At the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C. last Friday, a panel of three experts in the hospitality industry sparred over how to protect property rights while leveling the field between hotels and short-term rentals. Travel Technology Association's Matt Kiessling, right, listens as Brian Blaesser of law firm Robinson & Cole explains regulatory trends he's seeing with STRs. Matt Kiessling leads short-term rental policy for the Travel Technology Association, which represents technology companies in the travel industry such as Expedia and Sabre Corp. He says his organization doesn’t oppose taxing short-term rentals, but he fears too much regulation could end up curtailing property rights. “What you shouldn’t do is ban people from doing what they want to do with their property,” he told the audience, “especially when they aren’t changing the use of that property.” But Craig Kalkut, vice president for government affairs at the American Hotel & Lodging Association, disagreed that taxation would hamper owners’ rights and noted that the high rate of taxation of hotels makes for unfair competition. “Our members all agree that there should be a legal and level playing field across the lodging industry,” he said. “There is a difference between what could legitimately be called home sharing and what is more commercial.” One of the central questions around this debate relates to differences in the way websites that facilitate short-term rentals operate. Kiessling noted that while Airbnb manages the entire experience, from search to booking and payment, other sites merely exist for home owners to advertise their rentals: “They often don’t know if a property has even been booked, so the idea that they would be able to collect and remit taxes ... is nearly impossible,” he said, suggesting that in some cases, it should be up to the individual owners to pay taxes directly. Kalkut was doubtful that local communities could get home owners to volunteer to pay extra taxes on their own. “If you leave it up to the individual home owner, I don’t think much will be collected,” he said. He acknowledged that while the process “might vary platform to platform,” Airbnb is already collecting taxes from owners in certain cities where ordinances require it. “They’re a tech company, so they should be able to figure out how to collect and remit taxes.” Brian Blaesser, who heads up the real estate development practice at Boston-based law firm Robinson & Cole, agreed with Kiessling that requiring home owners to pay taxes would be a tidy solution to the problem. But he cautioned against the spread of a practice he’s observed where local authorities reclassify residential properties in the tax code. “It’s one thing to pay taxes. It’s another when the local community itself is saying, ‘We’re going to reassess your property as commercial,’” he said. “If it’s going to be a trend, that’s a dangerous trend.” But Kalkut said that many who use short-term rental sites own a spate of properties and aren’t owner-occupants of any of them. He suggested it might be time to rethink the strict commercial vs. residential paradigm in the face of a new hospitality environment. “Would you say a bed and breakfast is residential use?” he asked. “The realities are changing, and a lot of this is new.” Blaesser, whose firm helps NAR and other groups analyze local ordinances related to the regulation of short-term rentals and other real estate issues, sees a “disturbing” trend where some state and local governments use new taxes and other rules to quash this growing industry. “You are running up against a fundamental issue here about what government can do,” he said, warning real estate professionals that if they don’t watch these restrictive trends very closely, “you’re going to be pushed into a much more regulated environment.”

Source: Realtor Magazine