Tuesday, January 25, 2022

Crony Capitalism (Vacation Rental Edition)

My wife and daughter just returned from a delightful long weekend in Santa Fe, NM. The entire family will return soon to Saint Francis's fine city where, as Hermann Banks reminds usstrangers are kind and beauty is overflowing and the local government is captured by crony capitalists. In fairness to Banks he never has said as much about local government, but I would imagine he wouldn't dispute it. 

Case in point:

A friend of mine has a vacation home there that he purchased a few years ago for both personal use and as an investment. Part of the investment is renting it out as a short-term vacation rental.

About six months ago I booked his place for my family's trip this coming April. In October I received an urgent text message from the rental property service directing me to check my email. Doing so I saw a short message stating that my reservation was no longer available, they were searching for a substitute property, and would be back in touch soon. I somewhat shrugged it off as being a mistake since I knew the actual owner well. But before I had a chance to contact my friend I received another email regretfully informing me that my reservation was cancelled with no substitute.

I reached out to my friend still thinking this was just a clerical error in their system. While a clerical error had occurred, it had a deeper problem behind it. My friend was somewhat upset but a lot calmer about it than I would have been. In fact I was livid for him and ready to go to the barricades. Not because of my vacation plans being disrupted but because of why this was happening and the implications it had for him.

The short version is this: The property management company had failed to make sure that my friend was current in his short-term rental permit with the city of Santa Fe (and yes, this is enough to get me to the barricades--the fact that a city government makes property owners get permission to use their property . . . but wait, there's more). The failure here was pretty significant in that it had expired the prior December 31st. Shame on the management company for sure. 

Should be no problem, though. Just refile as this should be a formality at this point. My friend does so starting a few days before my cancellation email by calling the proper city office. Keep in mind that my friend lives in Tulsa, OK; so all of this is out of direct control for what it's worth. I'm not sure if being able to go down to city hall would have made things better for him. They probably wouldn't have been better for me if I were in his shoes due to the whole ready-to-storm-the-castle attitude I have in these matters. Nevertheless . . . the city official looks it up and says, "Uh-oh, I don't think we'll be able to do this." 

[I swear this is the short version] It seems there exists another, current, valid in-the-eyes-of-the-Duke-of-Santa-Fe short-term rental permit for a property located within 50 feet of my friend's. You see kids, in America Big Hotel has decided that short-term rentals are a threat to their business. They've convinced well-meaning homeowners that people renting out their property could be scary. Soooo, rather than compete they've helped create rules to stop the madness. 

But this no-longer-short story doesn't end with just a Bootleggers and Baptists tale of the hotel lobby working hard to stifle competition along with the help of residents who think they should be able to dictate what happens on other people’s property. We get some government failure and unintended consequences to boot. 

My friend was taken aback at the news he couldn't get a permit because one nearby already existed (a new rule) but was immediately relieved relaying to the official, "Who has a rental? I know all my neighbors, and none of them rent." Upon further inspection, the city official realized that there are two roads with the same name in Santa Fe. The other permit is for a property miles away from my friend's. He could get it after all. Just need to have the local inspector swing by the next day to validate it all. Phew, that was close . . . but wait, there's more . . . as you probably suspect knowing what came next for me. 

The inspector comes out to my friend's house. Presumably begins checking boxes. Sees that there is another property located within 50 feet holding a short-term rental permit by looking it up just like the prior city official did. So he promptly denies the permit and goes about his day. 

This triggers a very fast and unforgiving process in the several rental property agencies my friend uses for his listing. Because I'm sure so as to not fall afoul of city governments everywhere and their crony capitalist controllers, they act swiftly to cancel all of my friend's future rentals. Remember this is October right before a busy Thanksgiving and Christmas season and he depends on repeat business as well as referrals. Along with all of these would-be customers, it is now that I receive a cancellation via email. 

At this point my friend was already on top of getting this reversed--I would not say satisfactorily resolved. He cleared it up with the city and over a LONG weekend was square to lease his property. Then came damage control. Many apologetic messages later with many discounts offered and still a large number of permanent cancellations foregone, he had done all he could to salvage some of his 9+ months of bookings.

It is hard seeing the system work the way it is actually, ultimately intended. It is harder still being a victim of it.




Summer Rental


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