Short-term rentals tax

Can a County tax help fund affordable housing initiatives?

February 14, 2019

The issue of short-term rentals, including Airbnb, is important to residents. Many people are struggling to find affordable housing and worry that short-term rentals are contributing to an increasingly cost-prohibitive market. While not definitive, there is evidence that STRs reduce long-term housing and/or rental supply. While I share those concerns, I would also like to acknowledge that owners of short-term rental properties have invested time, money, and energy into our community.

Creating a county lodging tax is not inherently in favor of or against short-term rentals—the tax is unlikely to impact the growth of the market. In addition, since zoning happens at the city, town, and village level, Columbia County is unlikely to create regulations regarding where and under what conditions a short-term rental can exist. It is possible that the County could provide municipalities with compliance support—to help municipalities enforce whatever regulations they create.

NY State Law

New York State law allows for counties to levy a lodging tax. Unlike sales tax, the state does not take a cut and 100% of the revenue stays local.

Dutchess Legislation

Dutchess County charges a 4% lodging tax.

Hudson Legislation

The City of Hudson charges a 4% lodging tax.

Since the City of Hudson already charges a 4% lodging tax, there are some decisions about how to incorporate a potential Columbia County lodging tax. Options include:

  • County tax is not applied to short-term rentals in the City of Hudson
  • County tax is in addition to the tax levied by Hudson

Massachusetts

Massachusetts has a 5.7% tax on short-term rentals. Individual cities and towns may also impose a tax of up to 6%. Additionally, towns and cities are allowed to impose a “community impact fee” of up to 3% to help fund affordable housing and local building projects.

Enforcement and Compliance

Airbnb works with counties and can collect tax directly through the rental service. There are several NY counties that do this, including Dutchess County.

In addition, there are also services that provide additional compliance data for a fee.

Definitions

There are different types of short-term rentals and they can be taxed and regulated in different ways:

  • Owner Occupied
  • Non-owner Occupied
  • Multifamily/commercial buildings

In addition, there are legal definitions for a traditional Bed and Breakfast. Bed and Breakfasts, as well as traditional hotels, typically pay sales tax while many other short-term rentals do not. A lodging tax focused on short-term rentals that do not pay sales tax could help level the costs of doing business amongst the different services.

Revenue

If the tax is enacted, revenue should be used to improve the lives of our residents. I would like to see revenue fund more affordable housing. The growth of tourism and the increase of short-term rentals have contributed to increasing housing costs. Supporting affordable housing is key to ensuring that all of our residents can benefit from our economic growth.

Local Research

Hudson and 12534

As of September 2018, Hudson Lodging Tax registrations include:

  • Total Number of Owners: 122
  • Total Number of Licenses: 134
    • Inn: 4
    • Private Residence, Non-Owner-occupied: 39
    • Private Residence, Owner-occupied: 69
    • B&B: 18
    • Hotel/Motel: 4
  • Total Number of Rooms: 478

As of November 2017, Affordable Housing Hudson’s research on Airbnb listings in 12534 found:

  • Hudson appears to be very attractive to multi-listing hosts (people who have multiple listings), and the growth continues.
  • The top 10 listings in 12534 make 40 - 90K per year
  • The annual growth rate is substantial at 53%
  • There are 254 active rentals; 77% are entire home rentals
  • 51% of the hosts are multi-listing hosts; there are 164 active hosts in the market.
  • Entire home revenue is growing at 8% monthly, while private room rentals are going down 15% monthly

Hudson’s 4% tax is on target to bring in $240,000 in 2018.

Columbia County

An October 2018 audit of Columbia County short-term rentals found:

  • 921 listings, 1,275 rooms in 834 unique rental units
  • Medium rental for $199 per night
  • 87% rentals are for an entire home

A review of Airbnb in the County found significant growth for the Summer of 2018:

  • 14,000 guest arrivals
    Up from 11,900 the previous summer
  • 360 hosts
    Up from 290 hosts the previous summer
  • 2.5 million in revenue
    Up from 2.1 million last summer

The County estimates a 4% tax would generate $636,000, $397,000 if Hudson is excluded. As short-term rentals increase, the revenue would increase.

What do you think about a County lodging tax? Let me know.