17 C20-2024-014 - STR Modifications Public Communication — original pdf

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str_executive_summary Executive Summary: Austin Loses $225,000 Every Day in STR Revenue[1] February 2025 Current Crisis Austin's short-term rental (STR) enforcement is severely understaffed, resulting in massive revenue losses and neighborhood impacts: Current Enforcement Gap Total STRs 15,200 Current Staff 4 Inspectors Inspection Cycle 6 Years Backlog 850+ Complaints Market Size: 15,200+ properties, only 2,200 (14.5%) licensed[2] Peer Cities: Denver (80% compliance), Nashville (75% compliance)[3] Response Time: 4+ months average for violation reports[4] Daily Revenue Loss: $225,000 ($82.18M annually)[5] Cost of Inaction Every day without action costs Austin: $225,000 in lost revenue[6] 2-3 new unlicensed STRs[7] 5-10 unaddressed neighbor complaints[8] Declining compliance rates[9] Implementation Options Based on peer city success models: Path to Compliance Current State 14.5% Compliance $82.18M Loss Minimum Path 8 FTE / 18 Months $24.65M Recovery Denver Model 12 FTE / 18 Months $37M Recovery Nashville Model 10 FTE / 24 Months $31M Recovery 1. Minimum Path (Recommended) 8 FTE: $340K annual investment 18-month implementation $24.65M first-year return ROI: 72.5x investment 2. Denver Model 12 FTE: $1.2M investment 18-month implementation $37M potential return Highest compliance rate (80%) 3. Nashville Model 10 FTE: $850K investment 24-month implementation $31M potential return Platform cooperation focus Implementation Timeline Minimum Path Timeline March 2025 First 2 FTE June 2025 Next 2 FTE September 2025 Full Capacity Q1 2026 $24.65M Return Recommendation Approve funding for the minimum path (8 FTE) immediately. Every day of delay costs Austin another $225,000 in lost revenue[10]. This modest investment will: 1. Generate $24.65M in first-year revenue[11] 2. Improve neighborhood quality of life[12] 3. Begin bringing Austin in line with peer cities[13] 4. Pay for itself in less than 2 weeks[14] Detailed analysis: strreform.org/str-enforcement-2025 1. City of Austin Controller's Office, Revenue Impact Analysis (2024-2025) ↩ 2. City of Austin Development Services Department, STR Registry Database (February 2025) ↩ 3. Denver STRA Committee and Nashville Metro Codes Department (2024) ↩ 4. Development Services Department, STR Division Time Study (January 2025) ↩ 5. City of Austin Controller's Office, Revenue Impact Analysis (2024-2025) ↩ 6. City Controller's Office, Daily Revenue Impact Calculations ↩ 7. Development Services Department, STR Market Growth Analysis ↩ 8. Austin 311 Service Request Data, 2024 Annual Report ↩ 9. Development Services Department, Compliance Trend Analysis ↩ 10. City Controller's Office, Daily Revenue Impact Calculations ↩ 11. Budget Office, STR Program Financial Analysis ↩ 12. Austin Code Department, Neighborhood Impact Report 2024 ↩ 13. Peer City Enforcement Program Reviews (2024) ↩ 14. Budget Office, ROI Analysis ↩ str_enforcement_analysis Short-Term Rental Enforcement Analysis: Austin's Daily $225K Revenue Loss February 10, 2025 Executive Summary This analysis examines Austin's short-term rental (STR) market, comparing our enforcement capabilities with peer cities and quantifying the daily cost of inaction. Using real-world data, comparative analysis, and sensitivity modeling, we demonstrate both the financial and community impact of inadequate enforcement resources. Key Findings: Over 13,000 STRs operate without licenses (only 2,200 are licensed)[1] Austin's 14.5% compliance rate lags peer cities (Denver: 80%, Nashville: 75%)[2] The city loses $225,000 daily ($82.18M annually) in revenue[3] 850+ neighbor complaints remain unaddressed from 2024[4] Peer City Analysis Peer City Enforcement Com Denver 80% Compliant Nashville 75% Compliant Austin 14.5% Compliant 12 FTE 10 FTE 4 FTE 3-Week Response 3-Week Response 4-Month Response Success Stories 1. Denver, Colorado Increased from 15% to 80% compliance in 18 months Investment: $1.2M in enforcement Return: $12M additional annual revenue Key: Adequate staffing (12 FTE) 2. Nashville, Tennessee Achieved 75% compliance rate 10 FTE inspectors 3-week average response time Platform cooperation requirements 3. Austin's Current State 14.5% compliance rate 4 FTE inspectors 4+ month average response time Limited platform cooperation Current Market Analysis STR Licensing Process Yes (14.5%) Compliant 2,200 Properties Annual Rev STR Property Licensed? No (85.5%) Enforcement Non-Compliant 13,000 Properties Known Facts 1. Licensed Properties: 2,200 STRs[5] 2. Unlicensed Properties: 13,000+ (based on city estimates)[5-1] 3. Total Market: ~15,200 properties[5-2] 4. Current Enforcement Staff: 4 inspectors[6] 5. Hotel Occupancy Tax: 17% total (11% city, 6% state)[7] 6. Average Nightly Rate: $290 (conservative estimate)[8] Compliance Rate Calculation Current compliance rate = Licensed / Total Properties 2,200 / 15,200 = 14.5% compliance rate Neighborhood Impact Analysis 2024 Complaint Distribution Total Complaints 850 Noise 383 (45%) Parking 255 (30%) Trash 128 (15%) Other 85 (10%) Community Impact 1. Response Times[9] Noise complaints: 4+ months average Safety violations: 3+ months average Parking issues: 5+ months average 2. Neighborhood Effects[10] 45% increase in noise complaints (2024) 30% increase in parking violations 15% increase in trash/maintenance issues 3. Property Value Impact[11] 5-10% decrease in adjacent property values Increased neighbor turnover Rising community tension Inspector Capacity Analysis Daily Time Budget 1. Total workday: 8 hours (480 minutes) 2. Required meetings/admin: 1.5 hours (90 minutes) 3. Breaks/lunch: 1 hour (60 minutes) 4. Available inspection time: 5.5 hours (330 minutes) Inspector Daily Time Budget Available Inspection Time 330 min (69%) Meetings/Admin 90 min (19%) Breaks/Lunch 60 min (12%) 5.5 Hours 1.5 Hours 1.0 Hours Single Inspection Requirements 1. Physical inspection: 45 minutes 2. Travel between properties: 35 minutes Additional 15 minutes during rush hour 3. Documentation/reporting: 15 minutes 4. Total per inspection: 95-110 minutes Annual Inspector Capacity Total days per year: 260 (52 weeks × 5 days) Minus holidays (10), vacation (15), sick days (5) = 230 working days Maximum inspections per day: 3 Annual capacity per inspector: 690 inspections Realistic capacity (90% efficiency): 621 inspections Current Total Enforcement Capacity (4 Inspectors) Maximum annual inspections: 2,760 (690 × 4) Realistic annual inspections: 2,484 (621 × 4) Percentage of properties covered annually: 16.3% Years to inspect all properties once: 6.1 years Sensitivity Analysis: Inspector Capacity 1. Inspection Time Variations: Best Case: 85 min/inspection = 3.9 inspections/day = 897 annual Average Case: 95 min/inspection = 3.5 inspections/day = 805 annual Worst Case: 110 min/inspection = 3.0 inspections/day = 690 annual 2. Efficiency Factors: 100% Efficiency: 690 inspections/year 90% Efficiency: 621 inspections/year 80% Efficiency: 552 inspections/year Daily Cost of Inaction Daily Revenue Loss Breakdo Total Daily Loss $225,150 Hotel Tax $207,342 License Fees $17,808 Revenue Loss Analysis 1. Daily Impact: Tax Revenue Lost: $207,342 per day License Fees Lost: $17,808 per day Total Daily Loss: $225,150 per day 2. Weekly Impact: Tax Revenue Lost: $1.45M per week License Fees Lost: $124,658 per week Total Weekly Loss: $1.58M per week 3. Annual Impact (Conservative Scenario): Tax Revenue Lost: $75.68M annually License Fees Lost: $6.50M annually Total Annual Loss: $82.18M annually Sensitivity Analysis: Revenue Impact 1. Occupancy Rate Scenarios: Conservative (50%): $82.18M annual loss Moderate (60%): $97.32M annual loss Aggressive (70%): $112.45M annual loss 2. Compliance Rate Impact: Current (14.5%): $82.18M annual loss Target (50%): $41.09M annual loss Peer City (75%): $20.55M annual loss Required Staffing Analysis Comparative Staffing Analysis Response Time by Staffing L Current State 4 FTE Phase 1 8 FTE 4+ Months 2-3 Months Target State 12 FTE 2-3 Weeks Staff Requirements 1. Inspector annual capacity: 621 properties (realistic average) 2. Required inspectors for full coverage: Annual inspections needed: 33,440 Required FTE: 33,440 ÷ 621 = 54 FTE (theoretical) 3. Minimum viable staffing (8 FTE): Would enable inspection of high-priority properties Represents 100% increase in current capacity Allows focus on highest revenue impact Implementation Options Analysis Based on peer city models: 1. Minimum Path (8 FTE) Investment: $340,000 annually Timeline: 18 months First-year return: $24.65M ROI: 72.5x investment Target compliance: 25% 2. Denver Model (12 FTE) Investment: $1.2M annually Timeline: 18 months Potential return: $37M ROI: 30.8x investment Target compliance: 80% Additional benefits: Digital enforcement tools Automated detection system Platform integration 3. Nashville Model (10 FTE) Investment: $850,000 annually Timeline: 24 months Potential return: $31M ROI: 36.5x investment Target compliance: 75% Additional benefits: Platform cooperation program Online verification system Streamlined licensing Comparative ROI Analysis Investment vs. Return Analys Minimum Path 72.5x ROI Nashville Model 36.5x ROI Denver Model 30.8x ROI $340K → $24.65M $850K → $31M $1.2M → $37M Implementation Strategy Implementation Timeline & Im March 2025 First 2 FTE June 2025 Next 2 FTE September 2025 Full Capacity $12.33M Impact $12.32M Impact $24.65M Annual Phase 1: March-May 2025 1. Hire and train first 2 FTE 2. Focus on highest revenue properties 3. Implement digital tools 4. Expected Impact: $12.33M revenue recovery Phase 2: June-August 2025 1. Hire and train next 2 FTE 2. Expand to medium priority properties 3. Platform cooperation program 4. Expected Impact: Additional $12.32M revenue Phase 3: September 2025 onwards 1. Full 8 FTE capacity achieved 2. Comprehensive coverage plan 3. Data-driven enforcement 4. Expected Impact: $24.65M annual revenue recovery Recommendations 1. Immediate Action Required Approve 4 additional inspector positions Allocate $340,000 for staffing Begin hiring process by March 2025 2. Technology & Process Improvements Digital inspection tools Automated STR detection Online licensing portal Platform cooperation agreements 3. Policy Updates Increased penalties Platform verification requirements Progressive enforcement program Conclusion 1. Generate $24.65M in first-year revenue 2. Reduce response times from 4+ months to < 3 months 3. Address 850+ backlogged complaints 4. Begin bringing Austin in line with peer cities Every day of inaction costs Austin $225,000 in lost revenue. While peer cities achieve 75-80% compliance rates with adequate staffing, Austin's 14.5% compliance rate reflects severe understaffing. The proposed 8 FTE solution would: The investment of $340,000 will pay for itself in less than two weeks of recovered revenue. Without immediate action, Austin will continue to lose $82.18M annually while falling further behind peer cities in STR enforcement effectiveness. 1. City of Austin Development Services Department, STR Registry Database (February 2025) ↩ 2. Denver STRA Committee and Nashville Metro Codes Department (2024) ↩ 3. City of Austin Controller's Office, Revenue Impact Analysis (2024-2025) ↩ 4. Austin 311 Service Request Data, 2024 Annual Report ↩ 5. City of Austin Development Services Department, STR Registry Database (February 2025) ↩ ↩ ↩ 6. Development Services Department, STR Enforcement Division ↩ 7. City of Austin Controller's Office, Hotel Occupancy Tax Collections Report ↩ 8. Market analysis shows average rates of $310; using conservative $290 estimate ↩ 9. Development Services Department, STR Division Time Study (January 2025) ↩ 10. Austin Code Department, Neighborhood Impact Report 2024 ↩ 11. Austin Board of Realtors, Neighborhood Impact Study 2024 ↩