Neighbors, council member fight Airbnb-style rentals in Minneapolis

Downtown neighbors protested plans to turn nearly an entire apartment building into a makeshift hotel Monday night, arguing the developer misled them and will introduce a transient population that will disrupt the community.

"What makes me upset is that the community's not considered in this," said Susan Eisenberg, among those in the standing-room-only-crowd of the Downtown Minneapolis Neighborhood Association's meeting. "Because I'm pretty sure everyone in this room is really upset."

Developer Sherman Associates shared its plans with the association for a 122-unit apartment building at S. 205 Park Ave. Shane LaFave, director of development for Sherman, said it has signed a five-year contract with San Francisco-based rental company Sonder to dedicate 94 of those units to short-term leases.

"This is a really solid company," said LaFave of Sonder. "We said, 'If this is happening, then why not here? Why not in this building?' "

"How about next to your house?" one crowd member shouted.

City Council Member Steve Fletcher shared his opposition to the proposal, saying he will introduce an ordinance to restrict short-term, Airbnb-style rentals this summer. Fletcher said private companies are beginning to stake a claim in the Minneapolis market by leasing out apartments en masse, and as the city paves the way for more density by loosening zoning restrictions, he worries the trend will steal away valuable long-term rentals from the tight Twin Cities market.

"The reason we're allowing density is because people need places to live," Fletcher said in an interview before the meeting, "not because we want people to have an abundance of places to stay for the weekend."

Several audience members accused Sherman Associates of lying to the neighbors about its intentions with the building when the company bought it from the city. Others said the city is culpable for allowing Sherman to buy the property in the first place without guaranteeing it would be used for longer-term tenants or owners.

Some expressed concern over the magnitude of turning nearly an entire downtown building into short-term rentals, fearing it would disrupt the community for those who live there full time.

"When you take over the entire building ... that changes the tone, it changes the tenor," said Rick Wald. "Essentially, you're opening a hotel, and you didn't apply for a hotel license."

Just the beginning?

The debate may be a forecast of a larger conversation to come citywide.

Fletcher and others say the 205 Park proposal is just one of many plans from building owners to turn large swaths of units into full-time, short-term rentals through companies like Airbnb and Sonder.

Alisa Mulhair, general manager for Sonder in the Twin Cities, said the company is renting 33 units in Minneapolis, including some nearby downtown. She said Sonder differs from Airbnb in that it screens its tenants and prohibits parties or noisy tenants. Units rent for about 20% less than a hotel, but more than an Airbnb, she said. Sonder offers rentals ranging from two days to several months and anticipates more longer-term rentals in Minneapolis, catering to business travelers or snowbirds, she said.

At the meeting, Fletcher said the Sherman Associates proposal was "immediately a red flag," and he asked them to rethink going forward as planned.

"Frankly, we need to figure out how, as a city, we're going to regulate this," he told the crowd. "And it would be good if that wasn't happening in a reactive mode to something that has people pretty agitated. I've heard from a lot of you. I haven't heard from anybody who isn't a party to the deal that's supportive of the deal."

Fletcher added that Sherman has been working with his office, and Sonder "may be the best case scenario for this business model," even if it's not a model many people want. He said he's still working out the details on what ordinance language would entail, but he believes 94 units is too many.

"There's a part of me that thinks this actually might be a nice thing in small quantities," he said, "that the right amount might not be zero — but it might be 10 percent at most."