jersey City became the first municipality to legalize AirBnB – levying a 6% hotel’s tax on each rental: http://www.nj.com/hudson/index.ssf/2015/10/airbnb_agrees_to_collect_hotel-tax_for_jersey_city.html

    Lastly, we have friends that live right next to Dharma home suites. They love it. There is a dearth of hotel options in Hoboken (literally one exists), and anyone staying at these places are typically a Hoboken resident’s extended family coming in for the holidays. We walk by that area all the time and it definitely seems to be a net benefit.

    Great discussion on this interesting issue!

  10. Gilby

    I’d be afraid that AirBnB doesn’t circumvent rent control or eviction laws in Hoboken. 1414 Grand isn’t rent controlled, so it’s not a problem there, but I hate that they’re not paying hotel tax to the city.

  11. lori

    Let’s say you own a 3 unit brownstone with legal rents of $1,000 per unit. You could rent those units out for $200 a night, or $6000 a month. Now, instead of a total of $3,000 you are grossing $18,000. What just happened to your legal rent???

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