Chamber Insider Blog

Short-Term Rentals, Long-Term Implications: Why Short-term Rental Legislation Matters

Editorial written by Beth Erickson, President & CEO of Visit Loudoun

More Loudouners are renting out their homes online. What does this growing trend mean for the future of Loudoun’s hotels, B&Bs and tourism industry?

As the official tourism entity for Loudoun County, Visit Loudoun is the only organization solely dedicated to promoting tourism and driving travel demand for the county. In 2014, state tax receipts in Loudoun County were nearly $40.9 million, up 10.4 percent from 2013. Tourism generated approximately $1.6 billion in travel spending and supported over 16,000 jobs. As the voice of the hospitality and tourism industry in Loudoun County, we are heavily engaged in helping to shape public policy that will be put forward in Virginia’s 2017 General Assembly session.

Short-term rental sites like Airbnb, first launched in 2008, have been gaining in popularity. What started as a platform for homeowners to become “hosts” and thereby rent unused bedrooms or beds for additional income has grown to two million listings worldwide—eclipsing Marriott International, InterContinental and Hilton Worldwide combined—and has been valued at more than $24 billion according to a 2016 Pennsylvania State University School of Hospitality study (From Air Mattresses to Unregulated Business: An Analysis of the Other Side of Airbnb). Make no mistake, this is BIG business and, in the Commonwealth of Virginia, one that is both unregulated and untaxed.

Airbnb by the numbers in Loudoun County:

On July 11, 2016, there was an inventory of 473 residential units listed on Airbnb, representing 919 sleeping rooms. That number dwarfs—by more than seven times—the 127 sleeping rooms in traditional bed and breakfasts in the county. Moreover, the number represents 16 percent of Loudoun County’s total hotel inventory of 5,700 sleeping rooms in our 37 hotels and resorts.

Ok, so what’s wrong with someone renting out their spare bedroom or even their entire house for a weekend or two a year? Nothing. The Pennsylvania State University study found that the typical Airbnb host “earns $5,110 a year and is typically shared less than 4 nights per month.” According to the Internal Revenue Service you can, “…use a dwelling unit as a personal residence and rent it for fewer than 15 days and not report the rental income.” On day 16, that property becomes a rental property. I don’t take issue with a homeowner renting a spare room or their entire house for fewer than 15 days a year but Airbnb didn’t reach a valuation of $24 billion on fees generated by the “typical” Airbnb host alone.

Illegal Hotels:

Visit Loudoun’s interest is in the fastest growing—and most profitable—segment of Airbnb’s business model: full-time operators, renting units 360 or more days per year and multi-unit operators who rent out two or more units. In other words:  un-registered, un-taxed, and non-compliant illegal hotels.

Among the key findings in the Pennsylvania State University report, the Washington, DC market ranked third—only behind Miami and Los Angeles—in the number of full-time and multi-unit operators:

  • Nearly 30 percent of Airbnb’s revenue came from “full-time operators” with rentals available 360 days a year. (Each of these operators averaged more than $140,000 in revenue during the period studied.) 
  • Individuals or entities renting out two or more residential properties on Airbnb account for 17 percent of hosts. (This rapidly growing segment of “multi-unit operators” drives nearly 40 percent of the revenue in those markets.) 

“Not Sophisticated Enough?”

While these businesses—illegal hotels—are enjoying the shared success of Loudoun County being recognized as a desirable place to visit, they are not required to play by the same set of rules.

On one hand, you have Loudoun County businesses that are licensed; compliant with local zoning policies; reporting basic industry data like occupancy and average daily rate; and remitting taxes at the local, state and federal levels. 

On the other hand are Loudoun County “hosts” aka businesses that are neither licensed nor compliant with local zoning policies. The rental platform, Airbnb, is not required to report basic industry data nor remit taxes at the local, state and federal levels. Instead, under the “help” tab on the Airbnb website (https://www.airbnb.com/help/article/481/how-do-taxes-work-for-hosts), hosts will find the following suggestion: “If you determine that you need to collect tax, you can usually either incorporate it into your nightly price, add it within a Special Offer, or ask your guests to pay it in person.” Such tactics ensure a purposeful lack of equality in the marketplace.

During a July 14, 2016, Virginia Housing Commission Hearing in Richmond, Jillian Irvin, Public Policy Director for Airbnb said, “we don’t think that most of our hosts are really sophisticated enough to figure out the nuances of the tax codes.” (Source: http://wvtf.org/post/concerns-about-airbnb-could-lead-stronger-regulations)  If that’s true, which I would debate, then Airbnb is certainly sophisticated enough to remit taxes on their behalf.

Loudoun County: a Great Place to Live, Work, Play, and Visit:

The Loudoun County Chamber of Commerce, Department of Economic Development and our elected officials recognize the economic and quality of life benefits that come from sharing our county with visitors. As a key economic driver in Virginia, we are in the position to shape the conversation, including advocating that:    

  1. Short-term rentals on Airbnb and online vacation sites be taxed like hotel rooms.
  2. Short-term rentals on Airbnb and online vacation sites be required to report industry data and be transparent in that reporting to localities and to the Commonwealth.
  3. Short-term rentals on Airbnb and online vacation sites register as businesses and adhere to local zoning and all other regulations.
  4. Localities have transparency regarding the identities of short-term rental providers.

The more than 16,000 Loudoun County tourism and hospitality professionals and our valued visitors and residents are due nothing less.

Editorial written by Beth Erickson, President & CEO of Visit Loudoun

To learn more about our Public Policy committee, and the various initiatives the Loudoun Chamber is working on behalf of our members, click here.

Stay connected to the Loudoun Chamber through our eNewsletter, containing local news, upcoming events and ways to get involved in our community.

Join our Email List