With travel picking up again in fits and starts, short-term rental hosts around the world are fully engaged to capitalize on the excitement.
But in the rush to attain some semblance of new normalcy, it’s important that owners take a moment to understand new efforts to enforce marketplace legislation around lodging, lest they trip into the myriad of regulatory and compliance-related potholes that are popping up globally.
STRs in the U.S.
In 2020, Airbnb became a target for state and local governments throughout the United States as state lawmakers claimed the online marketplace was failing to collect and remit billions of dollars in taxes.
Throughout the year, states including California, Georgia and Illinois set to work on marketplace legislation that would clamp down on short-term rental platforms such as Airbnb and Vrbo.
State and local governments continue to enact marketplace legislation, with each taxing jurisdiction taking different approaches in terms of responsibility, applicability, classification and fines for failing to comply.
Regardless of location, the consistent trend is that authorities are looking to booking platforms to help monitor and enforce requirements, both now and in the future.
Pamela Knudsen - Avalara
Enforcement can come down straight through the marketplace, and compliance with licensing, registration and remittance is being more highly scrutinized than ever.
Further obscuring these laws is a difference in overall approach, sometimes making it unclear whether the laws apply to short-term rentals at all. Some states have taken a direct approach, first deployed by Massachusetts, that utilizes a registry of rental units and requires all “rental intermediaries” (lodging marketplaces) to collect and remit occupancy tax.
Others take more roundabout approaches, such as applying the South Dakota v. Wayfair ruling – chiefly concerned with taxing online marketplaces such as Amazon – to short-term lodging platforms by designating them as “marketplace facilitators.”
Yet another method has been to change the definition of “innkeeper” to also include outside facilitators of lodging services, hoisting responsibility for collecting hotel taxes onto Airbnb and similar platforms.
Within this shifting legal landscape, many states are placing the burden of enforcing unlicensed properties on marketplace platforms. In many cases, the licenses required by these states are brand new, resulting in platforms being fined for their users lacking licenses they may not even know about.
Regardless of the method used, this legislative trend shows no signs of letting up. Keeping up with the onslaught of legislation at the state level is taxing enough, but there are still more layers that are sure to leave short-term rental operators flummoxed.
Meanwhile, in Europe
While the U.S. has had its own back-and-forth with STRs, the ongoing debate is remarkably similar across the Atlantic. The U.K., the European Union and many other areas around the globe are all struggling with the rise of STRs.
Much like the U.S., authorities across Europe are concerned with making sure guests are “good neighbors.”
Governing bodies are looking at three key metrics: the impact on housing for residents, the impact on tourism and the overall economic impact of STRs.
Properly addressing these concerns means understanding both the individual and collective effects of these metrics - how much tourism money are short-term rentals bringing in, and how can residents be assured that their neighborhoods won’t be negatively impacted?
While the U.K. has largely been slow to introduce any manner of widespread regulations, the same surging market trends are being observed as elsewhere in the world. Recently, Thanet District Council in Southeast England, for example raised a motion to discuss STR rental limitations, though it fizzled out short of the debate stage.
On the opposite side of proactivity, the EU has been swift and fluid in its response to STRs, with many cities in European countries introducing their own rules and regulations.
Some of these have been struck down by higher powers while others have stuck. Barcelona, notably, has completely banned short-term rental rooms, while continuing to allow the short-term rental of full apartments.
Other cities and countries have taken different approaches, including:
- Differentiating between “peer” rentals versus “professional” rentals is one area of consideration. Peer rentals are private individuals who own and rent their second homes while professional rentals are those units owned by companies or organizations that own multiple STRs in a single location.
- Limiting the number of units a professional organization can rent out as STR’s in a single location.
- Limiting the number of nights per year that an STR can be rented out for both professional and peer rentals.
Consistent with approaches being used in the US, many of these EU authorities are holding booking platforms responsible for ensuring compliance of the hosts who use their services.
By levying fines and other penalties, they are engaging platforms such as Airbnb and Vrbo both to further understanding of market dynamics and to provide an additional means of enforcement.
The EU is now considering more sweeping action, with discussions being held as to whether the union requires an overarching set of regulations or if it would be best to leave it up to individual countries and cities to develop regulations that work best for them.
Playing catch-up
Regardless of location, the consistent trend is that authorities are looking to booking platforms to help monitor and enforce requirements, both now and in the future.
The STR landscape is shifting rapidly across the globe, with many regulations morphing across nation, state, city and even district and municipality lines. Understanding these evolving discussions and making sure rentals are compliant is going to be paramount for everyone involved in the STR industry.
It’s unrealistic to expect owners to keep up with these rapidly changing regulations on their own.
Modern, cloud-based technology tools can pave the road for automated compliance, allowing hosts and businesses to focus on the quality of their operation rather than the newest ordinance or local law they might accidentally violate in today’s increasingly complicated regulatory minefield.