Audit finds short-term rental enforcement lacking

Members of the Council Audit and Finance Committee learned Monday that, though the city has had success in bringing illegal short-term rentals into compliance, those that do not come into compliance are falling through the cracks.

On a positive note, a city audit found that the Code Department had been largely successful at bringing unlicensed STRs into compliance. The audit said 72 percent of noncompliant rentals were brought into compliance, by either fixing the problems or ceasing the short-term renting.

However, there appear to be major problems with that remaining 28 percent. The audit found that when buildings were not brought into compliance, there was little or no follow up.

Austin Code Department Assistant Division Manager Marcus Elliot said that is because the department feared its evidence would not hold up in court. At one point, the city estimated that there were 272 illegal short-term rentals in the city, but Elliot says that number is probably higher now.

Despite that, the city has never taken a rental operator to municipal court.

“It’s a big issue, and it’s become a bigger one as the weeks go by,” said Elliot. “A lot of the people in the neighborhoods now have changed. They don’t want (STRs), and unless we figure out how to enforce this now, it’s going to be an issue that never goes away.”

Elliot says that his department is having trouble enforcing the ordinance.

He explained that, after issuing a citation, his department monitors noncompliant STRs for a minimum of 30 days. Most of the people comply. However, if they do not, he said, “the process basically stalls.”

“Until we get that second confirmation that they are continuing to operate without a license, we can’t move forward,” said Elliot. “We’ve got a process where we give them 14 days to come in and register. If they cease at that point, we are back at square one. Before we move through the legal process we have got to have additional information.”

That has been difficult, he explained, because while people readily admit to renting their house the first time around, he and his staff had not gotten anyone to answer the door on second, third or fourth visits.

“Our understanding was that we needed additional findings, because they admitted it to us once,” said Elliot. “In order for us to initially cite the owner with that violation, we had to identify it. If we stopped at any point in there, we can’t swear before a municipal court that we continued to observe that violation.”

Elliot said that if the department does not find additional information of continued illegal operation after 30 days, the case is closed, and it needs to open a new case or wait for a new complaint to come in. Part of the problem, he said, is the loophole in the ordinance that was intentionally created to allow those running STRs to “test the waters” by advertising rentals before they are registered.

“That’s what’s created the problem, because that’s the first thing they remind us about when we go out … we’ve got to prove they are actually operating before we move into the legal process,” said Elliot.

The Code Department is talking to City Legal and intends to get clarity before Jan. 15 about whether it can take a case to court with only one violation. The department also wants to know if neighbors and neighborhood associations can testify to an STR’s illegal operation.

Elliot explained that his department relies on neighborhoods to help identify illegal rentals, because they are able to see what is happening on a daily, and nightly, basis.

“With their support, we can actually get the ordinance to where we need it work, where people aren’t ‘testing the waters’ under the guise of operating without a license,” said Elliot. “Right now it’s important for us to work with the homeowners associations and neighborhood associations to try to catch up with these complaints.”

City Council Member Laura Morrison suggested a report for the new Council to help it get up to speed and know how the plan is moving forward. She also said if the ordinance was unenforceable as currently written, then that should be made clear, along with any suggestions about how to make it enforceable.

Council Member Bill Spelman said that, though he would no longer be a Council member, he would be following the situation because people operating STRs illegally and refusing to talk to the city about it really annoyed him.

There was some good news for the city from the audit as well. This year, the city collected about $2 million in licensing fees and Hotel Occupancy Tax from the rentals.

Council passed a short-term rental ordinance in 2012, after many hours of public testimony, debate and heated rhetoric.