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Vacation rentals could see new taxes, regulations in NY

ALBANY — Short-term vacation rental units would be tracked by New York state, and platforms would have to collect occupancy and sales taxes on reservations the same way they do on a hotel stay, under a bill just approved by the state Legislature last week.

It’s not law yet, and could be vetoed or significantly changed by Gov. Kathy Hochul, but the bill as it stands now would require property owners who provide short-term rentals for part or all of a place they own, as well as the platforms that promote and book those units to guests, to register their rentals with the state and provide regular updates on their use.

For communities that already have registries, those can remain in place, but no new local short-term registries could be formed after the bill takes effect. Short-term rental owners in those communities with pre-existing registries would have to stay up to date on both the local and state systems.

It would also implement a statewide requirement that these units be taxed, with both a sales tax and an occupancy tax collected on the stay. Occupancy taxes, or “bed taxes,” are charged specifically to hotels and motels, with the money generated then directed to a regional tourism promotion organization or government agency to promote the region as a travel destination. Those taxes would be charged and paid at the platform level, but people with individual rental units would have to maintain their own taxes and registry processes.

Advocates of the bill include Assemblyman Scott A. Gray, R-Watertown, who is the ranking Republican on the Assembly Tourism Committee and represents a portion of the 1,000 Islands, St. Lawrence River and Lake Ontario shoreline that has a strong tourism economy and many vacation rental units.

“The really important thing is that this provides transparency and all of the information,” Gray said.

As of now, there is no concrete way to track how many vacation rental units exist in a given community, said Corey Fram, director of tourism for the 1,000 Islands International Tourism Council, which promotes Jefferson County and the 1,000 Islands as a vacation destination.

The organization, a nonprofit that receives some of Jefferson County’s occupancy tax revenue to do its work, doesn’t promote or advocate for specific legislation, but Fram said he would welcome many aspects of the bill approved last week, including the registry that would provide a true count of vacation rentals.

Fram said the industry currently relies on a combination of third-party reports to get a clear picture of how many units exist in a given area, and while they are fairly accurate, there tends to be variations between sources that allow officials to establish only a rough range rather than a true count.

“There are dips and waves, so to speak,” he said. “There’s stuff they miss, stuff they catch, so it gives you an approximation of what’s happening.”

Fram said he has data that shows New York, excluding New York City and Long Island, does between $900 million and $1.1 billion annually in vacation rental sales, meaning it is likely around $1 billion in total.

For Jefferson County, there’s data to show between $12 and $13 million annually in short-term rental sales, but he said he is most comfortable saying its a $12 million industry. But there’s no clear certainty, something this bill would change.

“With registration, that legitimizes it,” he said. “I get information on traditional hotel performance, but I really benchmark that against the information I get on occupancy tax from the Jefferson County treasurer.”

Gray said he believes that a short-term rental registry will also assist local governments with planning, by giving local leaders a clear picture of what properties are being used and where. It will also give law enforcement and emergency services an idea of how many people may be in a property, enhancing public safety in the event of an emergency.

“In the Finger Lakes area for example, they’re concerned that they lack water, they lack sewer,” he said, pointing out that many vacation rental properties host more guests than the house they’re using would typically support for long-term or owner-user purposes when only one family would typically be using it at a time.

“Lake George is concerned about their septic systems failing,” he said.

Assemblyman Billy Jones, D-Chateaugay Lake, whose district includes the popular vacation towns in southern Franklin County and much of the eastern North Country, said he is supportive of the legislation as well, which he said he feels will level the playing field between larger hotels and the communities that can support them with short-term rentals and the communities that rely primarily on them for visitor housing.

“Our municipalities wanted it, our hospitality and tourism industry wanted this,” he said.

Jones also said that the registration component poses benefits for both town planning and zoning boards and especially for emergency services.

“God forbid something does happen, they want to know which facilities are being rented and have people in them,” he said.

There are also concerns about communities becoming overburdened with short-term rental use, where a large proportion of what was once single-family housing becomes vacation rentals. Gray said a businessman in Lake George has bought a former motel just to convert into apartments for staff he hires, and many communities in the region complain about shrinking housing stock. Gray said the registry will allow communities to keep an eye on how much of their housing stock is being used by non-residents, which can inform policy decisions at the local level.

Fram said that the collection of occupancy tax from short-term rentals could also feed into a tourism boost for local communities by providing tax dollars they have never had a chance to benefit from before.

“If you think of rural townships that do not have a hotel or a motel, but they may have quite a few short term rentals, particularly along the St. Lawrence River and Lake Ontario, those folks are suddenly going to become players in destination marketing,” Fram said.

He also added that he thinks that the inclusion of short-term rental properties in bed tax collection could give the owners a more prominent hand in promotion of their businesses.

“Whether we want to admit it or not, in the destination marketing world the hotels paid the bills so they kind of got the attention,” Fram said.

Some communities have already established registries and tax collection on short-term rentals, but it’s on a case-by-case, platform-by-platform level in many cases. Both Lewis and St. Lawrence Counties have agreements to collect taxes on short term rentals booked through AirBnB, but that doesn’t capture rentals done through other smaller platforms or independently.

Fram said this statewide system would cover more ground, and by implementing it statewide at the same time it eliminates the argument that adjacent communities that don’t collect the tax could be cheaper and more competitive.

Despite the support the bill has from some lawmakers and some in the industry, the people who operate short-term rental units themselves are not pleased to see this new regulation on their industry. Amanda J. Miller operates a number of short-term vacation rentals along the Lake Ontario and St. Lawrence River shores.

“This is adding insult to injury at this point,” she said.

Miller argued that short-term rentals are vastly different from the hotels and motels that pay an occupancy tax. They’re zoned differently and their property taxes are calculated differently. Their impact on the community individually is much smaller, and many people who operate in the industry have only one or a few rental units as opposed to the dozens or hundreds of spaces available in hotels.

“To take a single family home, zoned residential and then all of the sudden lump it in with the mega hotels and motels is just wrong,” she said.

She also said that the boom in the industry sparked by the online platforms like AirBnB has passed, and short-term rentals are no longer the hot industry item they used to be.

“I got rid of a couple of mine, because the AirBnBs have become so oversaturated that the business model is changing and evolving,” she said. “We’re not a mega corporation making all this money. Most of the people on AirBnB are just trying to pay for their properties.”

Miller said that short-term rentals aren’t a new player in the tourism game – they’ve been a prominent feature in the north country and other upstate New York vacation spots for decades, sometimes even nearly 100 years.

She said short-term rentals, outside of the recent and now-passed boom, have catered to a different clientele than a hotel would: large groups, families and people with pets that would find a hotel too expensive, too inconvenient or fully impossible to stay in.

Miller said it’s not a huge benefit to property owners that the tax question is handled by the platforms they take bookings through – owners will still have to maintain their registrations and track the taxes as paid by the platform to make sure no violations occur.

Miller also said she wasn’t convinced that having short-term rental units pay into the bed tax program and tourism marketing will lead to them being more represented in the materials produced.

“The hotel’s hate us,” she said “And how do you level the playing field? How do you take my single family home, assessed at $250,000, and put me in the same category as a $10 million waterfront hotel? I just don’t think that will happen.”

Assemblyman Kenneth D. Blankenbush, R-Black River, was heavily critical of the bill passed in Albany as well, saying in a statement after it was passed that he thinks it’s a mistake that could put onerous regulations on an industry that, in his rural Tug Hill and Mohawk Valley district, could drive people out of the short term rental game.

“While the intent is good and I believe in leveling the playing field, I was forced to vote in opposition. Simply put, the negatives outweigh the positives. New York state has proven it is inefficient when managing registries such as the cannabis and ammunition databases. What would make this any different? This registry for short-term rentals would raise expenses for the residents of New York, while cutting the profits they were making from their rentals. I support the idea behind this legislation, however, the execution by Albany Democrats is destined to be botched,” he said in a statement sent after the bill passed.

The bill as passed by the legislature has not been delivered to the Governor’s desk for her review yet. Her office conducts a legal review to ensure the language in a bill doesn’t violate any laws or leave loopholes for legal challenge, which can be corrected by a chapter amendment in New York or wholesale veto if the governor feels it is uncorrectable.

Gray said he is anticipating that the Governor may offer some chapter amendments on this bill, which would be negotiated by the Governor, the bill’s original sponsor and the leaders of the Assembly and Senate.

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