Housing

Short-term rentals: plague or plus?

With the rise of companies like Airbnb, locals feel all sides of the financial impact

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It's no secret in Taos that divisive issues most often take the forefront of local chit-chat and public debates. Other issues are so insidious they tend to linger on the back burner, out of sight and out of mind. But one slow-moving conundrum -- the growing number of short-term rentals -- is getting more and more attention.

Rising numbers of short-term rentals through online hubs such as Airbnb, HomeAway and others have Taoseños concerned about the impact on availability of long-term rentals -- that is, the stock of housing for those who can't buy a home. And yet, Taos property owners have found the short-term rental market a good way to make extra revenue and help pay their bills.

Short-term rentals have taken the housing market by storm in the past few years. They rose in popularity in Taos nearly five years ago, with an increased surge in the market three years ago. According to a listing on AirDNA, a website that tracks data from Airbnb listings, Taos listings rose from 125 cumulative listings in 2014 to 512 in 2017.

And that is changing the way some towns and cities view the market popularized by sites such as Airbnb.

"[Short-term rentals] really change the character of the neighborhood," said Town Manager Rick Bellis. According to community members in town, some neighborhoods have become infamous for turning into short-term rental subdivisions.

The dramatic increase of short-term rentals has even caught the attention of the Taos Town Council, which passed legislation regulating the properties in attempts to collect taxes from the hosts who turn their their rooms or houses into short-term rentals as a way to generate a new form of income. The ordinance calls for hosts to register all short-term rental properties within the town boundaries as small businesses.

Bellis said Taos needs the short-term rentals to accommodate tourists who want to stay overnight but aren't looking for a hotel room. At the same time, long-term rentals are also needed to house those working in the tourism industry.

"It is definitely starting to affect the availability of affordable housing for the local workforce," Bellis said about the short-term rental market.

Because of this dichotomy, town officials took it upon themselves to attempt to regulate the commerce going on with short-term rentals in order to bring in lodger's and gross receipts taxes to pay for the amenities tourist use when they visit.

How it works

Looking for a different experience than just a hotel, many short-term rental guests have taken to the new online companies and actively search for their perfect place to stay a night or two. Many listings in Taos are obviously marketed for tourists; labeled as "cozy casitas" or "romantic adobes."

Short-term rentals are defined as a place where guests stay less than 30 consecutive days.

Short-term rentals -- by means of Airbnb, HomeAway and others -- usually begin with an online profile. Guests and hosts can interact and guests can book and pay for their stay online. The guest requests the nights they wish to stay, much like a hotel. Many have limits as to how many people can stay, if pets are allowed and if parties or events are acceptable. Hosts can add a trip itinerary option for an extra charge, which takes the guests on a tour of the area, based on the host's interests.

Once the money leaves the guest's hand, the company they used brokers the fees and taxes in the area to the appropriate municipality.

Lodgers tax is paid by the parent company - such as Airbnb - to the county or municipality, if required by their laws. Taos County alone received over $4,000 in lodgers tax payment from Airbnb for the month of October.

"Airbnb provides an affordable way for people to visit Taos and adds additional lodging capacity so Taos can welcome a growing number of visitors and see the economic benefits of tourism," said Airbnb spokesperson Laura Rillos in an email.

"Because Airbnb guests stay longer and spend more at local businesses than guests who stay in other types of accommodations, this is a meaningful economic contribution to the community," she said.

Hosts are often around to accommodate the needs of guests that a normal lease contract might have included such as maintenance or repair. Hosts sometimes live off-site or in another state and may have a third party look after the property between rental stays.

Short-term rental future

Short-term rentals in Taos could be causing issues with more than just the locals in town by gobbling up available spaces.

In Taos, gross receipts tax is 8.5 percent of each purchase in a business, which includes the transfer of money for short-term rentals. This tax is paid by businesses to the state, which then distributes the money to the appropriate municipality based on where the money was spent. With hundreds of short-term rental listings in the Taos area and only a handful of them registered as businesses, the town could be losing tens of thousands of dollars in potential gross receipts revenue every month. This equals missed revenue that the town could use on projects to better the infrastructure of the area.

According to Airbnb, the average host in Taos is making $7,800 per year while renting their space out for 33 nights out of the year. In addition, the company said most Taos hosts rent out their space on a casual basis and would not be available for long-term rental in the first place. Rooms average a nightly rate of $134.If 50 unregistered properties are rented out within the town limits on these averages, the town of Taos could potentially be missing out on nearly $19,000 in gross receipts tax per year.

"The vast majority of Airbnb hosts in Taos share the homes in which they live and many use the extra income they earn to afford to stay in their homes," said Rillos. "Most Airbnb listings are booked on a casual, infrequent basis, suggesting they would never be available for a long-term tenant. In fact, only 25 entire home listings in Taos were booked for more than half the year. We remain committed to working with the [town] of Taos to ensure short-term rentals strengthen the community and to protect long-term housing stock."

"The challenge is not so much the lodgers tax, as compliance -- getting these short-term rentals to register as a business and pay gross receipts tax," said Taos tourism director Karina Armijo. "There are a lot that haven't. Our challenge right now is that we are short staffed."

Other cities across the nation have taken steps to regulate, limit or even ban the practice of short-term rentals. The city of Nashville, Tenn., has been on the front lines of regulation, with an ordinance in place since 2015. Similar to that of the town of Taos, the ordinance calls for owners to obtain a permit and requires them to register as a business. The city has even gone as far as including a cap on the number of non-owner occupied short-term rentals allowed within the limits. Nashville also has a hotline where residents can report short-term rentals operating on an illegal basis.

Ordinance 15-11 Short-term Rental Overlay

On November 24, 2015, the town of Taos passed Ordinance 15-11 to try and regulate the short-term rental market in Taos stating they find it "desirable to protect and enhance the Town's economic base by attracting tourists, visitors and residents" and passed a serious of regulations. Among these would require a short-term rental host to apply with the town for a business license as well as a permit to operate as a short-term rental, both annual re-certifications. According to town officials, any sort of business applying for a license would need to have several steps completed including an inspection from the fire marshal before operation.

With more staff available to keep tabs on the short-term rentals, the town would be able to enforce the codes and possibly collect the full amount of taxes from a short-term rental property. Without registering as a business with the town, the town misses out on the gross receipts tax from the property while only collecting the Lodgers tax from the companies. Business licensees can be obtained through the town of Taos Planning Department for $35 per year which expire every year at the end of December.

There are hundreds of rental listings within the town. While Armijo could not pinpoint the exact number of people who have registered, she estimates that those with the proper credentials are a growing, but small, minority.

Although she understands the money and attention short-term rentals bring in to Taos, Armijo said the enforcement of the codes would also benefit the town through the collection of lodgers and gross receipts tax within the town.

While the town has passed regulations on the properties, Taos County does not have regulations or ordinances in place for the short-term rentals and only collects lodgers tax from the properties via an agreement with companies like Airbnb.

'Airbnb is the only option I have'

Officials and members of the community have voiced their concerns about the housing in Taos and are calling for more affordable housing in the area due to the lack of available properties. While there are several factors contributing to the housing issue in Taos, many are starting to look at short-term rentals as a cause for concern in small communities like Taos.

Yet those who operate short-term rentals are telling a different story, saying companies that broker short-term rentals are actually helping them and the community.

There are currently over 300 separate listings on Airbnb alone in the Taos area with others listed on other sites. Some homeowners in the area have taken to renting a room or two, or even their entire house, to put aside money toward the mortgage or general payments for the house. In addition, these listings are usually categorized in three categories such as owner occupied, non-owner occupied or multi-family.

With listings able to fetch hosts over $100 per night for some rooms, this has led many to turn their homes into short-term rental businesses for profit or just to make the needed payments. Rather than receiving around $800 for a monthly rental, owners have elected to switch to short-term rental which can bring in well over the monthly rent payments after the first two weeks.

Still, hosts say the payments are often just a way to pay for the bills it takes to keep the house.

"If any of you would like to rent my [five] bedroom house long-term for the $4,750 a month it takes to keep it, let me know," said Lindsey Robin Sandwhiches on an Oct. 30 post on The Taos News Facebook page. "I've had it [on] the market for almost a year without a single offer. Airbnb is the only option I have at this point. I'm not greedy, I'm not making huge profits, I just don't want to lose my investment or let a bunch of college kids destroy it."

Many people who responded to the Facebook posts expressed similar feelings towards long-term rental tenants and said that they prefer short-term rentals to keep their properties looking and working well. Some former landlords said they dealt with bad tenants in the past who drove them to look more into the short-term rental market rather than renting long-term. Also, some said their revenue from the venture greatly helps with their monthly income and allows them some financial freedoms they would not have otherwise.

Short-term rental hosts have a variety of stories as to why they use the companies to rent their houses, and some fall into a unique category of not being able to rent long-term for a variety of reasons. Some, like Airbnb host Catherine Horsey, only have a small space to rent out, and are unable to do so to a long-term tenant.

"We paid a whole lot more for our house than we expected to," said Horsey. Short-term renting "enables us to do some things we couldn't do otherwise, for example, we are doing some landscape work that I know we wouldn't have done if we didn't have this income. Its a win-win, I think, for the town and the state."

Horsey is a registered short-term rental business owner with the town of Taos and has her annual permit to operate her casita. The small offshoot of her house is used as a one bedroom listing and does not have a full kitchen. Horsey has to include a mini refrigerator to give guests the ability to keep things cold but does not plan on renovating and including a kitchen. Because of this, the rental is only used for short-term and acts as an income supplement which Horsey says is rented out the majority of any given month.

Though she said it was an easy process to register and become legitimate within the town codes, Horsey says she knows she is part of only a small percentage of hosts who have all their paperwork filled within the town codes requirements.

"There are a lot of communities looking into this because they are all looking to make sure they are getting the right revenue," said Horsey. "Also, they want to keep their neighborhoods intact. Its like any planning issue, you just have to sit down and be creative."

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