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Business booming for short-term rentals

A new tax deal and brewing regulations rein in local hosts

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Jonathan and Sarah Keeth – two public sector school workers – admit they’re not rolling in cash.

Their decision didn’t come easy, then, to invest nearly $130,000 and pay the added incidentals for a two-bedroom downtown loft on Boonville Avenue. But the income potential to offer the space as a short-term rental through San Francisco-based Airbnb won out.

They rolled the dice and by New Year’s Eve, the Keeth’s part-time business was up and running. Rent starts at $80 per night for the loft.

Across town, retired empty-nester Laura Hendricks has been offering up to three private rooms at $25 a night via Airbnb for the past year at her 1920-built farmhouse on Kimbrough Avenue. Hendricks said she mostly rents the rooms to traveling nurses, conference-goers and the occasional bandmates.

“It’s just fun,” Hendricks said. “It’s not about the money.”

The rentals represent two of some 190 listings in the Springfield and Branson areas on Airbnb.com, with options ranging from cheap-but-cozy private rooms for one to entire homes capable of sleeping a dozen guests or more.

Amid a new statewide tax deal and proposed regulations in Springfield, business is booming for short-term rentals. Missouri has 6,300 Airbnb hosts who collectively grossed nearly $29 million in 2017, said company spokesman Benjamin Breit.

Springfield’s share in the statewide numbers is minimal, but it’s been growing at a significant clip.

Last year, Breit said the Queen City clocked more than 8,000 Airbnb guest arrivals, generating some $749,000 for local hosts. The activity has more than doubled every year since 1,700 stays were recorded in 2015.

Branson’s another story. The tourist-heavy town easily eclipsed Springfield’s Airbnb bookings – 24,000 guests last year grossed nearly $2.25 million for their Branson hosts – to become the third-most booked city in the state. Branson bookings have tripled and quadrupled in each of the last years.

Level playing field?
It’s a business model that’s here to stay, said Springfield Convention & Visitors Bureau President and CEO Tracy Kimberlin.

He welcomes the boom, but with one catch: Short-term rental websites like Airbnb and VRBO need to play by the same rules that bind traditional hospitality.

“We do feel and do agree with the hotels that they should be playing on a reasonably level playing field with hotels, especially when it comes to paying sales taxes and hotel taxes,” he said.

Kimberlin said local hotels pay a total tax of about 13 percent on their bookings, and the figure puts the traditional hospitality market at a competitive disadvantage compared to short-term rental hosts.

The CVB and its members may get what they wish for.

In December, Airbnb announced a deal with the Missouri Department of Revenue to begin collecting and remitting sales tax revenue and other taxes on behalf of its online hosts, effective Feb. 1.

It’s a first for Missouri, with differing tax rates for the state’s 114 counties and the respective cities therein – but still, a likely lesser tax than paid by hoteliers.

In Springfield, for example, the tax deal equates to Airbnb collecting and remitting a combined roughly 7.6 percent sales taxes on local short-term rental bookings via its website and mobile app. The combined tax includes a standard 4.2 percent state sales tax, a 1.25 percent Greene County sales tax and a 2.1 percent Springfield sales tax.

Kimberlin noted short-term rental hosts aren’t bound by the same general cost of business as hotels – expenses related to life safety precautions per building and fire codes. But, he said, it might be asking homeowners too much to comply with the same standards.

“I think we can arrive at a happy medium,” Kimberlin said.

One edge for local hotels, Kimberlin said, is that the traditional hospitality market is trending toward more expensive rooms – at least for the time being.

“Strangely enough, right now, there seems to be very strong hotel occupancies for the more expensive properties,” he said. “They’re the ones who are doing the best occupancywise in town right now. There seems to be a pent-up demand for quality.”

Kimberling said the current citywide average daily room rate is about $85, up from roughly $82.50 reported by the CVB this summer.

Regs in the works
New city regulations could be coming down the pike. Springfield City Council is expected Jan. 29 to hold a public hearing on a proposed three-tier system for rental hosts.

The proposal would require an annual business license and certificate of occupancy from the city, paying annual fees that typically range from $25 to $105, according to city documents.

Short-term residential rentals of less than 30 days are technically illegal in Springfield, per current zoning, and even more so when more than three “unrelated” tenants rent a property.

The proposed regulations – drawn from cities such as Kansas City and St. Louis, and Austin and Waco, Texas – are off to a shaky start.

With a 4-2 vote Jan. 11, the city’s Planning & Zoning Commission recommended council reject the proposed regulations, which would divvy short-term rentals into three categories, among a slew of other provisions.

The first, Type 1, would allow short-term rentals in owner-occupied homes within single-family residential and townhouse districts, with a 95-day cap on the number of days booked annually.

According to city documents, Type 2 rentals would be allowed in owner-occupied and nonowner occupied homes within single-family residential or townhouse districts, but with no limit on the number of days booked. Unique to the grouping, owners of Type 2 rentals would be required to obtain a $1,700 conditional-use permit, which would require public hearings before Planning & Zoning and council members.

Types 1 and 2 rentals also would be bound by a 500-foot separation requirement from other short-term rentals.

Type 3 rentals would be allowed in all other zoning districts, with no residency requirement, booking limitations or separation requirements, though no more than two “dwelling units” could be rented per property, according to the city.

The proposed rules were not well received by Planning & Zoning Commission Vice Chairman King Coltrin, the only commissioner to speak at length on the proposed city code during the Jan. 11 meeting.

“I’ve used this type of facility in other states,” Coltrin said. “I can guarantee you they are not regulated with the amount of authority that we’re talking about here.

“It just seems like we have tried to load as much weight on this to make it as hard on people as possible.”

Council could approve the proposed regulations as early as Feb. 12. Existing short-term rental hosts would then be required to comply with the new standards within six months or terminate their rental offerings, according to city documents.

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