Updated: Montgomery County Can’t Keep Up with Short-Term Rental Violations

Updated: Montgomery County Can’t Keep Up with Short-Term Rental Violations

Enforcement position unfilled; only a fraction of listings are licensed

| Published:
Flats 8300

Flats 8300 in Bethesda

Photo by Kate Masters

This story was updated on Nov. 14 at 12:10 p.m. to clarify Bozzuto’s role in managing Flats 8300

Two years after passing legislation that opened the doors to short-term rentals on sites such as Airbnb, Montgomery County still lacks the resources to enforce more than a thousand potential violations.

The lack of enforcement has angered community members, who argue that the proliferation of unlicensed units — especially apartments and condominiums used exclusively as short-term rentals — contradicts the county’s oft-stated commitment to affordable housing.

“It’s clear this legislation has run amok and they can’t really enforce it,” said Katya Marin, an East Bethesda resident who’s referred several potential violations to the county. “And it’s impossible to see how these units will ever become affordable if companies can list them for hundreds of dollars on Airbnb with no consequences.”

A 2017 county ordinance allows short-term rentals, but with some key restrictions. All short-term rentals must be licensed through the county’s Department of Health and Human Services, which requires a $150 licensing fee and a 7% tax on the price of a room. The law also states that short-term rentals must be the primary residences for people leasing them.

If a property owner isn’t physically present in the residence, it can only be rented for a maximum of 120 days out of the year, according to the legislation. In other words, it’s OK to rent out an extra room or basement, as long as it’s licensed through the county. But it’s illegal to buy or rent a unit for the sole purpose of renting it out on sites such as Airbnb.

“In some cities, apartment buildings have been purchased for the purpose of renting out every unit as a short-term rental,” county analysts wrote in a 2017 report on the legislation, referring to short-term rental trends across the country. “… This provision would limit the number of units any individual may use for short-term rentals to one.”

Marin, who followed the legislation closely, knew it was intended to prevent the widespread conversion of homes and apartments to short-term rentals — linked to inflated housing prices and decreased home supply. So, she was surprised when she looked on Airbnb and found several listings for units in luxury apartments buildings in the county, including Flats 8300 on Wisconsin Avenue in downtown Bethesda.

Many of the short-term rentals in Flats 8300 are operated by Bluebird Suites, a larger rental company with hundreds of Airbnb listings across the country. The firm didn’t respond to two calls and an email sent to its New Jersey headquarters, but it lists Flats 8300 as an available location on its website, promising “luxury furnished apartments” for short- and long-term rental.

Flats 8300 is managed by The Bozzuto Group, a national real estate company based in Greenbelt. Spokeswoman Chintimini Keith wrote in an email that Bozzuto is “looking into” the issue of short-term rentals at the property and “will work with the [county] to address any issues.”

But the county has few resources for enforcing the ordinance. After passing the law in 2017, legislators allocated a single part-time enforcement position at the Department of Health and Human Services, which still hasn’t been filled, according to Clark Beil, a senior administrator for licensure and regulatory services.

Without a designated employee to enforce the ordinance, Beil has been tasked with handling thousands of potential short-term rental violations.

The department has software that scans for unlicensed listings, but it doesn’t catch everything, Beil added. Otherwise, enforcement depends on resident complaints, with little follow-through in the case of violators.

“We’ll send out a letter notifying the address that they need to apply for a license,” Beil said. “Then they either apply for a license or not. Unless we get a complaint, we don’t follow up. That’s just the way it is.”

Since the ordinance went into effect, the software has identified 1,681 short-term rentals through Airbnb and other rental sites, Beil said. But there are currently only 204 active licenses in Montgomery, and another 28 in the process of being approved.

Under the ordinance, any listing without a license is illegal.

The department can issue citations, which come with a $500 fine. If there’s no response, the county can take the property owner to court, Beil said. So far, the department has never issued a citation for a short-term rental violation.

If the department doesn’t receive additional complaints about a property, it typically waits a year before following up on a letter.

Follow-through is particularly difficult given the sheer number of companies that operate short-term rentals in Montgomery County apartment buildings. At Flats 8300 alone, at least two firms appear to offer units.

Since Bethesda Beat began reporting this story, Beil sent a letter to Invesco Advisers Inc., a Dallas-based company that owns the property. Beil said he received a response from Bozzuto, which told the department it would work with lease-holders to shut down violators.

Keith, the Bozzuto spokeswoman, did not respond to a follow-up email and several calls seeking more information.

Churchill Living, another property management company based in New Jersey, also lists apartments at Flats 8300 through Airbnb.

One Montgomery County resident, who agreed to be interviewed if he were not identified by name, said he stayed in a Churchill-managed apartment in the building for roughly seven months this year, renting the unit through Airbnb in two-month increments.

The price, which varied based on online demand for the property, was sometimes as high as $6,000 a month, he said.

The apartment where the Montgomery County resident stayed was posted on the site by a host identified as “Kara,” who lists her location as Hawthorne, N.J. — the same city where Churchill Living has its corporate headquarters.

When the resident went to pick up his keys and parking pass, he said, he met with a Churchill representative who told him that he worked part-time at Flats 8300, managing the company’s units there.

“It was a frictionless arrangement, as far as I can tell,” the resident said. “Everyone in the building was aware of it. It’s not like it was some secret.”

When a reporter called Churchill for comment on Friday afternoon, a receptionist with the company said that most employees had already left for the weekend. Multiple messages left at the office on Friday, Monday and Wednesday were not returned.

The company also lists furnished apartments in Silver Spring and Chevy Chase on its website.

The lack of enforcement concerns Marin, who said it contradicts the county’s frequently stated commitment to affordable housing. As short-term rental sites have increased in popularity, more researchers have examined their impact on local housing markets.

A recent study posted on the research site Social Science Research Network found that an increase in Airbnb listings decreased the supply of long-term rental units and had a small but measurable effect on rental and home prices. The growth of Airbnb contributes to about one-fifth of the average annual increase in U.S. rents and about one-seventh of the average annual increase in U.S. housing prices, researchers found.

“There’s evidence that when long-term rentals are converted into short-term rentals, that further depletes our housing supply and makes the units that remain even more valuable,” said Jane Lyons, the Maryland advocacy manager for the Coalition for Smarter Growth. “And in some markets, landlords will even raise the rents to match what they could be getting for short-term rentals.”

It’s not clear if Montgomery County is seeing the exact same effects. Airbnb rentals tend to have the biggest impacts on heavily touristy areas, where the demand for vacation rentals is already high, Lyons said.

But for residents like Marin and her neighbors, who frequently discuss the violations on a neighborhood Facebook page, the impacts already seem clear.

“The whole purpose of allowing development, to me, is glutting the market so people can afford to live here,” she said. “But now you have units that aren’t even available for long-term residents.”

“I’m not opposed to new construction,” she added. “But if the county came in and said the Bethesda Master Plan includes 3,000 new residential units, of which 500 will be short-term rentals, people would not have supported that.”

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