How to regulate rooms for rent in Massachusetts?

Airbnb hearing on proposed taxes draws strong interest

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LENOX — Airbnb, VRBO, HomeAway and other online brokers used by homeowners seeking short-term renters as part of the "sharing economy" offer a lifeline for income-challenged residents, especially seniors, trying to meet expenses.

Or, as the hospitality industry and business leaders contend, these internet services have created unfair competition and homeowners in the mom-and-pop rental business should be taxed and regulated like bed-and-breakfasts and hotels in order to ensure guest safety.

Forty-six speakers argued those points forcefully during a three-hour public hearing at Town Hall on Monday organized by the state Legislature's Joint Committee on Financial Services. More than 100 people attended the event, including state Sen. Adam Hinds, D-Pittsfield, and state Reps. William "Smitty" Pignatelli, D-Lenox, Tricia Farley-Bouvier, D-Pittsfield, and Paul Mark, D-Peru.

"This is a booming industry," said the joint committee's co-chairman, state Rep. Aaron Michlewitz, D-Boston. "The short-term rental industry, using an online portal, has exploded in the past couple of years. There's a need to create a framework in terms of regulation and taxation going forward."

State lawmakers are considering potential laws that would impose lodging taxes, health and safety regulations on homeowners renting their properties to short-term visitors.

The state Senate has approved a plan to apply the 5.7 percent state hotel tax and local levies of up to 6 percent on all private residences rented for short stays.

The state House is considering legislation that would set up three tiers of hotel-style taxes that could total up to 18 percent for the most active short-term rental properties.

The bill, if approved in a Senate-House conference and signed by Gov. Charlie Baker, would affect homeowners who rent via Airbnb and other brokers to short-term guests up to 60 days per calendar year, with higher tax rates for properties rented out for more than 60 days a year. Any rentals under 30 consecutive days through an online service also would be subject to taxes and regulations.

Baker's proposal would impose lodging taxes only on homeowners who rent out space for 150 days or more during a calendar year, which could cause some inn owners to convert their properties to private homes and to use online services up to 149 days a year.

"We appreciate that what's good for Boston isn't necessarily good for the Berkshires, and vice versa," Michlewitz said. "We're trying to get an understanding of how this industry is taking shape in your area."

Michlewitz pointed out that the laws being considered in Boston would tax the online portals such as Airbnb and its competitors, not the homeowners.

Lauri Klefos, executive vice president of the 1Berkshires strategic alliance, voiced support for the short-term rental phenomenon, suggesting "it will bring more people to the Berkshires over time, especially younger visitors and families."

"We don't want to speak against residents and their ability to raise some extra income to enable them to stay in their homes," she added. "Airbnb didn't invent home-sharing; it just commercialized it."

Local communities and the state could use increased revenue "that our guests are used to paying at commercial properties," Klefos said. "Some home-sharing properties have become businesses and we believe they should be treated as such."

"There have been marked changes in the marketplace in the past couple of years," said Bruce Singer, owner of the 10-room Devonfield Inn in Lee. He also owns a guest cottage on his property that uses Airbnb, where the rate has decreased by 60 percent to compete with the online service's rates.

"There needs to be some equal footing here," he stressed, noting that his inn, with 39 to 43 percent occupancy year-round, pays $40,000 a year in room occupancy tax and $18,000 a year in property tax, plus kitchen, pool and other inspection fees. "My neighbors on either side rent their homes under five rooms [and] don't have to pay any taxes or have any inspections. Their rates are lower; the local economy loses out and the competition has had an effect on us."

Airbnb regional policy director Will Burns stressed that the company "wants to pay taxes" and is working with state lawmakers "to allow us to collect and remit the same amount of taxes that the hotels pay in transient occupant tax. That would allow municipalities to get revenue from us as well if they already have a local hotel tax."

He also expressed support for state or local regulations as "absolutely essential" for short-term rental properties. But he emphasized a distinction between "the casual person who shares their home versus someone engaged in a more commercial activity. It's difficult to find where that line is, but we're eager to work with Beacon Hill to find that line."

Airbnb collects a service fee of 3 percent from homeowners using their site to rent rooms. Guests pay a fee to Airbnb ranging from 6 to 12 percent.

"We don't want to see this industry go away," said Kameron Spaulding, director of the Lenox Chamber of Commerce. "But we also need to have it on a fair and even playing field." He noted that the majority of his lodging industry members make 60 to 70 percent of their revenue on eight summer weekends.

Farley-Bouvier, the Pittsfield-based state representative, urged that homeowners be taxed on their rentals from Day One and applauded Spaulding's recommendation that some of the revenue should be returned to regional tourism councils.

"There's a disturbing trend in South County, where housing is very tight, that people are actually buying homes for the sole purpose of renting them out on Airbnb, and it's having an impact on the affordable housing stock," said Bill Cook, chairman of the Great Barrington Municipal Affordable Housing Trust and an Airbnb host. "If someone's doing that as a commercial venture, that's a lot different from renting out a room or two in your house."

But Rene Wood, of Sheffield, had a different view.

"These rentals are a source of much-needed, stable, countable income," she said. "That cannot be dismissed. Whatever the regulations are, they should be reasonable, simple and transparent. These Airbnb locations should not be regulated like a four-star hotel that's charging $1,500 a night. That's unreasonable; one size doesn't fit all."

As Carol Brunnschweiler, who rents a Lenox property, explained: "This is where I want to stay and raise my child, this is where I grew up, and it's becoming impossible for the younger generation to be able to do that because there are no jobs here for them."

"I have no problems following the tax laws you come up with," she told the lawmakers. "I'm just asking that you don't make it impossible for us small homeowners. We don't all go and stay out on Nantucket. I'm still working here, multiple jobs, while I rent out my house."

Great Barrington homeowner Stephen Filmus said he could not afford to stay in the Berkshires without renting rooms.

"We all want to be fair," he said, "but we don't want to not be able to function and make a living."

Reach correspondent Clarence Fanto at cfanto@yahoo.com or 413-637-2551.


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