Op-ed: Large cost to innkeepers, state of unregulated Airbnbs
The Chester Telegraph | Oct 23, 2017 | Comments 9
By Kathy Pellett
Operating an Airbnb is not just a matter of someone renting a room in his or her home to earn a little extra income.
It’s been suggested that a very large percentage of Airbnb operators are second homeowners, earning additional income from their real estate investment.
Vermont needs to wake up to the fact that this is not merely about a few senior citizens of Vermont supplementing their Social Security to stay in their homes. Many of these operators are very well-off individuals from out of state renting their Vermont vacation property. By not regulating this growing industry, the state and lodging industry is, in effect, subsidizing Airbnbs.
In a recent discussion on Vermont Public Radio, it was noted that state tax revenue in March was down about $25 million, much of which was lost revenue from Meals and Room taxes. Even though the state made an agreement with the Airbnb company to collect meals and room taxes, there are easy ways for the operators of these establishments to get around both collecting and reporting the amount of tax due to the state.
Legislation must be enacted to ensure the state is able to collect the taxes that are due. As more tourists opt to rent from an Airbnb, not only is this lost revenue for licensed establishments, but also it’s lost revenue for the state if there is no law in place that mandates Airbnbs to collect Meals and Room taxes and submit it to the state.
Traditional establishments must be licensed by the state, have health certifications and, if they are serving water to the public, have a separate water certification. Airbnbs are not required to do this, although they are offering their guests the very same services (including drinking water) as traditional inns.
If one establishment needs to certify that its water is safe to drink, wouldn’t any rental establishment need to do the same? If regulated establishments must pay fees to the state for licensing and certification, shouldn’t every establishment that is renting to the general public do the same?
The Department of Health has regulations for what it calls “long-term” rental housing; i.e., regulated inns, hotels and B&Bs. Local health officers enforce them at the municipal level. The Rental Housing Health Code defines “rental housing” as “all dwellings, dwelling units, rooming houses, rooming units or mobile home lots let by owner to one or more persons to be used as a regular residence.” Strangely, the new category, “short-term” rentals, does not fall within this definition. What is the difference? They are all short-term rentals: hotels, inns and B&Bs all rent for as little as one night – no different than the rental time at an Airbnb. Why has the state made this ridiculous distinction when there is none?
What appears to have happened is that the traditional, unregulated, long-term rental business, which existed for ages (i.e., ski houses, summer rentals) has now, thanks to the internet, been transformed into an unregulated, short-term rental business.
Further consequences are lost employment opportunities. Airbnbs don’t need to hire staff to work in their homes, once again adversely affecting the local economy.
This problem is multifaceted: There is the issue of regulation and licensing; there is the issue of lost revenue; there is the issue of lost jobs; and finally, there is the issue of safety and the reputation of Vermont as a tourist destination.
Licensing and regulating all web-based rental properties needs to be mandatory not voluntary. Airbnbs should be subject to the same state licensing and certification regulations as are traditional inns, hotels and B&Bs. This legislation must ensure a level working field for the regulated hospitality industry in Vermont. It’s good for everyone, including the state coffers. There is an opportunity right here to increase revenue without burdening residents with additional taxes when, come January, the state will surely be seeking new sources of revenue.
Kathy Pellett is a former state representative. She lives in Chester.
Filed Under: Commentary • Op-ed
I’m the other Kathy and I wish to apologize for any confusion I caused by not using my last name. I also would like to clarify that what I had expressed is solely attribitable to me.
No one is looking to “hurt” anyone. The state has a separate classification for camps and camping facilities that excludes them from these regulations. The problem is a lot of business owners are already being hurt by this “wild west” approach to rentals. Airbnb is fairly new to Vermont but other states that have endured it longer, New York and Texas for example, are now waking up to the problems that these unregulated rentals create for the local communities. Airbnb is not a new business model by any stretch of the imagination. It’s the same old business model that has been around for ages, just dressed up to look different, thanks to the internet. Don’t be fooled by this big corporation’s marketing scheme.
Hey Barry – I like you, too! And I think you’ve made great contributions to the town in terms of your business and your suggestions and service. thank you for being a contributing member of the community.
But…this is the “new business model” in Vermont…well I don’t think so. I guess the person who buys a pair of scissors and takes an online course in hair cutting — but only wants to do a couple of hair cuts – maybe for friends, hangs out a shingle and opens for business. no license necessary? Pay the state taxes on your services? No way — it’s the new business model! How is this person different from the person who is licensed (i.e., pays a fee to the state) and is subject to inspections from the state of Vermont? One says, I only want to earn a few bucks — the other says, this is my profession and this is how I am earning a living. But the new Vermont business model says…for all you people just wanting to make ends meet or earn a little extra, you don’t have to be licensed or or pay us taxes from your business? Hmmm, I don’t think this is what the “new business model” should look like – nor do I think the state would agree either.
I’m not saying there should be NO Airbnb’s — re-read my article, it says, equal treatment. You rent a room, then get a license and pay your fair share to the state. I’m also not talking about what renters can afford. Of course, there are people who may only be able to afford a few bucks a night, fine. But the establishment should be subject to paying the state their fair share.
Fairness is the issue, not whether or not there should be Airbnb’s.
P.S. For all those Kathy’s making a comment, please put your last name or indicate you’re not me! It might be a little confusing to readers (Telegraph, take note, please require last names). thanks.
In 2000, I was left with the family camp built in 1934 by my grandparents.
As a working Vermonter, my wages do not come anywhere close to being able to afford to keep the family camp. My only option was to rent it out to be able to keep it.
Every dime goes to pay the bills or the maintenance. In addition, I clean it myself because I can’t afford to pay someone a living wage to clean it for me. Local businesses are hired to do the maintenance for me.
I buy the firewood from Paul Brooks or Rudi Michael down the road, Clement Irrigation from Perkinsville mows the lawns, Mike Estes from Perkinsville helps with repairs. I pay 9 percent rooms and meals taxes to Vermont on the rental income I bring in. Don’t hurt this Vermonter for trying to keep the family camp.
Born in Montpelier, raised in Plymouth, schooled in Woodstock and UVM, lives in Baltimore, works for Rutland Mental Health Services in Rutland.
Please note: The comment from “Kathy” to the article I wrote on the issue of Airbnb’s vs. licensed inns … as published 10/24 is not another Kathy, not the author of the opinion article. Perhaps last names should be used, especially when the name of individual who writes a comment is the same as the author of the article. There shouldn’t be any confusion as to who is writing what. Thanks Telegraph for giving space to this important issue.
Kathy Pellett
First of all I want to say I like Kathy Pellett and appreciate her service. I have different feelings on this topic I know we agree on others. I support this new business model in its intended form a room in a home.
In response to her questions. On commercial and non commercial properties. Loopholes are Loopholes. Sometimes loopholes create unique opportunities to put money in people’s pockets. The AirB&B concept is a room to rent in a home it’s not an Inn or Hotel. One or two rooms. A bed and a common bath in most cases that’s it.
I’d say yes AirB&B people expect less as do people who go to a camp ground you get what you pay for. Some people are happy with less other are not it’s not for us to decide,
I am kind of offended by the question if people can’t afford an Inn are they spending money. Some of my carvers and guests who come to my Festival are in that boat. Yet, they are buying burgers and dogs from the Snowmobile Club helping them raise money plus providing entertainment for people who can afford to stay at the Inns not to mention supplies. Not everyone can afford an Inn. Please consider retracting that statement it sounds elitist and rude.
AirB&B’s don’t undercut Inn’s it’s a different concept. An Inn can take cash and not claim it just as likely as any other business that involves cash. I believe AirB&Bs rooms are sold on line so it’s less likely. They are not selling drinks or meals it’s a room so there is no other taxes to collect. A guest may eat in our town or shop here if the stay here that adds to the economy. More people are better for our economy.
I’m not sure about insurance I’m guessing if you are having guests you want to have extra insurance. That is on the owner. If they get more insurance that will benifit agents.
Homes have septic systems for the amount of rooms they have therefore they should not be exceeding its use. I’m not sure it’s anyone’s business how much well water a home owner uses. My guess is rooms are available because kids are gone. I don’t feel an extra car in a driveway is a big deal either. I really believe more money in the hands of the people is always good. When people spend we have an economy. When we over regulate and create hurdles we make that harder. Having a number of rooms, serving food and drinks is different than having a room in your home with a bed it’s not the same type of Duck. It looks like a Duck and quacks but it’s a different Duck.
Maybe rules need to come in number of rooms over two rooms for rent would becomes an Inn. There is a difference in a kid mowing a lawn and a lawn care company. The lawn care guys can’t get all crazy over a kid with a mower. This is the same type of deal. It’s a few rooms and some extra money. Maybe one of these people will create an Inn after the experience.
Kathy hits the nail on the head. Airbnb has falsely sold itself as a way for Granny to “age in place,” the air mattress on the floor concept.
They also claim that their business model keeps the money in the local economy, as opposed to the big chain hotels where the money goes to out-of-state shareholders.
The problem is, that’s not the reality. By Airbnbs own statistics, 75 percent of rentals in Vermont are whole houses — second homes to be precise — where the money is deposited in out-of-state bank accounts and doesn’t get re-circulated in the local economy.
Additionally, the state is not getting the required Meals and Rooms Tax revenue. I have had 2 separate Airbnb owners admit to me that their guests only use Airbnb the first time they rent. When you rent on Airbnb, you get the owner’s e-mail address and cellphone number.
The second time, the rental is done directly with the owner with no sales tax revenue going to the state. Another boasted that he pays the mortgage on his ski house with his Airbnb rentals.
Let’s not forget that the owners of the inns and B&B’s in the area are trying to make a living, not afford a ski house for sporadic use.
This area has lost almost 40% of its inns and B&B’s the last few years. That’s not just a local business owner losing everything, it’s also a lot of lost employment opportunities for local residents who are then forced to either leave the area or seek government assistance.
I agree that Vermont has a bad reputation when it comes to supporting business development. But, this is just another example of that bad reputation.
Are Airbnb owners legitimate businesses? If they are, then they must adhere to all the rules and regulations required of all the other lodging establishments in Vermont. Stop being hypnotized by the internet’s ability to make the difficult seem easy. This is not a new business model. It’s the same old package with different wrapping made to look brand new.
Are commercial properties in Vermont taxed at a higher rate than residential properties? If so, do short stay inns and hotels fall under a commercial tax rate? If they do, why should a person running an Airbnb be taxed at either the homestead or non-resident rate when they are utilizing their property as a commercial enterprise?
Are Airbnb guests no less deserving the safety precautions and standards to which regulated lodgings must adhere?
Also, if the people you mention who can’t afford to stay at an inn or hotel, how likely are they to be spending money in town? What happens to the inns in town when unregulated Airbnbs start popping up throughout town, undercutting their prices?
How many Airbnb owners make under-the-table rental deals with established guests, circumventing hospitality taxes?
What about liability and homeowners insurance? How many homeowners insurance companies allow for short term rentals? What happens when a guest falls?
What about septic and wells for those Airbnbs not on town water or sewers?
Noise, traffic, parking on roads?
Regulate, license and tax Airbnbs accordingly.
Kathy makes good a good argument but, at issue is that an AirB&B is a different level of stay.
An inn or B&B has rooms set up in a special way for guests and offers services or an experience that is something more than a bed. I saw the story of the AirB&B the first bed was an air mattress blown up in a spare room.
I would like to suggest the possibility of greater income in the pockets of those with less fancy digs and more guests visiting who may not be able to afford an inn. I believe a true AirB&B guest is signed up on line through their national site therefore the sales tax can be collected at that time.
Regulation will kill the concept taking money out of a new business model. Regulation on land use and business are at the core of lost revenues in Vermont. Not a few people staying in an AirB&B or riding with Uber.
Businesses leave Vermont because it’s not a business friendly state. Also people don’t want to move here to retire because too much tax is taken out of their checks.
New Hampshire is rated way higher than Vermont as a place to live. New York is recruiting business by offering incentives and doing TV ads. We need more business to create more revenue, not to regulate people out of business.
I did meet someone who moved here to improve her life. She has three kids and moved from New Jersey because the benefits are better here! Let’s say that date ended quickly. That’s the problem we have here. We reward the wrong people and look at those wanting to make money as greedy or bad. A rising tide raises all boats. The Bernie ideas need go: it’s not sustainable thinking.