The New Orleans City Council has yet to weigh in on proposals to legalize short-term rentals citywide, but Mayor Mitch Landrieu’s administration already is working on a way to cash in on properties rented through Airbnb and similar sites.
As legislators in Baton Rouge hash out ways to cover a nearly $1 billion shortfall in this fiscal year’s state budget, they’ll also consider a bill that would extend existing taxes on hotel and motel rooms to the growing trend of short-term rentals as well as to small, traditional bed-and-breakfasts that are now exempt from those taxes.
The city-backed bill is among the measures in Gov. John Bel Edwards’ legislative package for the special session that is now underway.
The measure is still in a preliminary draft and subject to changes, but the current version includes a requirement that websites like Airbnb, VRBO and others that market short-term rentals must collect the taxes themselves and provide information on what owners are renting out rooms and homes, how often they’re doing so and how much they are charging.
Critics have said such safeguards are necessary to ensure that those using the websites to make money are following the rules in light of the weak enforcement of laws that now ban short-term rentals in the city.
The bill would likely do little to solve the state’s budget woes, as most of the taxes are now redirected back to tourism promotion efforts. And, for the same reason, the city also wouldn’t reap a windfall from House Bill 59, which was put forward by the Landrieu administration and filed by state Rep. Helena Moreno, D-New Orleans.
But Landrieu administration officials say the measure could provide a stepping stone for efforts to capture significant revenue from sites like Airbnb.
“We’ll see how far we get with this bill in the special session, but I wouldn’t rule out us going back if there’s another special session or in the regular session to come back with a local bill to deal with specifically short-term rentals,” said Deputy Mayor Ryan Berni, whose responsibilities include overseeing the city’s lobbying efforts.
To do that, the city would need to propose additional legislation dedicating more of the revenue from short-term rentals to the city or imposing additional taxes on top of the ones being extended.
The main thrust of the present bill is to extend existing hotel taxes to rentals with six or fewer bedrooms, which are now exempt, and to gather the taxes from the sites or businesses that market those rooms. That would include both traditional bed-and-breakfasts that now are legal but do not have to pay hotel taxes as well as currently illegal rentals in homes.
The measure also would allow the state to collect additional taxes from travel sites that often buy blocks of hotel rooms and resell them to their users for a markup. The state now gets taxes only on the amount the sites pay, but if the legislation is passed they also would be taxed on the amount they receive when they resell the rooms.
Moreno said state revenue officials estimate extending the tax would bring about $1 million to the state general fund annually. Most of the additional money collected would go to tourism-related organizations.
Only a small portion of the taxes collected in New Orleans would actually go to city government. Of the current 13.5 percent sales tax on hotel rooms in the New Orleans, only about 1.5 percent goes to city government.
Based on estimates from InsideAirbnb.com, a site critical of the service that analyzes its use, the 2,646 properties in New Orleans that rent through the service would generate a total of about $9 million a year in taxes. About $1 million of that would go to the city under the current arrangement.
In their recent recommendations for regulations that would legalize short-term rentals, city planners stressed that the city should pursue some sort of mechanism to make money from short-term rentals that would at least cover the increased costs of enforcement if they are legalized. Those recommendations were adopted by the City Planning Commission earlier this year, though the commission stripped out language that would allow short-term rentals of entire homes and apartments in residential neighborhoods.
The council has yet to consider those proposals, but Councilwoman Stacy Head, who has taken the lead on the issue, has said the city should work to get state legislation in place that would allow short-term rentals to be taxed while the details of the regulations are worked out.
The state legislation so far does not appear to have aroused significant opposition from either legal bed-and-breakfasts or Airbnb.
Alison Schumer, a spokeswoman for Airbnb, which is seen as the largest player in the New Orleans market, said in an email that the company is working with lawmakers on the legislation. Although “collecting and remitting hotel taxes can be incredibly complicated,” she said, the company does collect taxes in some other states.
“Our community of hosts want to pay their fair share, and we want to help,” Schumer said.
The Professional Innkeepers Association of New Orleans, which represents traditional bed-and-breakfasts in the city, voted five years ago to support measures that would extend hotel taxes to both its membership and the growing short-term rental market in order to level the playing field, said Bonnie Rabe, head of the organization.
The group opposes the proposed city regulations, however, largely because they would allow short-term rentals without treating them as businesses that need commercial insurance, on-site employees or owners and other things required of bed-and-breakfasts.
“We are on board with (the state tax legislation) because we feel like that is going to be more of a definitive way for the state and the city to be able to figure out who is licensed and paying their taxes,” Rabe said. “It’s not something that costs us more. We can put it right on our bill and charge it to our customers.”
Follow Jeff Adelson on Twitter, @jadelson.