Philly is cracking down and delisting unlicensed short-term rentals from companies like Airbnb

Philadelphia is cracking down on unlicensed short-term rental operators who host on online platforms, potentially shuttering a couple thousand properties.

On July 12, the Department of Licenses and Inspections (L&I) announced that the city had directed such online platforms as Airbnb and VRBO to delist properties that lacked the licensing required in Philadelphia. The companies had five business days to comply.

For operators such as Steven Patterson, who manages 60 properties in Philadelphia, the crackdown is shortsighted.

“I feel that they are not looking at the big picture,” said Patterson, whose company Ur Home in Philly caters to families in town for extended stays while their loved ones are in Children’s Hospital of Philadelphia. “They’re going to have to go back to hotels, where it’s so expensive. How are they going to cook? How are they going to do laundry?”

The city estimates that 85% of the properties reviewed by L&I are unlicensed, or between 1,500 and 1,700 rentals. Industry advocates say the number is as high as 2,500. The agency did not have a count of how many properties had been delisted, although Patterson and several other hosts interviewed by The Inquirer hadn’t received warnings yet.

In the short term, L&I advised that customers who have existing reservations should check with their platform to learn what their policy is if a property is suddenly delisted.

Asked about its policy, the largest short-term rental company, Airbnb, did not answer directly.

“For months, Airbnb has worked closely with the City of Philadelphia to ensure they have the necessary tools and support to effectively enforce their current rules, including the ability to identify listings that may be unlicensed for removal,” said Haven Thorn, an Airbnb spokesperson.

The enforcement action comes almost seven months after Philadelphia implemented new regulations intended to bring order to a short-term rental industry that critics say surged out of control during the pandemic.

Philadelphia City Council passed a law for short-term rentals in 2015 as a result of Airbnb’s initial emergence. It required that operators get a zoning permit for businesses operated out of homes a host lived in, while a hotel license was required for those who rent out properties where they didn’t live.

Those rules weren’t much enforced, however, and many operators built their livelihoods around a gray market status quo that allowed them to operate with little oversight for years.

“I wasn’t aware there was this legislation,” Patterson said. “Airbnb didn’t say that this was in place. Otherwise, maybe I would never have done it. But I just wasn’t aware.”

After complaints about “party houses” surged during the pandemic, Councilmember Mark Squilla, whose district includes parts of Center City, the Riverwards, and South Philadelphia, introduced new legislation that required those who operate short-term rentals out of their homes to get “limited lodging operator” licenses. For those who ran businesses out of properties where they don’t live, the new law reinforced hotel requirements.

This time, L&I is actually enforcing the new law.

Short-term rental operators began receiving subpoena notifications from Airbnb in March, as the city reached out to online platforms to secure the addresses of rental properties listed on their platforms. Now they are putting that information to use.

“This is just the latest phase in the enforcement of the legislation,” said Shemeka Moore, spokesperson for L&I.

Short-term rental landlords say the process of getting their licenses has proved grueling and expensive. In many cases, those seeking hotel licenses must go to the city’s Zoning Board of Adjustment for permission to keep operating because their property’s zoning does not allow such a purpose.

Wait times at the Zoning Board of Adjustment have ballooned since the pandemic, and even cases in which a property owner faces no opposition can take six months to be heard.

“Most of these people haven’t even had their day in court,” said Theron Lewis, founder of the industry advocacy group Philadelphia STR Association. “In terms of banning folks, everything’s moving much quicker, like 100 times quicker,” than the licensing process.

But Squilla noted that his law passed in June 2021, and its implementation was delayed twice because of the protests of industry advocates. Even after the new rules officially went into effect at the beginning of this year, it’s taken until late July for the city to actually begin cracking down.

If operators had begun attempting to get a license when news of the rule implementation broke at the end of 2022, Squilla said, they could have gotten past the ZBA backlog by now.

“We passed the bill two years ago, we extended it, we gave them time, and, unfortunately, there comes a time where enforcement has to happen,” he said. “The ZBA process is slow, but there’s been plenty of time for folks to property obtain a short-term rental license.”

So far, 452 people have received a “limited lodging operators license,” and 209 have rental licenses designated as a hotel — out of a total Airbnb host count in the thousands.

“It’s basically thousands of people losing their jobs pretty much all at once,” said Lewis, the industry advocate.

For those worried about their incomes, Squilla noted that there is still the option of renting their properties for more than 30 days at a time — essentially becoming a conventional rental landlord. In the past, he has also expressed concerns about the short-term rental industry’s effect on housing prices if they take homes out of the standard rental or sale markets.

A University of Pennsylvania study found that short-term rentals are often concentrated in areas where rental housing predominates and that each 1% increase in Airbnb listings in a zip code creates a small increase in rents and house prices as the number of long-term rentals decreases.

As for Patterson, he’s been hearing horror stories about wait times at the ZBA and a lack of responsiveness from city agencies in general. As a result, he hasn’t yet applied for the variances he needs.

“I’m just beaten down,” Patterson said in a text message. “I heard just yesterday that someone had applied for a variance, and it’s been 15 months and still no answer. ... To go through all of this and wait for so long with no real hope is crippling to me.”