What local governments need to know
Short-term rentals are popping up in communities across America as more employees work from home, local economies reopen, and we’re able to vacation again.
These types of accommodation offer flexibility and fun for travelers and bring additional revenue to local communities through taxes (hotel occupancy tax, transient occupancy tax, short-term rental tax, etc., plus incremental food and beverage taxes). Local government leaders often see the downside of short-term rentals, such as late-night parties, litter, and constituent complaints. That makes it difficult to see the benefits of this growing market and how to support short-term rental hosts.
However, unless a municipality is prepared to ban short-term rentals (and then deal with illegal short-term rentals) it’s a great idea to learn more about vacation rental hosts, learn about the business, and what local governments do to facilitate positive and profitable relationships with these entrepreneurs.
Let’s bust some top myths for local leaders regarding short-term rental hosting:
- It’s all mom & pop shops: The idea that platforms like Airbnb are full of individual hosts is untrue. In 2018, individual hosts clocked in at just 1/3 of listings on Airbnb. Stats have decreased even further since, while there’s been a surge of investors and managers putting entire apartment buildings on short-term rental platforms. While larger rental companies can be more professional and organized, it doesn’t necessarily mean that they’re more likely to be in compliance with local laws and fees.
- The hosting platforms take care of everything, from booking to paying taxes. Not true. Well, sort of true. Platforms like Vrbo and Airbnb have agreements with some jurisdictions about collecting and remitting taxes on behalf of local governments. But not all municipalities have agreements with online travel companies and short-term rental platforms. Plus, these companies don’t take care of registering properties with local governments, which local laws may also require. This leads to many vacation rental hosts being out of compliance.
- Short-term rentals don’t offer fee-based amenities like hotels. Not true. Many short-term rental hosts charge for amenities, such as minibars, rollaway cots, cribs, car seats, plus gym access, parking permits, and pool fees. These amenities fees are in addition to standard fees for cleaning, pet deposits, and even short-term-rental platform fees. Taxes must be paid on all of these fees. However, this doesn’t always happen and local governments get short-changed. Think this is just small potatoes? Depending on how many stays your area’s short-term rentals rack up, these incremental taxes and fees can really add up. Tax-compliance audits can make sure your government’s expectations line up with reality.
Check out more of our tips for monetizing and managing your community's short-term rental market.
Making it easy for your local hosts
Whether your community’s vacation rental hosts are independent operators or part of a large operations group, it’s important for local governments to foster good working relationships between local leaders and businesses.
Tips for local government officials include:
- Make your ordinances practical, understandable, and enforceable. Bring all stakeholders to the table when developing or refining laws and craft clear language. Our team has helped many municipalities review and draft short-term rental ordinances, from the simple to the complex.
- Offer an online registration and payment portal. Many municipalities still require paper forms and paper checks to register and pay taxes. This is very inefficient, especially for management groups with rentals in many municipalities. Instead, a platform like Localgov is business-friendly and connects taxpayers with a secure, consumer-style online portal that facilitates instant tax compliance.
- Level the playing field between hotel-motel operators and short-term rental hosts. If your community’s policies and procedures favor short-term rental over traditional hospitality providers, that’s not fair—and you’re going to hear about it. Hold all businesses accountable for paying taxes and fees and make sure that you can back it up with tax compliance audits that foster trust and transparency. Our parent company Azavar has completed thousands of compliance audits for hundreds of local governments.
Let's talk more about ways to promote business-government relationships while also increasing tax compliance among vacation rental hosts. As a partner to local governments for more than 25 years, our team understands how to get it done. Schedule a call today.