duction of personal computers and milkmen were done in by supermar- kets, a huge number of service jobs have been added to the economy. Lyft, for example, may create more opportunities for programmers over time while reducing the need for driv- ers. As it explained in its recent IPO, “In the next five years, our goal is to deploy an autonomous vehicle network that is capable of delivering a portion of rides on the Lyft platform. Within 10 years, our goal is to have deployed a low-cost, scaled autonomous vehicle network that is capable of delivering a majority of the rides on the Lyft platform. And, within 15 years, we aim to deploy autonomous vehicles that are purpose-built for a broad range of ride-sharing and transportation sce- narios, including short- and long-haul travel, shared commute, and other transportation services.” Third, the practical reality is that in a slow down, the first workers to be released will be contingent employees. Full-time workers will be expected to pick up the slack. So, what to do when a contingent gig worker applies for a mortgage? How should such income be count- ed? Should gig income be grossed down in the same way that non-tax- able income can be grossed up? There’s certainly work for lenders to do. Automated systems will need to be refined to incorporate new work patterns. Manual underwriting will become more common, not less. The need for job experience is likely to grow with gig workers, requiring at least a look back at three or four years of past earnings and not just one or two. IS IT REALLYA PRIME RESIDENCE? Across America, the nature of residential real estate is changing. For many homeowners, it’s not so residential anymore. Several million

travelers stay with homeowners on any given night. Empty bedrooms as well as unused attics and base- ments are increasingly seen as income opportunities. The hospitality industry is fight- ing back, demanding that local governments enforce ordinances which limit the competition faced by tax-paying hotels and motels. But the die have been cast: there are simply more homeowners than hotel magnates. Rather than fight short-term rentals, local govern- ments are increasingly coming to terms with the big rental platforms. They’re taxing the revenue received by property owners. More and more, it’s okay to rent a room as long as “Home sharing is making it possible to take what is typically one of their greatest expenses — their home — to make additional income that helps them pay the bills. Policymakers are taking notice and acting to support home sharing and the middle class.” While the connection between rental rates and tax collections is direct and obvious, there’s also evi- dence that, at least in some markets, short-term rentals are forcing up real estate prices and rental rates. This is good for owners, though not so good for buyers and tenants. For lenders, the growth of home sharing raises two questions: what is being financed and should the borrower’s income be bumped up on the basis of potential short-term rental income? Francois (Frank) K. Gregoire, an appraiser based in St. Petersburg and the four-time chairman of the Florida Real Estate Appraisal Board, told The Mortgage Reports in 2017 that, “a room rental situ- ation, depending on the number of rooms, may shift the use of the property from single or multifamily to a business use, such as a hotel or you pay the local government. According to Airbnb in 2015,

rooming house.” This new world of short-term rentals raises a number of questions for lenders:

• Is the property a prime residence or a riskier investment property?

• If the property is used for short- term rentals, has the income been declared for tax purposes? • If the home has not been used for short-term rentals, can an appraiser use short-term rental data from nearby and like prop- erties to create a valuation? • If local ordinances or HOA rules ban short-term rentals, can the owners repay the debt if rent- al income stops because of a complaining neighbor or code violation crack-downs? There are already efforts to create financing options for short-term rental properties. “Hosts in the U.S.,” says Airbnb about its financing initia- tive, “will be able to work with partic- ipating lenders to recognize Airbnb A room rental situation, depending on the number of rooms, may shift the use of the property from single or multifamily to a business use, such as a hotel or rooming house.” • Is the property insured for use as a short-term rental?


20 | think realty housing news report :: june / july 2019

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