Bill would tax holiday rentals to fund inexpensive housing

A proposed monthly bill in the Washington Condition Senate would give metropolitan areas a instrument to fund very affordable housing building by taxing holiday rentals listed on web pages such as Airbnb and VRBO.

Launched by Sen. Liz Lovelett, an Anacortes Democrat, SB 5012 would permit municipalities to levy an more tax of up to 10 percent on “internet-based” limited-phrase rental bookings. The tax would be paid out by people at the time of order.

The income need to be utilised to fund money and operating fees of reasonably priced housing packages.

A fiscal take note connected to the bill assignments that if every single municipality imposed the tax at the optimum level, it could make $31.4 million, or about 1-third of what the point out spent in 2019 on the Housing Trust Fund, the main funding system for setting up cost-effective housing. (Gov. Jay Inslee has proposed to maximize shelling out for inexpensive housing to $220 million in his 2021 budget.)

The invoice would not develop the tax, just permit nearby governments to do so if they choose.

Lovelett, who was appointed to the condition senate and subsequently won election in 2019, was beforehand a member of the Anacortes City Council. She recalls that the city desired to develop a similar tax on trip rentals, but lacked the authority to do so. (Cities and counties in Washington do not have “inherent taxing authority” except the condition legislature offers it to them.)

At a hearing for the bill on Wednesday, Lovelett argued that in locations where by seasonal tourism brings an influx of demand for holiday vacation rentals — this sort of as Anacortes and the San Juan Islands — landlords are ever more changing apartments to limited-expression getaway rentals, taking housing absent from inhabitants in an now restricted marketplace.

“While performing on the affordable housing strategic strategy for our jurisdiction, we understood that a single of the factors that was seriously exacerbating our rental shortages was the truth that we now experienced a full host of world-wide-web-centered rentals that used to be out there on the sector,” Lovelett explained.

Skagit and Whatcom counties both equally have a emptiness amount of 50 percent of 1 p.c, the cheapest in the state, according to data from the University of Washington’s Heart for Genuine Estate Investigation.

Lovelett explained the tax as intending to balance out the effects of tourism on localities, comparable to how an impact charge accounts for the more prices that growth incurs on cities.

“I look at this as currently being a straightforward choice for area governments to be equipped to start out bringing in money at the nearby degree,” Lovelett claimed. “Much like the lodging tax that is gathered in order to market tourism, this is likely to be collected to offset the problems that it provides to the rental marketplaces in any nearby jurisdiction.”

Because it is an decide-in tax, local governments can choose how higher to established it, she additional.

Many taxes by now implement to the two motels and brief-expression rentals, even though it was only in 2019 that the condition legislature passed HB 1798, which clarified that small-term rental operators must pay them far too. Previously, individual towns like Seattle, Bellingham, and Spokane experienced passed their very own shorter-term rental legislation, although the Division of Income (DOR) may well have been accumulating taxes as early as 2015, in accordance to the DOR web site.

In addition to the state’s 6.5% sales tax and any area revenue taxes, municipalities have the alternative to levy an additional 2% tax on lodging, known as the “hotel/motel tax.” and most opt for to.

That income, nonetheless, need to be put in on govt pursuits similar to tourism.

Like resorts, shorter-phrase rental operators also have to pay out business and profession taxes, unless of course they are little more than enough to be exempt. In accordance to the DOR’s web site, residence house owners who owe a lot less than $841 in B&O taxes for each year can use the little company tax credit score.

HB 1798 also necessary quick-phrase rental operators to acquire a small business license from the Section of Revenue (DOR) and invest in legal responsibility insurance policies.

The bill was backed by the Washington Hospitality Association and the sponsor, Rep. Cindy Ryu, a Democrat from Shoreline, claimed at the time that the monthly bill was meant to “even the playing field” involving Airbnb operators and resorts.

At the listening to on Wednesday, operators of short-phrase rentals argued that the new tax, if enacted by towns, would tip the scales in favor of resorts.

Don Mackenzie rents the basement of his Seattle residence element-time and his spouse and children owns a second cabin in Chelan County that they run as a small-phrase rental. He mentioned the tax singles out “small-scale entrepreneurs” like himself, placing him at a disadvantage in contrast to huge corporate resort chains.

In Seattle, a exclusive convention middle tax pushes the complete fee up to 15.7% for each limited-time period rentals and accommodations.

Other home homeowners testified that even if their holiday vacation households have been on the very long-time period current market, they wouldn’t be reasonably priced.

But housing advocates from throughout the condition praised the monthly bill, which they stated would give municipalities additional selections to fund the development of considerably-necessary affordable housing. They had been joined by community officials and people of the San Juan Islands, who placed part of the blame for the region’s housing scarcity on the holiday rental industry.

Jamie Stephens, chair of the San Juan County Council, explained the limited-term rental field as “contributing to the problem” by having units off the marketplace. Just times just before, Stephens voted, together with his two fellow council customers, to enact a six-thirty day period moratorium on issuing permits for getaway rentals. He extra that creating a funding mechanism for inexpensive housing is thetop precedence in the county’s housing prepare.

“I assist this tax simply because the exercise that is fueling the problem is now providing methods to assistance mitigate the difficulty,” mentioned Lisa Byers, the executive director of the Opal Group Land Have faith in in San Juan County and a member of a area group that advocated for the moratorium.

Study on the “Airbnb effect” tends to concentrate on big towns these kinds of as Los Angeles, New York, and Boston, exactly where facts does display that an increase in Airbnb listings pushes rental selling prices up and removes units from the lengthy-expression rental marketplace, lowering offer.

Even so, there’s substantially less kno
wledge on scaled-down communities this sort of as Anacortes and the San Juan Islands. And in cities with negligible tourism industries, it’s not obvious how important of an effect shorter-time period rentals have on housing charges or offer.

A 2017 study from scientists at the College of California-Los Angeles and the University of Southern California collected data from Airbnb, Zillow, and the U.S. Census Bureau in between 2012-2016.

Employing zip codes from across the region, the analyze found that a 10% maximize in Airbnb listings brought on rental price ranges to enhance by .4% and dwelling sale costs to boost by .7%.