Panel suspends rule regulating pool standards at Wisconsin rental properties

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Wisconsin homeowners are getting at least a temporary reprieve from a rule calling on them to obtain a commercial pool license before listing their pools or hot tubs on sites like Airbnb or VRBO.

The Joint Committee for Review of Administrative Rules voted 6–4 last week to suspend a state rule that had allowed the Department of Agriculture, Trade and Consumer Protection to require homeowners to have such a license if they were going to list their pools or hot tubs on property-rental sites. A challenge to the rule arose after the website Swimply, which allows homeowners to rent out pools or hot tubs by the hour, questioned why properties it was listing should be held to the same standards as public pools. Some homeowners had complained it could cost $100,000 or more to bring a residential pool up to commercial code.

Representing Swimply in the dispute was the conservative group Wisconsin Institute for Law and Liberty. Luke Berg, deputy counsel for WILL, said in testimony last week that, “a pool or hot tub does not become a ‘public’ pool simply because the home is rented on a short-term basis, any more than it would if the home were rented on a yearly basis or if the homeowner had guests over. It is a private transaction between two private parties; only the tenant can use the pool.”

Representing the state, Troy Sprecker, director of the bureau of food and recreational businesses at DATCP, agreed that the rule needed revision but argued against suspension. He said DATCP began working on revisions in February 2020 and is now 28 months into a 30-month plan to draft a proposed rule change.

“DATCP recognizes that emerging business models provided by online rental platforms for short-term rentals of lodging facilities or recreational facilities such as Swimply, VRBO and AirBnb present challenges as we attempt to regulate them under 20-year-old rules,” Sprecker said during his testimony.

Rep. Lisa Subeck, D-Madison, said DATCP should be given more time to revise the rule. She said she was reluctant to allow residential properties to go unregulated during the coming vacation season.

The Wisconsin Hotel & Lodging Association also spoke in opposition of the suspension, arguing the playing field should be kept level for hotel and motels. People on both sides of the dispute meanwhile questioned which agency should be responsible for regulating pools and hot tubs at short-term rental properties.

Wisconsin has far fewer hotels, motels and similar properties to book rooms in that it does online rentals. According to the Wisconsin Hotel & Lodging Association, the state has 484 accommodations for rent at hotels, motels, resorts, inns, bed and breakfasts, condominiums and vacation homes. VRBO’s Wisconsin page, in contrast, lists 10,648 vacation rentals, of which 2,069 are cabins and 6,042 houses. Airbnb and Swimply meanwhile had no comparable data.

The suspension of the state rule for pools and hot tubs listed on online rental sites may seem like a win for Wisconsin homeowners as they prepare for a summer surge of bookings. But Michelle Ebben, a real estate attorney at Michael Best, cautioned that there could be more regulation to come.

“I would suspect that if this deregulation goes forth, you can expect to see the attempts at the municipal level to preserve affordability of housing in tourism areas to create stricter regulation specific to pool or other areas of short-term rentals,” Ebben said. “As short-term rentals have garnered more popularity there are certain aspects that have been deregulated and it is inevitably responded to somewhere else to be prohibitive for short-term rentals. It’s just one particular example of the larger dynamic.”

She said hotel and motel owners’ concerns about fairness are legitimate.

“Competing against someone who doesn’t have the same regulation is a fair point to raise,” Ebben said.

But Anthony Gingrasso, a real estate and business attorney at Johns Flaherty & Collins, said it’s important to take into account the goals of regulation.

“If you’re looking at economic playing field, if that’s in their purview to regulate, and in this situation they are regulating safety,” Gingrasso said. “I don’t think that’s within that department purview and there’s a little bit of a difference between a hotel has multiple when ‘tenants’ and the vacation rental that has one ‘tenant.’”

Gingrasso said homeowners generally have a strong incentive to regulate their own pools given the income that can come from having a property with lots of good online reviews. He and others noted that sites like Airbnb and VRBO already use online reviews to provide oversight of the properties they list for rent. When a single negative review can already greatly decrease a rental’s appeal to potential renters, they asked, is it really necessary for the state to provide additional regulation?

“The pro is that especially as we are getting into vacation season, these homes are going to be utilizing their pool as an amenity that the home offers, maximizing what they can charge as far as rental fees,” Gingrasso said. “The benefit of suspending it outweighs the slight safety concern that might be present if parties don’t have pools up to code. It’s a close call. There are regulations that can be imposed by the site (Airbnb/VRBO) where the property is listed.”

Ebben said the final word probably won’t come until the state Legislature reconvenes in early 2023. She said lawmakers will then have to decide if this is an issue pertaining more to affordability or to common-sense deregulation.