Proposed 'Airbnb bill' could generate up to $1 million in hotel tax revenues, analysis shows

A proposed bill that would impose Baltimore’s 9.5 percent hotel tax on short-term rentals could generate as much as $1 million annually for the city, according to a new fiscal analysis.

The Baltimore City Council’s Taxation, Finance and Economic Development Committee will hold a hearing Thursday on the bill, which — in addition to applying the hotel tax to Airbnb-style sites — would limit people’s ability to rent out their properties.

The city’s Bureau of the Budget and Management Research wrote in a Tuesday letter to the council that the bill would have a “direct, positive impact” on Baltimore’s finances. But the analysts recommended the council amend the bill and eliminate two of its more controversial aspects.

The bureau wrote that the city would draw in much more tax revenue if the council removed proposed limitations on the number of rental properties a host could have and eliminated a provision that would only allow people to rent a space for 60 days a year if it’s not their permanent residence.

Getting rid of those two restrictions could generate between $1.6 million and $2.2 million in additional hotel tax revenues, according to the city’s analysis. A Baltimore coalition of Airbnb hosts has also been advocating for these changes, arguing that a 60-day cap and property limits threaten to put them out of business.

Councilman Eric Costello, the bill’s lead sponsor, said he is “flexible on the cap on days” and open to hearing other people’s and agencies’ perspectives on further amendments.

“There needs to be the right balance to ensure we’re not making neighborhoods overly transient,” he said.

Airbnb has been rapidly expanding across the Baltimore region. There were roughly 1,260 active hosts and 2,105 active rental units in the city as of April 2018. The finance department’s analysis only took into account 1,478 active units, because the proposed legislation would restrict the number of properties allowed per host to two.

These short-term rentals would generate between $587,000 and $1 million in hotel tax revenues annually, should the legislation remain as written. At least 40 percent of the proceeds would go to Visit Baltimore, the city’s tourism arm.

Airbnb and other hosting platforms have morphed into a thriving industry, allowing people to rent out their spare rooms — or even entire properties — on a short-term basis. Some people now own homes for the sole purpose of renting them out via these websites. But their popularity has presented problems for hotels and bed-and-breakfasts, which argue that hosts get an unfair advantage by sidestepping regulations.

The city’s proposed legislation would also introduce licensing requirements for short-term rentals. City officials could revoke a license if the host fails to comply with city building, fire, health and zoning rules. Costello said it’s vital the city creates a “swift and decisive mechanism” to yank a problematic property’s license.

A host would pay a $100 fee for each license, and would be limited to securing a license for two properties, including the host’s permanent residence. The Finance Department anticipates that licensing revenues would go toward offsetting the program’s administrative costs.

Airbnb spokeswoman Crystal Davis has agreed that online rentals should be regulated but described the city’s proposal as being beneficial for established hotels. An Airbnb representative plans to attend Thursday’s hearing.

Rachel Indek, of the Baltimore Hosts Coalition, said she and many other hosts don’t have a problem with the new licensing requirements or the imposition of the hotel tax. It’s the limit on nights and properties, she said, that would truly turn her industry upside down.

“We’re businesses,” she said. “I can’t sit vacant 305 days a year. No one tells Starbucks they can only operate 60 days a year. Treat us like businesses, license us like businesses, but let us operate freely.”

The coalition expects about 100 of its members to turn up at Thursday’s hearing. Indek, who owns five properties in the city and manages a handful of others, said she was heartened by the finance department’s amendment recommendations.

“That’s the best news I’ve heard all day,” she said.

trichman@baltsun.com

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