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Defeat of bill to regulate short-term rentals draws mixed reactions

The Puerto Rico Hotel & Tourism Association agrees with the Senate’s decision, while Airbnb said it represents a setback.

The Puerto Rico Senate’s vote against House Bill 1557, which aimed to regulate short-term rentals (STRs) in Puerto Rico, drew mixed reactions from the sector. While many agreed that STRs should be regulated, they felt the bill failed to address various key issues. However, others weren’t celebrating.

The right call
Among those welcoming the Senate’s vote was Miguel Vega, chair of the Puerto Rico Hotel & Tourism Association (PRHTA). He thanked the lawmakers for voting against the bill, “as it was far from being a favorable and effective regulation” for the STR sector.

“It’s necessary to include proposals from the entire sector to ensure a fair and healthy business environment for all tourism activities on the island,” Vega said in a statement Tuesday. HB 1557 “really left short-term rentals unregulated,” he added.

The legislature should reintroduce a bill that, among other things, classifies STRs as a commercial activity and increases the Room Tax to 11% on STRs and allocates 3% of that total to municipalities, the PRHTA said. These proposals were previously rejected by legislators.

The PRHTA argues that STRs, like hotels, paradores and small inns should be regulated by the state and municipalities and be subject to registration, inspections, permits, licenses, taxes, safety standards and commercial insurance.

“In other jurisdictions, STRs already register as a business activity, obtain licenses to operate, insurance policies, fire safety certifications and maintain an emergency contact,” Vega previously said. “Why are these same requirements not applied in Puerto Rico? Why are more demands placed on a six-room bed and breakfast than on a STR operation with 15, 20 or 50 units?”

During an interview with News is my Business ahead of the Senate vote, Vega further explained the association’s position on regulation.

“We want to find a balance between all and nothing. These are new trends, and we must embrace them. But we should apply tried-and-tested best practices used by other cities and countries throughout the world, adapt to the market, and coexist with all sectors,” he said. “If they’re going to regulate the sector, they should do it right.”

Regulating STRs is particularly critical because travelers who visit the island, stay at unregulated STRs and have bad experiences will likely share them with friends and online followers, damaging the reputation of Puerto Rico tourism, Vega said.

“So, it’s good to weed the bad ones with requirements so that only the good ones operate and provide good experiences for the travelers,” he said.

On Tuesday, Vega reiterated that the PRHTA will continue collaborating with other groups on a proposal for effective and fair regulation for all parties. “Now we have the opportunity to work on a joint project that truly benefits the industry and Puerto Rico,” he said.

Attempts to reach the Association of Paradores and Small Inns for comment were unsuccessful as of press time Tuesday. However, based on previous statements, it is likely the group agreed with the vote.

In a press release last week, the group said the bill should be withdrawn or rejected and “responsibly reworked” during the next legislative session. It recommended that Puerto Rico use best practices implemented and tested in other jurisdictions and accepted by digital platforms in other tourist destinations.

“We reiterate that HB 1557, as submitted by Reps. [José H.] Rivera Madera and [Joel] Sánchez Ayala, was a step in the right direction, but it was severely affected in the legislative process in the House with illogical and confusing amendments. The current version aims to legitimize the prevailing anarchy and create a new business category above our current laws and regulations,” Xavier A. Ramírez, president and co-owner of the Combate Beach Resort, said at the time.

“Our legislators have all the necessary information to create an adequate and balanced regulation to address the gaps created by STRs, using and adapting legislation approved in dozens of North American jurisdictions, much more robust than what is proposed in HB 1557,” Ramírez added.

STRs should be registered and contribute equitably to maintaining the infrastructure and public and common services they use for their operations, Christian Rivera, association vice president and co-owner of Parador Guánica 1929, said in the same press release. STR data and characteristics indicate that this is a commercial activity and must comply with regulations applicable to all transient accommodations, Rivera said.

The wrong call
Airbnb had a different take on the fate of HB 1557.

“The defeat of HB 1557 in the Senate represents a setback for thousands of Puerto Rican hosts who sought to responsibly comply with state-level regulations while generating the extra income they need by offering their spaces as short-term supplementary accommodations,” Carlos Muñoz, director of public policy and communications for Airbnb in Central America and the Caribbean, said in a statement Tuesday.

“It is unfortunate that, instead of looking after the interests of all Puerto Ricans and promoting proposals that contribute to the growth of Puerto Rican tourism, special interest groups preferred to sink a good bill because it did not guarantee a broad prohibition of the short-term supplementary accommodation sector,” Muñoz said, adding: “Puerto Rican tourism has lost.”

According to Airbnb, the defeat of HB 1557 leaves a regulatory gap with significant consequences:

– A unified island-wide registry, with more than 20 key points of required information from hosts, will not be established, preventing a clear analysis of the impact of short-term rentals on the island.

– Important operational standards aimed at guaranteeing a better product for tourists visiting the island will not be required.

– More than 15 measures aimed at promoting healthy coexistence between neighbors and good behavior from guests will not be implemented. These rules would have allowed neighbors and municipalities to actively participate in monitoring wrongdoers.

– Municipalities are left without an important mechanism to share Room Tax revenue and to effectively monitor CRIM [Municipal Revenue Collections Center] and municipal licenses, plus the collection of fines for law violations.

This regulatory gap at the state level will generate complexity and uncertainty in the operations of all service providers through various municipal ordinances, Muñoz said.

“Puerto Rico, which after the pandemic became a more diverse and accessible destination precisely because of short-term rentals, is now left without a regulation that could have addressed valid concerns such as product safety, community concerns and the interests of municipalities where these accommodations are located,” he said.

Stating that Puerto Rico “has fallen behind in modern and inclusive tourism regulations,” Muñoz added that Airbnb “remains committed to collaborating on the development of uniform, island-wide regulation aimed at eliminating the ambiguity and complexity currently faced by hosts.”

The bill
HB 1557 sought to address complaints from communities, organizations and individuals claiming that STRs are negatively affecting their health, safety and well-being.

Tourism and community leaders insisted that STRs are a commercial activity and should be defined as such in the bill, but the bill did not include that definition.

Other points of contention involved establishing a registration and permitting process for STRs, the Room Tax, and the authority of municipalities to oversee the sector, as well as issues related to safety, zoning, insurance, jobs, housing and neighborhood disruptions.

After its introduction in November 2022, public hearings and amendments, HB 1557 was approved by the House in June 2023. The bill then went to the Senate for a vote, and the Senate sent it to its Education, Tourism and Culture Commission, which held a new set of hearings in April 2024. A second report with amendments was released earlier this month, and the bill was submitted to the Senate floor for a vote, which took place on Monday.

The STR market
Short-term rentals are experiencing a global boom, with the market now accounting for 20% of the global rental industry, according to vacation rental software company Avantio, based in Spain.

The surge of STRs is presenting new income opportunities, increased tourism and regulatory challenges. STR regulations vary widely across and within countries, affecting aspects such as registration, licensing, zoning and taxes.

STRs have come under fire because of a variety of issues. For example, they can have a negative impact on affordable housing because they can limit the availability of long-term rentals in some cities, thus driving up housing costs for residents. They can cause neighborhood disruption, altering the character of a neighborhood and leading to problems with noise, parking and transient populations.

To address these concerns, governments throughout the world are implementing STR regulations.

Some cities require property owners or managers to register their STRs with local authorities. Others require a license to operate an STR, a process that involves inspections to ensure the property meets safety and health standards.

Many popular tourist destinations levy tourist taxes on STRs, which vary depending on location and property type. Some areas prohibit STRs, while others might limit them to specific zones or require a minimum distance between properties.

Regulations also can establish minimum safety standards for short-term rentals, such as fire safety protocols and requirements for smoke detectors and carbon monoxide alarms.

Some industry players favor regulations because they typically seek to ensure that everyone adheres to the same standards, level the playing field for STR operators, mitigate neighborhood disruption, enforce safety standards, and reduce uncertainty for tourists, property owners and managers.

Others reject the regulations because they add red tape to systems already burdened by bureaucracy. They can and do often produce uncertainty and confusion among stakeholders; standards can be difficult or impossible to enforce; and they can create an uneven playing field while claiming to do the opposite.

Unlike many European countries, the U.S. lacks a national regulatory framework for STRs. Regulations are primarily determined at the state and local level, which can create a complex patchwork of rules for property owners and managers to navigate.

Author Details
Author Details
G. Torres is a freelance journalist, writer and editor. She’s worked in business journalism for more than 25 years, including posts as a reporter and copy editor at Caribbean Business, business editor at the San Juan Star and oil markets editor at S&P Global Platts (previously a McGraw Hill company). She’s also worked in marketing on and off for decades, now freelancing for local marketing and communications agencies.

1 Comment

  1. Emily Hazel June 19, 2024

    Not a good start for the fire season. Luckily we have a lot of well trained fire personnel out there. We really need to appreciate what they do for us.


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