Short-term rentals a complex issue

LENOX — Fair fight. Level playing field.

Those catchphrases were heard repeatedly this past week when state lawmakers chose Berkshire County for a public hearing on the likelihood that the state and local communities will tax homeowners who rent space to short-term guests via Airbnb, VRBO, HomeAway, FlipKey and other online brokers.

As usual, what’s fair is in the eye of the beholder when it comes to a proposed lodging tax and safety regulations affecting the burgeoning internet short-term rental market. A “one-size-fits-all” approach may not do justice to some elderly or income-challenged property owners seeking a slice of the lucrative tourism pie to help cover their property taxes, maintenance and other expenses.

At least 100 people packed the Town Hall auditorium in Lenox last Monday when the state Legislature’s Joint Committee on Financial Services, joined by four Berkshire lawmakers, solicited testimony from the audience — 46 spoke, often passionately.

State Rep. Aaron Michlewitz of Boston, co-chairman of the committee and his colleagues listened patiently, asked relevant questions, and made it clear that the voice of the people would be considered as legislation makes its way to Gov. Charlie Baker’s desk.

It’s a very complicated issue. What’s a short-term stay and who defines it — the state or the local community? The proposed law would impose a 5.7 percent state tax and as much as 6 percent in local lodging levies on any rentals of less than 30 consecutive days through an online service. Health and safety regulations would be applied as well.

Properties would be taxed at one rate if they are rented out for up to 60 days total during a calendar year; if you rent out your home for more than 60 days, the tax rate could be higher.

Gov. Baker favors a very different approach — you could be in the rental business for up to 150 days and be spared any tax or regulations.

Tom Johnson, co-owner of the Birchwood Inn in Lenox, pointed out that under that approach, he could convert the 11-room B&B to a private residence, rent out the rooms during the busy summer and fall tourist season, avoid health and safety inspections and spare himself commercial property and lodging taxes. Several other innkeepers have made similar points.

How would a tax be collected? Airbnb regional policy director Will Burns said the company is prepared to collect lodging taxes from its hosts and send them on to the state. Presumably, the homeowner-hosts would pass on the extra charges to their guests.

It should be noted that residents who rent rooms or houses for a month or two continuously to one guest, such as a Boston Symphony staffer or a summer theater employee, would not be subject to lodging taxes and safety inspections.

Furthermore, in Lenox, for example, the zoning bylaws allow short-term rentals between Memorial Day and Labor Day, followed by weekend-only rentals through Columbus Day.

Which begs the question: Would a state law override local zoning rules?

There’s a middle ground, as Gwen Miller, the Lenox Land Use Director and Town Planner, suggested when she told the lawmakers that “Airbnb and the sharing economy in general is good for the Berkshires and for our residents, but it should be fairly and reasonably regulated as are our other businesses in the hospitality and tourism sector.”

Local officials in Lenox and Great Barrington have stated that investors are snapping up modest and middle-level homes for use as short-term rental facilities, operating them as lodging businesses, depleting the short supply of affordable homes and depriving the towns of commercial property taxes and lodging revenues.

Another worrisome trend is the erosion of the bed-and-breakfast business model. Phil Halpern, former owner of Lenox’s Brook Farm Inn, told the hearing that “at least a dozen inns in this community have closed, converted to private homes or just gone out of business.”

“Airbnb is not going away; they are a giant company,” said Halpern, who tried to get local officials to confront the problem four years ago, to no avail. “But I’m not afraid of the competition, what I’m afraid of is that you’re not playing with a level playing field.”

In his view, “all short-term rental properties should be licensed and inspected for fire risk, carbon monoxide detectors and general building safety, and subject to the excise tax. This is not an appropriate forum for the financial needs of individuals or an appropriate forum for tax reform.”

On the other hand, speaking for locals doing the “Berkshire Shuffle” (working multiple jobs to cope with low wages and higher living costs), Ellen Broderick, of Pittsfield, argued that “there’s a lot of economic breakdown in this county, and if we make things more difficult for the people at the bottom, that’s a mistake.”

Airbnb host Teva Smith, a Stockbridge property owner, explained that “these guests are often big families and they want to stay in a house. It’s been a win-win for myself and the guests. Our concern would be if the costs increase for us, we wouldn’t be able to continue to do it, because there’s not a lot of money left over.”

Eileen Lawlor, of Monterey, a clinical social worker, said because she lost clients after an injury, Airbnb rentals have allowed her to keep her home.

“My house was my investment in the future, I think we add a great deal to the area, it’s person-to-person,” she said. “I don’t think we’re competing with hotels. My investment is growing because people have enjoyed my house.”

The hearing attracted speakers who traveled 50 miles from the Pioneer Valley to make their points. Some stressed the so-called sharing economy that attracts a unique clientele.

“We have a different market of people than traditional B&Bs,” according to Valerie Haggerty, of Southampton. “I get people who like that it’s my home, that I’m there. Each guest leaves a review on our Airbnb website. It’s more of a relationship, I feel like the playing field is fairly level. It’s been great for me, a single mom with two kids in college.”

“Airbnb helps us cover some of our bills,” said empty-nester Michael Lehan, of Northampton, who rents out several rooms and said “we really fill a need; people come to town, they spend money, go out shopping and to restaurants.”

But innkeeper Joan Stoia of the Centennial House B&B in Northfield said she “strongly objects to companies like Airbnb that exist in the ether, making no on-the-ground investments in brick and mortar and infrastructure, to essentially cannibalize an established, important, productive sector within the state travel and tourism industry.”

She asserted that “this is an industry based on trust, so safety is of paramount importance when operating a short-term lodging establishment. If your goal is to raise taxes, then treat commercial activity as commercial activity for everyone. Airbnb is the economic equivalent of a shiny object. It will be disruptive in the long haul, and especially harmful to the safety and stability of the tourism industry we have all worked so hard to successfully build in Massachusetts.”

My takeaway from all this: Yes, the state and local towns should collect lodging taxes from Airbnb and its competitors. But communities in the Berkshires and Cape Cod have much briefer high seasons than other areas like the Boston metro region. Local government decisions covering health and safety regulations for the short-term rental business, based in part on state guidance, would help achieve reasonable fairness and a field that’s level for all players.

 

This article originally appeared in The Berkshire Eagle

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