By BECKY GILLETTE
Online vacation rental sites such as AirBnB and Vacation Rental By Owner (VRBO) are a huge phenomenon in the lodging market. Some customers are drawn by lower rates than for hotels, sometimes by renting just a room in a house.
VRBO and AirBnB have made it much easier for people to get into the vacation rental business, but there are concerns that not all of them have proper business licenses and inspections, nor do all pay the required taxes. In popular tourist areas like New Orleans, some residents complain they no longer have neighbors they know because all of the homes on their street are being rented by people who sublease to online vacation rental sites.
Mississippi is seeing such activity throughout the state, but in some areas more than others, said Linda G. Hornsby, executive director, Mississippi Hotel and Lodging Association.
“It is a definite concern as it continues to grow,” Hornsby said. “We are monitoring the negative economic impact of that not just here in Mississippi. In Louisiana, it is a number one concern. As it continues to grow, it exacerbates the problem.”
One issue is that some homes are being rented in residential areas that are not zoned for commercial activity. Hornsby said that is a code enforcement issue that they leave up to municipalities.
In addition to zoning issues, a major concern for municipalities and the state is whether rental owners on AirBnB and VRBO are collecting and paying all the applicable taxes. The Mississippi Department of Revenue recently clarified its definition of what properties are subject to sales and room taxes depending on where they are located.
“It does include VRBO or AirBnB,” Hornsby said. “If you go to those sites and other venues, very rarely are they quoting taxes. If they are not quoting them, they are not collecting and paying them.”
That can put a dent in the coffers of local and state governments. In October, AirBnB began voluntarily collecting 7 percent taxes from their rentals in Mississippi. That prevents each host from having to collect and remit the taxes.
State Tax Collector Herb Frierson says the Department of Revenue is actively engaged in securing as many voluntary collection agreements as possible.
VRBO has redefined which properties are subject to tax.
“VRBO is doing a little better job,” Hornsby said. “They have in most areas corrected their template so people who rent homes or rooms have a place for applicable taxes that is included in a quote request. If it is not quoted, it is not being collected and paid.”
She said unless there is a significant amount of enforcement, a lot of people can fly under the radar.
“There are laws on the books in Mississippi and in many states, but unless you have enforcement, offenders can say they didn’t know they were supposed to pay taxes,” Hornsby said. “A lot of money is being left on the table at a time we need more money.”
Hornsby said they have been investigating the issue for some time, and have identified a significant number of properties that are not operating legally. “We plan to work with the state and VRBO so we can identify them and turn them over to the appropriate state authorities to follow up,” she said. “Everybody wins.”
But on any given day, dozens of more rentals might be added. So, you catch one only to have more come on board that might not be paying taxes.
While Hornsby’s biggest concern is that online rental companies like VRBO and AirBnB can create an unlevel playing field, there are other worries, as well.
“Just as a consumer, you should be concerned about safety,” Hornsby said. “There are certain regulations commercial establishments have to abide by including being inspected routinely. A room in a house or a house itself doesn’t necessarily receive those inspections.”
Another concern is key or code entry. Unless keys or codes are changed after each guest, there remains the possibility a prior guest could have entry later.
“There is definitely a concern with a former guest having access to the property,” Hornsby said.
The financial problems with online rentals can be compounded. AirBnB is particularly big in Oxford, which has more than 300 listings on AirBnB. Oxford is an example of trickle-down effects.
“Most of the hotels send their data to Smith Travel Accommodations Report (STAR), which presents the Star Report every month,” Hornsby said. “The General Services Administration determines what the government per diem is in an area. Part of that is based on the Star Report. Oxford’s per diem got lowered significantly this year. Is it realistic? No. Government travelers usually stay in hotels. So, hotels are not getting what the going rate should be because the per diem got dropped.”
VRBO and AirBnB are growing in popularity each year. Hornsby said millennials, in particular, seem to be gravitating to those type of marketing and properties.
The issue has been raised in Bay St. Louis, said City Clerk Sissy Gonzales. The city is in the process of putting an ordinance in place for vacation rentals.
Ridgeland ordinances specifically prohibit short-term home rentals without the approval of the mayor and the board of alderman, said Alan Hart, director of community development for Ridgeland.
“The ordinance actually says you cannot rent for less than 30 days by any circumstance and renting for less than three months requires a special license from the City of Ridgeland,” Hart said. “We have discovered very recently that we have a few properties that are listed on AirBnB, and we are working with our legal counsel to determine the next step. The people who are doing it may have no idea it is not allowed. This is a commercial use occurring in a residential district. We’re working on a solution.”