Airbnb Makes its Mark on the East End Rental Market

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Ted Littleford illustration.

When Jay Schneiderman decided to take a trip to Mexico, he left all the planning to his tech-savvy, 18-year-old daughter.

She booked their excursions online — a tour of the historic district with a college professor, as well as an indigenous art workshop, where they made their own sculptures using traditional techniques. She hired Uber drivers to and fro, smoothly delivering them from place to place. And she lined up authentic stays with local hosts — all on Airbnb.

That got the Southampton Town supervisor thinking.

“This is a new economy — Airbnb and Uber, it’s not a bad thing. You have a lot of people who are afraid of it,” Schneiderman said. “You look at traffic and you say, if people came in by train and got around by Uber, we’ll have less cars on the road. And Airbnb is not necessarily a bad thing if you manage it. If you manage it, you can help stimulate your local economy, creating opportunities for people. I think everything within reason.”

The house-sharing and rental site has already found its place on the East End and, along with similar services such as HomeAway and VRBO, have single-handedly changed the market, rendering full summer rentals nearly obsolete in favor of shorter-term stays, much to the chagrin of some real estate professionals, hoteliers and neighbors who do not want a transient crowd, and question its legality.

“The short-term rental apps and websites have significantly changed the rental market throughout the Hamptons,” said Scott Strough, a licensed real estate broker with Compass. “Tenants have now scheduled by the week or weekend instead of being locked into a month or longer. It has hurt the people who depend on the rental income of the summer as it has diluted the number of full season tenants and monthly tenants. Not every landlord wants to be bothered with changing tenants every weekend.”

“A lot of people are renting their own homes and using sites like Airbnb, and what they can do online with the rentals, I don’t think there’s any way of controlling that,” said Enzo Morabito, a licensed associate real estate broker with Douglas Elliman Real Estate in Bridgehampton. “We will not be a part of it, it’s just not who we are. A lot of people call us on rentals and we tell them, under code, you’re supposed to rent for two weeks. That’s the code. So it puts the broker at odds with, ‘What do I do?’ The one-week rentals, unless you’re doing it as a favor, you’re asking for it. Just stay away from it, I’m telling you.”

He paused, and continued. “But the people who own these homes, as long as they are within the legality of what they’re supposed to do on Airbnb, who cares?”

“We have certainly seen a shift to shorter rental periods, and some landlords and tenants going direct,” said Chris Tice, senior managing director of The Corcoran Group in Sag Harbor and Montauk. “We’ve also heard from many homeowners who have gone this route, that they’ve had poor experiences with a tenant. Conversely, we have heard from some renters that when they booked through these services the house they rented was not what they expected.  Many of these homeowners and tenants have returned to work with Corcoran because they want a trusted expert in the process.

“I think the bigger concern is that these rental sites help facilitate many illegal, frequent short-term rentals, which can turn quiet communities into hi-trafficked areas, negatively impacting neighbors and neighborhoods,” she added.

Trouble often arises within the twists and turns of the Southampton Town code. Of the 800 town properties listed on Airbnb alone, the vast majority of them allow nightly and weekend rentals — which are by-and-large illegal, though there are several exceptions.

When a home is owner-occupied, a host can rent up to two bedrooms — each for at least two weeks and only twice per season. For a full-house rental, a rental permit is required through the Southampton Town rental registry, and most stays must also be two weeks.

But in December, the Southampton Town Board agreed to allow short-term stays for special events and occasions, such as the U.S. Open golf tournament in June, and perhaps The Hampton Classic Horse Show in August, Schneiderman said, which also happens to fall on Labor Day Weekend. Each request would be reviewed and, if approved, waive the two-week minimum, while still requiring necessary permits and code requirements.

Still, that is not stopping homeowners from listing their properties prematurely. A search for Memorial Day weekend — Friday May 25, through Monday, May 28 — pulls up 221 results in and around Sag Harbor alone, though the village does not fall under Southampton Town rental laws.

Sag Harbor accommodations range from entire shingle-style estates for 12 guests listed at $402 per night, and even smaller waterfront getaways at $1,100 per night, to a private apartment for two at $280 each night and private rooms in owner-occupied homes, which range from $175 to $320 per night.

Outside the village, rates stretch into the thousands. One five-bedroom, seven-bath Sagaponack property fit for 12 guests asks $3,500 per night. A Wainscott post-modern is listed at $5,000 per night, and a 10-bedroom, 13,000-square-foot Bridgehampton estate requests a whopping $10,000 per night.

An eight-bedroom Noyac property, listed at $6,000 per night, says in the description, “Can sleep up to 28 guests comfortably. Additional charges will apply. Each guest over 12 people will charge extra.”

“I’m trying to figure out what makes sense with the changing economy. Not all neighborhoods are created equal. Some places might not want short-term rentals at all. Some places may want them,” Schneiderman said. “I do not want to encourage sharehouses, who rent for the whole summer and break it up themselves into shares, and I’m not crazy about weekend rentals because I feel that’s too transient and is competing with the hotels.

“I’m looking at families,” he continued. “The primary market for families is the one-week market. That seems to be the sweet spot, and we don’t legally rent that, according to our code.”

One town over, East Hampton implemented its rental registry in 2016, allowing homeowners to rent for two weeks or more and to have as many as two rentals, 14 days or less, within a six-month period. Homeowners looking to rent must become a part of the registry, fill out a form, register with the Town Building Department and pay $100 for a two-year term — a direct result of services like Airbnb creating an influx of illegal short-term rentals, and the town struggling to enforce its regulations, according to East Hampton Town Supervisor Peter Van Scoyoc.

The landlord must also disclose the number of legal bedrooms in the house, their square footage, and certify that the home meets state-mandated safety standards, such as smoke and carbon monoxide detectors.

But if the home is owner-occupied, there is no limit to the length of term, or the number of times a host can rent — and they do not need to register for the rental registry, Van Scoyoc said.

“For decades, we’ve had regulations that prohibited excessive short-term rentals, but that’s been a long-standing exception from the short-term rental law. Having the owner on the property mitigates the potential for misuse and overcrowding,” Van Scoyoc said. “The registry has been well accepted by the community, for the most part. To date, we have over 3,800 properties registered. The summer rental market has expanded, in terms of the number of people renting, and I think by alleviating all the illegal short-term rentals, the quality of life improves, and the higher the quality of life, the longer people want to stay.

“There’s been a long history of people renting here in town as a means of financing college educations, helping them pay the mortgage,” he continued. “We understand that and we accept that and encourage it, but at the same time, we think it’s important to maintain our rural character as much as possible, and preserve the reasons that people want to come here — which is our quality of life.”

In Sag Harbor Village, Deputy Mayor Ken O’Donnell said trustees were still looking to its neighbors in trying to develop its own plan to regulate short term rentals, but acknowledged for a small municipality, the biggest hurdle is the ability to enforce its own laws.

“At this stage we are looking at what both East Hampton and Southampton have done and trying to figure out what will work best for the village,” said Mr. O’Donnell. “This is something that has really taken off, and for us, what is most difficult for a small municipality is how we regulate this. Right now, unless we get a complaint from a neighbor, or it is right in our faces, it becomes really difficult to enforce.”

When Alfredo Merat’s two children left their home in Springs for greener university pastures, he found himself an empty nester with a pair of empty en-suite bedrooms — and he immediately recognized a business opportunity.

The first year, he listed one bedroom on Airbnb, and to his initial surprise, it was a hit. The next year, he listed both rooms, and their popularity only increased, boosting his profile status to “Superhost” while collecting passive income and, most of the time, living in the house himself.

Five years later, Merat said he has only seen the advantages of Airbnb — on all sides.

“Airbnb serves a purpose. It’s an important resource because there are not enough hotels in the Hamptons, and a lot of my friends and contacts out here say it’s a great help for people who need it, who could use the money. It’s hard. It’s so expensive out here,” Merat said. “And then you meet nice people who come through. Airbnb has created a really great community. Then again, I don’t accept groups and parties and proms. I know how to be selective when a request comes in. I believe that each person has to look at his property and set certain guidelines.”

To cover his bases, Merat’s home is listed with both the East Hampton rental registry, as well as with Suffolk County, which collects a 3-percent accommodation tax, he said. Over the years, he has increased his nightly rate from $90 to as much as $230 for holiday weekends — which rivals professional bed and breakfasts, and local hotels, he acknowledged, though he pointed out that the Airbnb crowd is a different clientele altogether.

“I believe it’s fair to get whatever you can get — whatever’s the market price. This is America. So if someone says it’s $200 a night, and that competes with the hotel that’s 10 blocks away for $500 a night, hallelujah. It’s great to have that competition,” he said. “I think the hotels have to shape up and keep up with the emergence of this new style of traveling. It’s completely different. A house rental and a room rental are so different than a hotel rental, so they shouldn’t worry too much about it. But the three-night hotel minimum? Those years are gone, and they need to align themselves with what’s happening with Airbnb.”

Perusing Airbnb rentals on the East End, Merat cautions prospective renters to be careful — “There’s a lot of junk online now, a lot of stuff that’s questionable,” he said — and local real estate agents are echoing that sentiment.

“[Airbnb and Homeaway] have exhausted the infrastructure in our hamlets,” according to Judi Desiderio, chief executive officer of Town and Country Real Estate. “Homes are now ‘maxed out’ — maximum people, maximum cars, maximum wear and tear — but I do believe homeowners are beginning to see it’s not all what it’s cracked up to be.”

Bound by the restrictions of the rental codes, many East End agents are seeing a dip in their summer properties, they explained, opening up new business for short-term rentals that creates a new set of winners and losers.

“I don’t do as many rentals as I used to,” explained Julie Masson, a licensed associate real estate salesperson with Saunders & Associates in Bridgehampton. “However, when I do take on a new rental customer, I always try my best to make sure I know exactly who I am dealing with. I’ve had people say they are a family, when it’s really a group of unrelated people. I try my best to stay away from that. I think the security of having an agent working with you on the rental is still important to a lot of homeowners, as they actually meet at least part of the party who is going to be renting your home.”

Still, many homeowners do forego the registry process and working with brokers, she said, and rent directly instead. “They tend to make good money in this fashion and there hasn’t seemed to be much of a crackdown by the towns with these types of rentals,” she said. “Time will tell how this trend will play out.”

Schneiderman is hearing the same concerns — “Real estate people are like, ‘We comply with the law. We could rent houses by the week all day and night, but we’re not allowed to, so we don’t,’” he said — and is worried that the current rental code is forcing a market over to Airbnb.

“I’m not in a hurry to do anything on the rental law — there are no changes that are currently being proposed — but I think it’s time to start this conversation,” he said. “I’m not going to do anything that will compromise our quality of life. We have to be careful. If we were going to make some changes, it’ll be with considerable deliberation and consultation with our civic groups and business community and resort community. I think we’ll come up with something that is beneficial, not detrimental. Nobody is looking anymore for a monthly rental. We’ve got to tweak our rules a little bit to match the market.”

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