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St. Paul building shows how Airbnb is squeezing residents from housing market

The Lowry in downtown St. Paul plans to convert as many as 50 residential apartments to Airbnb rentals.

The Lowry in downtown St. Paul plans to convert as many as 50 residential apartments to Airbnb rentals. Visit St. Paul

Two years ago, the landlord at Lowry Apartments in downtown St. Paul informed residents their leases would not be renewed. According to the Pioneer Press, everyone on the 9th and 10th floors would be ousted.

The apartments would be converted to rentals through Airbnb.

The move makes sense in strict financial terms. Short-term rentals yield higher rates than long-term residents. That's why Sherman Associates announced in June that it would lease most of its 122 units in a new building on Park Avenue South in Minneapolis to Sonder. The company, an Airbnb rival, already leases 33 apartments in the city.

The problem, of course, is that it only exacerbates the shortage of housing for Twin Cities residents, while hiking rents via increasing scarcity.

As Minneapolis Councilmember Steve Fletcher told the Star Tribune: “The reason we’re allowing density is because people need places to live, not because we want people to have an abundance of places to stay for the weekend.”

But owner Jim Crockarell was making an even bolder move across the river at the Lowry. A St. Paul statute dictated that large buildings could rent out no more than four apartments on sites like Airbnb. Yet the Minnesota Department of Health had taken over hotel licensing in the city four years earlier.

So Crockarell got a license from the state, allowing him to technically convert the 9th and 10th floors to a hotel. Some 15 residential apartments were moved to Airbnb.

It would take two years to fashion a remedy.

This month, the city changed its rules for what is officially considered a hotel. They must now have a staffed desk, an on-site manager, exterior signs and a lobby, and keep at least five rooms available for walk-in guests. It's the extra labor and the walk-in clause that will cause pause for pretend hotels, since keeping five apartments vacant every night would likely be cost-prohibitive to an Airbnb masquerade.

Cockarell says he already has most of these rules covered, though he'll likely be grandfathered in on the new law anyway. He's already planning to convert more of his 100 residential units to Airbnb rentals, pushing the number closer to 50.

Yet St. Paul is hoping the new rules will prevent other buildings from forsaking residents for the more lucrative visitor trade. Or at least until landlords find a new way to skirt statutes.