For now, the thirty five hundred Airbnb hosts in Virginia operate largely in the shadows. The vast majority of those businesses pay no taxes, and they are not regulated by local governments in a way similar to hotels or bed and breakfasts. But, that’s about to change.
The times are a changing in Virginia, where the short term rental industry is exploding. That has the hotel industry worried, and their lobbyists have descended on Richmond in an effort to get the best possible deal.
“I think the hotel industry wants the government to protect their monopoly."
That’s Republican Delegate Chris Peace of Mechanicsville. He says technological advances have brought disruption to almost every corner of the free market.
“The hospitals want us to protect their monopoly. Uber. The taxicab industry wanted us to not allow Uber. I’m sure the banks are going to come forward and say we need to outlaw fintech apps because you can now send money directly to people without using a bank."
Last year Peace introduced a bill that would have regulated Airbnb and other short term rental operations at the state level, but it was scuttled after pushback from the hotel industry and local governments. That led to the creation of a commission to look into the issue and make recommendations. During a recent meeting of the commission, Airbnb operator Jerry Stokes of Fredericksburg brought a couple of props to make his point.
“This is the onerous package that I got from the Fredericksburg zoning office. Twenty four pages of hoops I have to jump through. Here is a one page application from Charlottesville."
Stokes would much rather deal with statewide regulation, so that he could avoid the headache of dealing with Fredericksburg. But leaders in the hotel industry say hold on. They have to register with local governments. Why shouldn’t everybody else? Edward Denton is with the Virginia Beach Hotel Association.
“At the end of the day the homeowners ought to be required to register. They ought to be able to follow the same exact laws that bed and breakfasts follow because that’s what they are people."
Hotels and bed and breakfasts across Virginia are regulated and taxed. The state knows who owns them, who operates them and how much money they make. For Airbnb, though, all of that happens in the shadows. Beth Ericsson at the Loudoun Convention and Visitors Association says many of the Airbnb operators rent out two or more residential properties.
“While they account for 17 percent of the hosts, they are 40 percent of the revenue. This is big business."
But is the juice worth the squeeze? Local governments would have to actually book rooms just to find out what the address is of the operators. That creates a tension that led to this exchange between Ericsson and Delegate Peace during a recent meeting of the commission looking into new regulations.
“Were talking about an area that is grey and we don’t know how juicy that orange is, but at $197 a night as an average rate and 900 rooms in inventory that’s a pretty good orange."
“I appreciate it, and as a member of the Appropriations Committee with a $1.5 billion shortfall I would love to know how much tax we would have collected since July 1st had we passed the bill."
Edward Mullin, representing Airbnb, says local governments face no legal restrictions to collect the lodging taxes.
“There’s no legal impediment to collecting it. The impediment is a logistical one. And candidly that logistical impediment was a big reason why we brought forward a bill this year to allow the hosting platform to collect and remit at the state level."
That bill failed, though. And now Delegate Peace is hoping the special commission might be able to craft something for the upcoming session, which is only four months away. He says one of the reasons the bill died is that it had no provision for Airbnb operators to register with local governments. He thinks that might offer and opportunity for compromise.
“Well I think you may see some give in certain areas and it may be local registration with a fee but no further local obligation on the part of that homeowner."
The commission is expected to issue a final report and a series of recommendations, before the end of the year.