REAL ESTATE INVESTORS are increasingly reshaping local residential neighborhoods by acquiring homes and apartments and converting them into full-time tourist lodging as “short-term rentals.” What began about a decade ago with a few homeowners offering an occasional room for rent is now a hot investment trend—producing record earnings for absentee owners, but also threatening housing availability, public health and safety, and tax revenues.
So it is no surprise that after intense debate a Massachusetts General Court conference committee is now tasked with reconciling two contrasting bills on this issue. A House measure recognizes and appropriately addresses the reality of the short-term rental marketplace, while its Senate counterpart falls short by focusing on just tax collection. The conferees should move toward the House model of putting Airbnb rentals in compliance with longstanding rules related to lodging – which exist for good reason.
Airbnb’s co-founder Brian Chesky once quipped, “There were laws created for businesses, and there were laws for people. What the sharing economy did was create a third category: people as businesses. They don’t know whether to bucket our activity as person or a business.” Beyond being false – “people as businesses” date from the dawn of civilization – these platitudes mask Airbnb’s position that it needs or deserves special legal treatment, when neither is true. Time has shown that Airbnb’s millions of commercial lodging offerings should just be treated as such, and that this massive global conglomerate is capable of complying with basic rules when compelled to do so.
Let’s begin with the fundamentals. State and local governments and the broader public cannot hold businesses accountable for complying with laws if they do not know what businesses operate within their borders and where. That is why public registration of businesses is a centuries-old, tried and true governmental practice intended to guarantee compliance with applicable laws.
This practice must be applied to Airbnb, which instead defaults to shielding its lodging activity from state and local laws. It has campaigned across the nation to keep secret the existence and location of the lodging rentals it markets. Airbnb’s push for secrecy is a thinly veiled effort to prevent the rule of law from applying to its operations.
Unfortunately, the Senate bill aids and abets Airbnb’s efforts to avoid compliance by failing to require, as the House bill does, a public registry of short-term rental locations. The Senate bill supposedly establishes a legal duty for short-term operators to collect lodging taxes. The administration of that law is rendered impractical by the absence of a public registry or other mechanism for state tax officials to locate the rentals and ensure their compliance with the law.
The Senate bill also authorizes hosting platforms to operate under “voluntary tax collection agreements” Airbnb has peddled around the globe. These agreements turn taxes into an “honor system.” Worse yet, Airbnb’s agreements often grant huge, unjustified gifts of tax amnesty to Airbnb and its operators. They also transfer the determination of taxes to be paid from tax agencies to Airbnb. That scheme is an abusive surrender of governmental power to a private company that invites error, mischief and even tax evasion.
In contrast, the House bill offers the best template for action on short-term rentals. It establishes a public registry of rentals critical to the rule of law and prohibits hosting platforms from marketing unregistered lodging. Importantly, it would protect consumers by requiring short-term rental operators to follow non-discrimination laws that respect the dignity of each human being, as well as public health, safety and insurance laws that protect individuals in case of an accident.
Last, the House measure ensures lodging taxes will be reported and collected by lodging operators or hosting platforms on a mandatory and equal basis—with no sweetheart deals or exceptions allowed.
The House approach ensures that Massachusetts visitors and residents staying in short-term rentals will enjoy some measure of safety from unreasonable risks, and the benefit of services financed through taxes collected equitably. And the Commonwealth will benefit by ensuring the rule of law isn’t ignored just because business is conducted through an “app.”
Dan Bucks is the former executive director of the Multistate Tax Commission and former Montana Revenue Director.