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Money & Ethics

Should My Neighbor Be Allowed to Turn His House Into a Short-Term Rental?

It's a debate that is raging in all of America’s major cities.

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Q. I live in a quiet neighborhood, zoned for single-family residential homes, near the downtown of a city popular with tourists from all over the world. The house next to mine sold recently, and the new owner seems to be renting it out by the night and weekend through an online lodging service. Some of the guests like to party on their vacation, which is disturbing the evening peace on our block. I’m also worried that this practice will depress our property values. Do you find my concerns legitimate?

See Also: Rent Your Home for Fun and Profit

A. I sure do, not only ethically but also legally. The debate over these short-term rentals is raging in all of America’s major cities. It’s a classic clash between different rights—for example, the right of entrepreneurial landlords to make a buck and the right of neighbors to maintain the atmosphere of their locale. In some cities, there is the added concern that investors who buy homes in order to profit from short-term rentals are pricing young home buyers out of the market. All of this calls for public discussion and compromise that respects both sides.

Some rental apartment buildings prohibit brief sublets by tenants who might want to earn extra income when they’re away. That’s the landlord’s right. Some condominium boards—acting on behalf of all the unit owners—also ban brief rentals, as well as invite condo owners to report violations they see or suspect.

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But some apartment-building owners, who control all the leases, may be tempted to plunge into the tourist rental market themselves to earn much more on a nightly basis than on a monthly or yearly lease. If neighboring tenants find this to be a nuisance, they have every right to find out whether the landlord’s practice of turning the apartment building into a de facto hotel violates local zoning.

Ditto if the house next door has become a tourist crash pad. Talk to your neighborhood association and zoning officials about whether this is allowed. A reasonable compromise might be new zoning laws that don’t ban such short-term rentals but limit their frequency.

Have a money-and-ethics question you’d like answered in this column? Write to editor in chief Knight Kiplinger at ethics@kiplinger.com.