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Letter to the Editor – Short Term Rentals: Wallace Kaufman, Newport

Property Rights, Short Term Rentals, and Regulations

The heart of the controversy over short term rentals (vacation rentals) is the question of who owns what rights and who can limit, take or buy those rights. Reviewing a few fundamentals about property rights can offer ways to resolve the controversy either by neighborhood, ballot, or government action.

Private property and its defense has been central to humankind since we were all hunter-gatherers. Useful land and its resources became the private property of a person, family, or tribe by various means. Until the last few centuries, the primary means was warfare.

With the invention of writing and government property rights were recorded and regulated. Owners could never say, “It’s my property and I can do what I want.” That’s because “property” is not one right but a bundle of rights, like arrows in a quiver, jewels in a trunk, bales of hay in the barn. The right to rent a house or apartment as a short term rental is one of many other rights. And in an oceanfront town like Newport that right has considerable value. The arguments against STRs in neighborhoods of owner occupants are very strong, but they can prevail only if the value of the right to rent short term is recognized.

When the owner of an STR bought or converted the property, he or she exercised an ownership right protected by law. Similarly, when owner-occupants bought their homes in a single family neighborhood, they felt the density was protected by zoning and land use law. They felt protected by title searches that would warn of claims against their property like boundary problems or rights of way. Title searches do not analyze zoning codes or warn about future land use changes that are legal. Appraisers should but seldom do.

Since city, county, and chambers of commerce all consider tourism an unqualified economic plus, their policies have inevitably led to more overnight tourists, more demand for rentals, and thus increases in the value of short term rental properties. If one were to look for the root cause of the STR controversy, tourism is it.

The opponents of STRs often charge STR owners with being greedy. Let’s be less inflammatory and say they are self-interested. Then we can acknowledge that owner-occupants are also pursuing their self-interest. Since government is the only power that can take or grant a property right, both parties lobby government officials. (In the case of a citizen initiated referendum, they assume the legislative power of government.)

The 5th Amendment to the Constitution does limit the power of government to take property without “just compensation”, but courts have only rarely required compensation for a taking of value caused by re-zoning. (In 2004 Oregon ballot Measure 37 passed and required local governments to compensate owners for value diminished by state wide zoning in the early 1970s.)

The state did not make limiting STRs easier last year when it outlawed single family zoning in cities over 10,000—in the name of affordable housing, of course. Any lot with one house can now have two (subject to local setbacks and other regs).

The root cause solution of the STR controversy would be for commissioners and town councils to decrease incentives for tourism. That’s as likely as convincing cougars to be vegans or allowing sex only on Tuesday.

The easiest way to resolve the STR controversy would be to compensate STR owners for a decrease in value. Appraisers have quite accurate ways of determining the present value of future rents. But who would pay? City and county taxpayers? Suppose local governments established a fund to buy these rights. The fund could be finite and could be tapped by STR owners bidding. An established board of knowledgeable citizens could decide which bids were reasonable and accept the best deals. The STR owner would still have a valuable long term rental home. Nor is there any obstacle to neighborhoods creating private funds to buy away the STR right for a property.

A second mechanism worth exploring is creation of neighborhood associations whose members voluntarily cede to the association their right to rent their property as an STR. Such an agreement would not phase out existing STRs but would be a covenant “running with the land” or in other words binding present and future owners. The legal agreement would have to have provisions for change and probably a time limit, perhaps automatically renewed unless a certain number vote otherwise.

If you do keep STRs out of your neighborhood, be aware that the value of your home will probably increase and so will your taxes. On the other hand, if your home can qualify as an STR, its value and taxes might also increase.

Wallace Kaufman, Newport

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