A New Short-Term Rental Fight Is Simmering In Boston

A battle over short-term rentals in Boston is brewing, pitting operators, city leaders and community leaders at odds over what some are calling a loophole in recently passed legislation.

Sonder, a San Francisco-based short-term rental provider, was blocked by a zoning board in November from converting a downtown building into what it calls "executive suites." Mayor Martin Walsh and city councilors pushed back against Sonder's proposal, claiming it could hinder goals to increase the city's affordable housing supply.

The fight pits community groups and city officials against STR companies, which say executive suites aren't a regulatory workaround but an attractive and beneficial model for pandemic-era travelers.

"There are ways to have nightly rentals, it's called a hotel. There is a zoning category for it,” said Ford Cavallari, chairman of the Alliance of Downtown Civic Organizations. "It’s trying to arbitrage, trying to find loopholes in the zoning code, and that’s just wrong."

Sonder's offerings fit the executive suite designation because they feature a kitchen, setting it apart from a hotel room. The model appeals to weeks-long business travelers, medical stays and students, short-term rental executives said.

Hotel designations for Sonder properties wouldn’t be an effective path for the city and its housing stock, Sonder General Manager Gregg Klein said Thursday afternoon.

“If in five years, the building owner says, ‘I’d rather have these be multifamily, I think we can get more money that way,’ we can leave that unit and all that needs to be done is an application,” Klein said. “You can now have a by-right multifamily product.”

The executive suites represent a challenge for Boston’s affordable housing push, driven hard by Walsh as he prepares to depart for President Joe Biden’s administration. The city Thursday announced the creation of more than 1,000 affordable units in 2020, the latest in a series of housing goals in the nation’s third-most-expensive renter’s market.

Sonder’s latest appeal to convert a downtown Boston building into 21 executive suites in November was rejected by the Zoning Board of Appeals behind strong rebukes by representatives of Walsh and city councilors.

“Boston needs to focus on long-term housing for our residents and on strengthening our communities during these unprecedented times,” Councilor Kenzie Bok said in a statement.

The fight is a departure from the Airbnb controversy of years past, which concluded with Boston passing an ordinance in 2019 to set guidelines for owner-investors listing unoccupied housing. Sonder’s move at 103-111 Arch St. was bashed by Bok and City Councilor Ed Flynn as utilizing a loophole in zoning codes, a term disputed by Sonder.

“It could not be further from reality,” a Sonder Boston representative said in a statement.

Sonder cited the allowance of executive suites in city code, noting hurdles including Americans with Disabilities Act requirements and safety standards, high taxes and the six-figure cost of securing an executive suite license. The company also said it shut down more than 220 units in Boston, or half of its portfolio, in response to the city’s STR ordinance.

Klein also doubled down on Sonder’s aim to avoid hurting the city’s affordable housing stock.

“We don’t want to be where we’re not wanted to be,” Klein said. “We’re really focused on speaking with the community."

Hotels, subject to their own taxes, building standards and beholden to staff unions, did not lobby on behalf of either side in Sonder’s appeals. The Massachusetts Lodging Association, which pushed hard for the 2019 Airbnb ordinance, didn't respond to repeated requests for comment.

Zoning attorney Jeff Drago of Drago + Toscano LLP, who represented Sonder before the ZBA in the November meeting, said the units aren’t aiming to displace residents and specifically aim to operate in downtown commercial areas.

“During the pandemic, there was a need for doctors and medical staff to have shorter-term housing,” Drago said. “They needed to work near where they live. A short-term rental, where I can stay there for two or three weeks during my shifts and be near a hospital, that really solves that problem for them.”

Sonder’s appeal was backed by the Downtown Business Improvement District, which hoped Sonder would spur more travelers and economic activity.

“It is unfortunate that they were denied at a time when property owners are doing all they can to make sure their properties are active and vibrant and not empty in these challenging and unprecedented times,” Downtown BID President and CEO Rosemarie Sansone said.

Currently, an appeal for an executive suite conversion must go through a public hearing before the ZBA, according to Boston’s Inspectional Services Department. The ZBA considers community input and neighborhood impacts including potential impacts to residential housing stock before reaching a decision.

“From ISD's perspective, the process is working as designed, and we have not seen a significant negative impact on residential housing stock due to executive suite conversion,” ISP Director of Publicity Lisa Timberlake said in a statement.

The department confirmed 950 STR registrations within Boston’s city limits as of December 2020, issuing 203 permits last year amid slower registration activity, the ISP said. The city didn't release the number of executive suites compared to Airbnbs and other STRs in residential properties but said the number was significantly less. 

Sonder touts 85 properties in the Fenway-Kenmore neighborhood and downtown from rates of $113 to $388 per night, according to its website. Offerings range from studios to multi-bedroom, 1K SF-plus spaces, with minimum stays varying. 

Figures in the STR industry cite a confidential memo from the city’s legal department allegedly instructing ZBA members that executive suite conversions can only offer stays of 28 days or longer. The memo stems from an executive suite conversion attempt last February in East Boston, Universal Hub reported.

ZBA members then asked the city’s legal department to examine the issue — their subsequent memo was responsible for at least three executive suite rejections in 2020, sources told Bisnow. The ZBA has not published its rejection decision on Sonder’s November move.

As STR companies weather a downturn amid the coronavirus pandemic, more operators are weighing entering the Boston market this year. The chiefs of STR companies Mint House and Korman Communities’ AKA brand told Bisnow of their interest in Boston, but their future is unclear.

As Walsh awaits confirmation as Labor Secretary, mayoral hopefuls and Councilors Michelle Wu, Andrea Campbell, and interim mayor-in-waiting Kim Janey have all backed affordable housing efforts and have sparred with Airbnb on the STR issue. 

No executive suite conversion appeal was listed for Thursday’s ZBA meeting, the first of the new year, but the calls for oversight remain strong.

“We think there’s a right way to do it, and we would invite any of the nightly, shorter-term rental operators to become legitimate,” Cavallari said. “Become a hotel.”

UPDATE, JAN. 21, 5:15 P.M. ET: This story has been updated with additional comments from Sonder.