WASHINGTON – May 17, 2016 – A panel of three experts in the hospitality industry sparred over how to protect property rights while leveling the field between hotels and short-term rentals.
The discussion took place during the Realtors® Legislative Meetings & Trade Expo in Washington, D.C. last Friday. One participant – Matt Kiessling, who leads short-term rental policy for the Travel Technology Association that represents technology companies such as Expedia and Sabre Corp. – said his organization doesn’t oppose taxing short-term rentals, but he fears too much regulation could end up curtailing property rights.
“What you shouldn’t do is ban people from doing what they want to do with their property, especially when they aren’t changing the use of that property,” Kiessling said.
But Craig Kalkut, vice president for government affairs at the American Hotel & Lodging Association, disagreed. He said that taxation wouldn’t hamper owners’ rights and noted that the high rate of taxation of hotels makes for unfair competition.
“Our members all agree that there should be a legal and level playing field across the lodging industry,” he said. “There is a difference between what could legitimately be called home sharing and what is more commercial.”
One of the central questions around the debate: The different way websites that facilitate short-term rentals operate. Kiessling said that Airbnb manages the entire experience, from search to booking and payment, but other sites merely exist so homeowners can advertise their rentals.
The advertising-only websites “often don’t know if a property has even been booked, so the idea that they would be able to collect and remit taxes … is nearly impossible,” he said, suggesting that it should be up to the individual owners to pay taxes directly in some cases.
Kalkut doubted that local communities could get homeowners to voluntarily pay extra taxes on their own.
“If you leave it up to the individual homeowner, I don’t think much will be collected,” he said. He acknowledged that the process “might vary platform to platform,” but Airbnb is already collecting taxes from owners in certain cities where ordinances require it. “They’re a tech company, so they should be able to figure out how to collect and remit taxes.”
Brian Blaesser, who heads up the real estate development practice at Boston-based law firm Robinson & Cole, agreed with Kiessling that requiring homeowners to pay taxes would be a tidy solution to the problem. But he cautioned against the spread of a practice he’s observed where local authorities reclassify residential properties in the tax code.
“It’s one thing to pay taxes,” Blaesser said. “It’s another when the local community itself is saying, ‘We’re going to reassess your property as commercial.’ … If it’s going to be a trend, that’s a dangerous trend.”
But Kalkut said that many people who use short-term rental sites own a spate of properties – and they aren’t owner-occupants of any of them. He suggested that it might be time to rethink the strict commercial vs. residential paradigm in the face of a new hospitality environment.
“Would you say a bed and breakfast is residential use?” he asked. “The realities are changing, and a lot of this is new.”
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