State should tax Airbnb, but let cities make rules
Home-sharing through websites like Airbnb and HomeAway has meant more lodging choices for visitors to Massachusetts. And it’s allowed property owners to earn money renting out their spare rooms and stately Colonials.
But it’s also become a source of considerable agita on Beacon Hill: How to tax and regulate this sudden behemoth?
Lawmakers are feeling pressure from all sides: Airbnb, which wants a light touch; the hotel industry, which says its surging competitor should be subject to the same rules it has long abided; and housing advocates, concerned that short-term rentals are taking much-needed units off the market.
For all the complexities and competing interests, though, the path forward is surprisingly clear: The state should tax home-sharing but impose only a basic set of safety and antidiscrimination regulations on the industry, leaving it to cities and towns to add more rules as they see fit.
Start with taxes. Over 250 American jurisdictions — from the state of Connecticut to the city of Sebastopol, Calif. — already collect levies. Airbnb itself has embraced the trend. “Read my lips: ‘we want to pay taxes,’ ” said Chris Lehane, head of global policy for Airbnb, at the US Conference of Mayors last year.
It’s not exactly altruism at work, here. Airbnb customers foot the bill, not the company. And certainty on the taxation question can only help with any plans to go public.
But whatever the company’s motivation, the elimination of any controversy over whether to tax home-sharing has made the job easier on lawmakers.
Now the question is how to tax home-sharing. Last year, Airbnb logged about 592,000 guests in Massachusetts. Had the rentals been taxed at the 5.7 percent rate now levied on hotels, the state would have collected about $15 million. The Senate has already passed legislation that would take just that approach. House legislation would employ a tiered strategy, levying escalating state and local taxes on three levels of host — “residential,” “professionally managed,” and “commercial” — separated out by how frequently they rent.
Either approach could work. The flat rate has the advantage of simplicity, while the graduated system would allow the state to incentivize “residential” hosts (homeowners renting out spare rooms) over “commercial” hosts (business people who have bought up two, three, or 10 units and are renting them out on a regular basis).
The trickiest questions facing lawmakers aren’t about taxation, but regulation: Should only homeowners be allowed to rent out rooms, outlawing the commercial operators snatching up precious housing in tight markets? Should Airbnb hosts be subject to the same kind of licensing and inspections required of hotels? And what about insurance?
Here, the state should tread lightly, so as not to quash a useful industry.
The state should bar discrimination against guests based on race, disability, and other factors. And a basic annual safety inspection is reasonable. But any additional regulation should be left to cities and towns, which can tailor rules to their specific circumstances. A city like Cambridge is likely to have different concerns than a Cape Cod town like Brewster.
Every city or town, though, will need better information from Airbnb and its competitors. Officials should insist on municipal registries, so they can keep tabs on how much home-sharing is happening, where, and by whom. Airbnb is starting to come around to the idea, as long as the process is a simple one. In Chicago and New Orleans, hosts can register with the city right on Airbnb’s web site. Massachusetts municipalities should emulate that approach.
With ready access to the data, city officials may learn that Airbnb is not quite the menace some imagine. The company says it facilitated entire-home rentals (as opposed to spare rooms in otherwise occupied houses or apartments) in just 1 percent of Boston’s housing stock last year — making it a comparatively small player in the city’s housing crunch.
The hotel industry insists that Airbnb’s footprint is bigger — and that the number of commercial operators running what amounts to off-the-books hotels is on the rise. City officials should remain vigilant. But home-sharing has been good for the region, on balance, and squeezing it with too much red tape is a bad idea.