Suite Surrender

Mayor Hales welcomes Airbnb to Portland, while its clients face city fines.

For the past four years, Sheila Baraga has been running a 21st-century black-market guest house among the soaring elms of the Buckman neighborhood.

Baraga turned a 1908 apartment building on Southeast 16th Avenue into DIY lodgings, giving the seven rooms names like "Urban Cabin" and "Buckman Guest Flat." Using the online marketplace Airbnb, she's been renting rooms to vacationers for $50 to $100 a night.

Not anymore. City inspectors sent her a warning letter last month telling her that she was illegally running a business in a residential zone by renting her apartments for less than 30 days. Baraga also isn't paying lodging taxes or the cost of health and safety inspections as other bed-and-breakfast businesses must do.

Baraga—who has been warned by the city before and twice threatened with fines—knows the city letter was prompted by a complaint from a neighbor. "I obsessively have been thinking, 'Who is it?'" she says. "I was really upset and I said, 'I hate my neighbors.' I don't want to hate my neighbors."

A recent check on Airbnb found more than 1,300 Portland homes—most of them renting rooms for the short stays that are the mainstay of Airbnb's business. Most of them, in theory, violate city rules.

So there was some degree of irony when Portland Mayor Charlie Hales announced March 14 that Airbnb is moving its operational headquarters to a building in Old Town, bringing its North American call center along with 160 jobs. 

Since January 2013, inspectors have received 32 complaints—and issued 25 violation notices, mostly in Northeast and Southeast Portland. Under current rules, homeowners would have to seek a zoning change to operate legally—at a cost of $4,130.

Airbnb has clashed with municipal rules from New York City to Austin, Texas—and Portland is no exception. In January, Portland planning officials proposed zoning-code changes that would ease restrictions, allowing people to rent out one or two bedrooms of their homes after paying a small fee.

That doesn't satisfy either the entrepreneurs who want to turn their spare bedrooms into guesthouses, or the neighbors who don't want motels next door.

Steve Unger, owner of Lion and the Rose Victorian Bed & Breakfast Inn in Northeast Portland, says Airbnb has siphoned off business. 

"Some of these places are condos in the Pearl, or mansions in Irvington," Unger says. "And they don't have any inspections, and they don't pay anything, and they don't notify their neighbors. It creates an unlevel playing field."

The debate over Airbnb is the most prominent example of Portland's odd relationship with what's been dubbed the "share economy"—tech companies that create an online bazaar for people to loan out their homes, cars or even parking spaces for a fee.

This is no community garden: Forbes estimated last year that the share economy produced $3.5 billion in annual revenues for people renting out their places and stuff.

City officials see these borrowing-based companies as a natural opportunity for the city. But they've been hesitant to alter regulations to allow them to operate here.

Last year, the city's taxi review board rejected the car service Uber, which lets customers reserve luxury-car rides on their cellphones.

"We shouldn't be the proving ground all the time," says Josh Alpert, a policy director for Hales. "Let other places see what works and what doesn't. Nothing wrong with being the first generation of what works."

Founded in 2008 in San Francisco, Airbnb is now valued at $2.5 billion—booking 6 million guests last year. The company takes a 3 percent cut from renters, and grabs as much as 12 percent in fees from travelers.

"Portland residents are some of our first-ever Airbnb hosts," says Molly Turner, the company's public policy director. "We want to be on the up and up."

Hilary Meehan started using Airbnb in 2011 to rent out the guest bedroom in her home in the Southeast Portland neighborhood of Colonial Heights. She had reached out to the city to try to comply with code and to pay lodging taxes—but realized making her project legal would be too expensive. She shut down her rental.

"I kept stubbornly trying to make it work," Meehan says. "But I needed to have a zoning permit, and that was going to cost me three grand. What?"

Tamara DeRidder, land-use co-chairwoman for the Rose City Park Neighborhood Association, says she worries relaxed laws will squeeze an already-tight rental market—causing homeowners to evict their poorest tenants.

"These are artists, these are folks on the margins," she says. "I would hate to see them lose their homes to a short-term renter.” 

The Planning Bureau will unveil its latest code revisions March 21, says supervising planner Sandra Wood.

For her part, Baraga says she is renting her apartments for longer than 30 days, rather than paying the city's fees.

"They don't want these renegades out there making money," she says. "We don't have somebody telling us what to do, and we're doing it well? It's shocking.” 

WW arts contributor Pete Cottell added reporting to this story.