Summer is here, which means many of us have vacations on our minds. You’ve likely heard of the popular online vacation-rental service websites promoting what they say are less-expensive alternatives to hotels, such as Airbnb, HomeAway and VRBO. Maybe you’ve even used one of these options yourself.
But if you are the property owner or a tenant looking to rent your space to paying travelers, there’s much to consider.
Technically, your apartment, extra room or cottage is not a hotel. So if you’re renting it out, does that mean you are required to pay local hotel taxes? Are you all of a sudden a member of the hospitality industry? Does the city you live in permit short-term rentals?
With the rapid growth of the online short-term rental industry, issues such as taxes lie in uncharted territory, and answers aren’t crystal clear. It’s important to remember, too, that beyond any local hotel taxes, a person profiting from a vacation rental typically would be required to declare that income and pay the appropriate taxes.
Airbnb, in particular, has been in the news lately as cities popular with tourists are cracking down to either ensure local hotel taxes are being paid or working to stop these types of vacation rentals.
Here’s how Airbnb works: Users post what they are offering as a short-term rental and travelers who find what they like, book and pay through Airbnb, which tacks on a booking fee.
In New York, Portland and San Francisco, Airbnb will require users to add local hotel taxes to a visitor’s bills. But many cities, including San Diego, do not have such an arrangement with Airbnb. This means the responsibility for collecting local taxes falls to the person renting out the space.
For its part, Airbnb advises hosts — whether they’re owners or renters of the space being shared — to be aware of laws in their cities regarding short-term rentals and terms of their leases.
The city of San Diego requires the payment of the rental unit business tax by anyone who owns, operates, or manages rental property, including hotels, motels, and any property advertised or rented during the calendar year.
San Diego also requires that operators collect transient occupancy tax from guests staying less than one calendar month. Some other cities in the region, such as Carlsbad, also charge an annual business tax and require the collection of transient occupancy tax.
The Carlsbad City Council recently decided to create regulations for short-term vacation rentals; such rentals aren’t allowed now, but hundreds of them exist anyway. The goal is to come up with a system that would allow Carlsbad residents to apply for permits that would let them rent their homes to travelers.
In addition to financial concerns with online short-term vacation rentals, there are other ramifications to consider.
Subletting, or charging another person to rent all or part of an apartment or residence that you rent without changing the lease, typically requires a landlord’s written permission. So posting your residence on a short-term rental or vacation swap site would be a form a subletting — and would probably violate the rental agreement and even could constitute fraud.
Is your landlord likely to give you permission? That’s between you and your landlord. But it’s better to ask and get a “no” response than not to ask and get an eviction notice.
As popularity of the online vacation rental sites continues to grow, and questions about the industry continue to surface, it’s important for landlords to reiterate the rules with tenants, reminding them of the fine print in their leases.
Beyond the legal issues of taxes and leases associated with short-term vacation rentals, there’s a closer impact to consider: that of being a good neighbor. Having traveling guests in and out of your apartment or home can be a nuisance to your neighbors. News reports and anecdotal evidence show that it’s often complaints made by neighbors that lead to the uncovering of vacation subletting.
Thus, it’s crucial for property owners to be proactive by checking vacation rental websites to see if tenants are listing their properties, and also to ask neighbors to report any unusual activity, such as frequent vacationing visitors.
The efforts of online businesses to expand lodging options for travelers are admirable, but the industry and local municipalities are still adjusting to rapid change and growth. Whether you’re a host or a vacationer, be sure to check all the local regulations before sealing the deal on a short-term rental.