2018-04-19 / Front Page

Online Rentals, Airbnb Concern for City, State

By Andy Long

The growth of short-term rentals, defined as lodging rented for less than 30 days and often marketed on such websites as Airbnb, is drawing scrutiny from both the city of Newport and the state of Rhode Island.

Newport has hired a San Francisco company, Host Compliance LLC, to identify such properties, determine whether they are complying with city and state regulations and if they have established hotel tax accounts. (See “Tourism Revenue Takes Hit,” NTW, Aug. 3, 2017).

The council recently extended the company’s contract for three years, at a cost of $30,831 annually. “I would like to point out the successes we’ve had with Host Compliance,” Councilor Jamie Bova said. “They were able to identify 637 rentals and determine the addresses of 337 of them, and 237 were identified as non-compliant. The city has been working to bring the non-compliant units into compliance.”

It was the sheer number of offerings that City Manager Joseph J. Nicholson Jr. pointed to at the June 28, 2017 meeting, when the council approved the Host Compliance contract last year. “It appears to be a well-organized software tool that’s going to enhance our ability to monitor these properties, as opposed to going through all these websites, half of which I’ve never heard of, to help us identify who is renting illegally and not paying their taxes,” he said.

The Host Compliance program also determines if a rental property advertised as being a Newport property is actually in the city, which many times is not the case.

City Councilor Kate Leonard, who is concerned about short-term rental units being used as party houses, asked Nicholson at the June 2017 meeting, “Is the goal to stop the business use in a residential area? … I think it’s really important that it’s not about revenues… but to identify those properties that are doing something they’re not allowed or licensed to do.”

Nicholson replied that it was an “enforcement tool,” and “a way to ensure compliance with city and state regulations.”

At a Feb. 27 forum held by the Alliance for a Livable Newport, Nicholson said letters were sent to all city property owners who were identified as marketing short-term rental units. “We were inundated with phone calls. Some were operating legally. Many were operating outside the scope of the law,” he said.

In some cases, the letters informed owners that lessees were renting their property without their knowledge.

Rental owners who wish to continue marketing their property could face expensive upgrades. Also, those who are considering renting a guest house or a spare bedroom on a hosting platform are learning the legal requirements.

In a recent e-mail to Newport This Week, Newport Zoning Officer, Guy Weston, wrote, “I think from a public information outreach and from an enforcement angle, the process is working quite well. I have found that information has spread beyond those that have received notices, alerting owners who are interested in renting a dwelling [on] a daily or weekly basis, that the city has a registration process that must be followed.”

Other concerns about short-term rentals go beyond regulatory reform; they include concerns about how they affect Newport neighborhoods on a daily basis.

In an email to NTW, State Senator Dawn Euer said that a proliferation of such units would raise property taxes for those on fixed incomes, cause landlords to evict year-round tenants to create more lucrative vacation rentals and make strangers of old neighbors as residents are priced out of town.

“I think that ensuring that all vacation rentals are regulated the same way is an issue of fairness,” she said. “We have many local bed-and-breakfasts that are dutifully paying their taxes and following public safety regulations. Those laws and regulations are in place for a reason, to protect the public and to compensate for city services.”

Euer said that there is a need for new state legislation to help local governments oversee the short-term rental market.

Her Newport counterpart in the state house, Rep. Lauren Carson, is also concerned with the impact of short-term rentals but is focused primarily on tax and revenue issues, as she chairs the House Commission to Study Methods to Grow Tourism. Carson worries, she said in a phone call with NTW, about the lack of transparency in the collection of taxes on short-term rentals and in the reporting of that data to both the state and municipalities.

She said further, “Tax collection agencies need to know who is submitting… the lack of clarity and transparency violates democratic norms.”

As it now stands, a third-party hosting platform, another term for companies that advertise these rentals on websites, collects the hotel, sales, and local room taxes owed when a unit is rented. They in turn make bulk payments to the state and cities without indicating from whom the funds come and how much individual owners are paying.

“The policy has not caught up with the technology,” Carson said, pointing out that it would not be at all difficult for these companies to report such information.

Mayor Harry Winthrop summed up the city’s approach to the short-term rental issue at the February meeting of the Alliance for a Livable Newport, saying, “The bottom line is, if you’re operating illegally, we’re going to do something about it.”

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