Tag Archives: Airbnb

Unintended Consequence–Albemarle’s AirBnB Black Market

FORUM WATCH EDITORIAL

By. Neil Williamson, President

When a new business concept is successful the first thing the government attempts to do is tax it.  What is the second thing? – regulate it.  In an interesting ‘Short Term Rental’ twist of fate, Albemarle has completed the first thing ensuringBlack Market photo credit news.softpedia but is about to put those revenue sources (and others) in jeopardy by driving much of this thriving new industry out of the open and into a Black Market.

Please let me explain.

Back in June 2017, Albemarle joined many Virginia localities in updating its tax code to capture ‘transient lodging’

TAX CODE
At its June 14, 2017 Board meeting, the Board of Supervisors amended the County Code §15-900 and §15-901 to enable the County to impose taxes on residential transient lodging, previously not included in this regulation. They also amended County Code §8-616 to explicitly list short-term rentals on the list of businesses subject to the business,professions, and occupations licensing (BPOL) tax requirements.

Albemarle County has been engaged in a “community conversation” regarding the regulation of short term rentals (AirBnB, HomeStay Charlottesville, etc.).  Rather than dealing specifically with the impacts of such rentals, with ordinances already on the books, Albemarle is seeking to restrict the number of rentals any property might be able to book in any given calendar year. This is a mistake.

According to Allison Wrabel’s article in Monday’s (10/30) Daily Progress, our good friend, Travis Pietila, of the Southern Environmental Law Center (SELC) spoke out last week’ Planning Commission meeting about this very issue:

“We need to make sure that the revenue to be gained from homestays does not lead to building new houses in the rural area that would not otherwise be built, and it’s critical that the limits put in place to keep that from happening are enforceable,” he said.

Pietila said that the 90-day limit proposed for whole house rental was too high and that a 30-day limit seemed much more appropriate.

“But a more fundamental concern is that the limits based on a number of days a property can be rented would prove unenforceable,” he said.

While we firmly disagree with SELC’s position that property owners should be restricted from building new homes on parcels that have that fundamental property right, we concur that limits based on a number of days would not only prove unenforceable – it not only starts a negative domino effect on transparency and taxation – it is an unfair restriction on property rights.

Negative Domino effect – if allowed to only permitted to rent my house on a short term basis for 30 days a year, that is exactly what some savvy property owner will claim.  If there is market demand for greater than 30 days a year (ie: weekend from April 15 to December 31 = 76 days), the incentive is to rent the space and not claim the rental on the TOT form, lower the BPOL payment, don’t report the rental revenue for 46 days of occupancy on state or federal income tax forms.

This scenario fits Investopedia’s definition of a Black Market:

Economic activity that takes place outside government-sanctioned channels. Black market transactions usually occur “under the table” to let participants avoid government price controls or taxes. The black market is also the venue where highly controlled substances or products such as drugs and firearms are illegally traded. Black markets can take a toll on an economy, since they are shadow markets where economic activity is not recorded and taxes are not paid. In the financial context, the biggest black market exists for currencies in nations with strict currency controls. While most consumers may shun the black market because they consider it sleazy, there may be rare occasions when they have no choice but to turn to this necessary evil.

What is gained by this charade?

More from Wrabel’s article:

Commissioner Pam Riley said she is concerned about the impact on local housing, especially as the county considers adding apartments and townhomes.

“The more you remove what could be housing units, really at any price range, from the long-term rental, you’re really exacerbating your affordability problem,” she said.

The Free Enterprise Forum finds itself again agreeing with SELC’s Pietila’s  economic analysis, if not his property rights restriction on that analysis:

Pietila said officials should consider limiting whole-house rentals in the rural area to existing houses.

“This would give existing homeowners the ability to earn some extra income and help defray housing costs, while reducing the risk of encouraging new house construction,” he said.

We have seen anecdotally, the short term rental income provides the revenue needed that makes the housing ‘affordable’.  If a unit (home, apartment, townhouse) has a monthly cost (mortgage/rent) of $900 a month and it is rented four weekend days at $150 a night, that generates $600 in revenue, this income helps offset housing cost.  Anecdotally, we have witnessed families visit their parents for football weekends and pay their entire monthly housing cost with the revenue.

Commissioner Daphne Spain is quoted in Wrabel’s article questioning the property owner rights regarding short term rentals:

…Spain said she noticed that many comments said that people should be able to do what they want with their homes to generate income.

“I don’t give much credence to that, because if they wanted to open a brewery or a speakeasy to earn money, or a brothel, that wouldn’t be allowed, so there are limits for the public good on what a person can do with their home and these are all residential areas,” she said.

Spain’s argument is really comparing apples and oranges. Unlike a brewery (or even brothel), the use of the property is still residential – it is just a question of the length of stay in residential.  How are the impacts different?

Which has more impact on me as a land owner, my neighbor renting out his house on weekends or a family with 5 teenagers moving in next door?

The reality we see from the Planning Commission is a clear anti short term rental bias.  Albemarle County would be wise to focus on mitigating any impacts of short term rentals [under existing ordinances] and skip any fatally flawed attempt to strangle this thriving new business with onerous regulations that are unlikely to be followed and will be impossible to enforce.

Respectfully Submitted,

Neil Williamson, President

Neil Williamson is the President of The Free Enterprise Forum, a privately funded public policy organization covering the City of Charlottesville as well as Albemarle, Greene, Fluvanna, Louisa and  Nelson County.

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Fluvanna Considers Short Term Rentals

By. Bryan Rothamel, Field Officer

If you operate a shImage result for airbnbort-term rental in Fluvanna County, bad news, it is a zoning violation. Good news, the Board of Supervisors wants to make it legal with limited government regulation.

The board was briefed on the item during its August 16 meeting because county staff was alerted to a new ‘bed and breakfast’ in the locality. It was a home listed on Airbnb.

Upon review, staff determined there was no legal way to operate such using the current laws. The supervisors gave overwhelming support to allowing the operation.

Currently if there was a complaint, staff would determine it was a commercial operation (hotel) operating in a residential zoned property. This would be a zoning violation.

Staff proposed making short-term rentals a by-right operation in residentially zoned properties. There would be no special use permit, there would be no need to register.

Still, even that Don Weaver (Cunningham District) was against. He wanted even less government regulation than that. Staff said unfortunately if the board wanted to allow the operations, the only recourse was to add it to the zoning laws.

A zoning ordinance change will have to go through the Planning Commission before it works its way back to the Board of Supervisors for final approval.

Also during the meeting staff briefed the board on approval of a grant for the burn building. The grant will help the county build a practice facility for the volunteer firefighters. The anticipation is the county will have to match up to $300,000 for the building.

One option staff previously discussed was getting donations or using staff man hours to ‘match’ the funds. For example, if a cement company donated the slab the building sits, the value of the cement would be considered part of the county match funding.

The county will soon be able to accept debit and credit cards along with online payments, through a contract with PayGov. The county will install multiple card readers throughout to handle various payment needs.

The lease with Fluvanna Christian Service Society (FCSS) is finalized. FCSS, which operates a food bank, will lease ground space behind Carysbrook Gymnasium. The lease is for $15 a month and FCSS can pay in yearly checks.

FCSS will put moveable sheds on the leased area. FCSS currently operates a shed and a stick-built building behind Social Services building, mere yards from the new location. The move will make it easier to load and service those in need. The county is buying the stick-built building from FCSS once the move is complete.

The supervisors will next meet on Sept. 6 at 4 p.m. There will be a work session scheduled for after. At the Sept. 20 session, supervisors will discuss the Emancipation Monument that will be donated.


https://freeenterpriseforum.files.wordpress.com/2015/10/bryan-rothamel.jpg?w=151&h=151The Free Enterprise Forum’s coverage of Fluvanna County is provided by a grant from the Charlottesville Area Association of REALTORS®and by the support of readers like you.

Bryan Rothamel covers Fluvanna County for the Free Enterprise Forum

Fluvanna Finances $8 Million for ZXR Water Project; Discusses Refinancing School Debt

By. Bryan Rothamel, Field Officer

The Fluvanna County Board of Supervisors have a tentatively agreed to finance the Zion Crossroads (ZXR) water project with $8 million of debt.  The county was approved to finance up to $8.5 million through the Virginia Resource Authority.

The ZXR project is projected to cost $10.2 million. The county has $4 million in cash savings, most commonly called the fund balance.  Supervisors debated how much they would feel comfortable financing between $6 million and $8 million and for how long.

“I would encourage you to go $8 [million],” said county administrator Steve Nichols.

OBrien2014 photo credit Fluvanna County

Tony O’Brien

Tony O’Brien (Rivanna District) said, “The more flexibility we have in regards to the fund balance, the better.”

The county was advised by staff to go no more than 25 years on the bonds to avoid financing a project longer than the project’s replacement cycle.  The estimated lifespan of the project is 50 years for the water tower, 15 to 20 years for mechanical parts and 70 to 80 years for the pipes.

“You should view this debt as an investment,” said O’Brien.

Don Weaver (Cunningham District) said, “It is definitely an investment.”

Also at the June 7 meeting, supervisors decided it will sit back and watch the market in regards to how to reinvest $58 million worth of bonds.  In third quarter 2018, the school bonds will have about a 100-day span where money can be reinvested. The proceeds of the investments would be profit for the county.

“I don’t think you will make less [later] than you are going to make today,” said Patricia Eager (Palmyra District).

The county explored a float agreement where the county would now offer companies an opportunity to invest money when the chance arises in 2018. The companies would pay the county now for the opportunity later.

Another option is to buy state and local government series (SLGS) securities. However, the government regulates when those can be purchased. Currently SLGS securities are not allowed to be purchased but it is expected to open again.

As the opportunity to reinvest the bonds gets closer, the float agreement becomes less advantageous because companies would not be ‘betting’ on the market. Another issue with the float agreement is the county would pay fees which would take away maximum income.

If SLGS window is closed during the reinvestment period, the county could purchase treasury bonds for a similar rate.

“In other words, [by not doing anything now] we are taking a risk?” said Mozell Booker (Fork Union District).

Eager responded, “Not a very big risk.”

The county administration recent discovered a new ‘bed and breakfast’. Staff has discovered 20 to 25 homes are listed on popular sharing economy website airbnb, where owners can rent out spare rooms to strangers.

The state now allows localities to regulate this new type of lodging options. Many localities have had an adversarial relationship with airbnb because many owners are failing to pay lodging (and business) taxes. [Albemarle County is considering a new lodging tax and business tax ordinance this Wednesday]

However Fluvanna has no lodging taxes. County staff asked the supervisors for direction regarding the issue. Weaver found no issue if renting your own home was legal.

“Have you had any issues?” Weaver asked and received a no. “Then leave it alone.”

County attorney Fred Payne said, “I think [the market] is so new, it is still shaking down.”

Staff offered an opportunity to require airbnb hosts to register with the county. “I think it is a very fluid market,” said O’Brien.

Staff research and return to the board with opportunities or regulations.

The next Fluvanna Board of Supervisors meeting is June 21 at 7 p.m.


https://freeenterpriseforum.files.wordpress.com/2015/10/bryan-rothamel.jpg?w=151&h=151The Free Enterprise Forum’s coverage of Fluvanna County is provided by a grant from the Charlottesville Area Association of REALTORS®and by the support of readers like you.

Bryan Rothamel covers Fluvanna County for the Free Enterprise Forum 

Photo Credit: Fluvanna County

Greene Discusses Legislative Priorities

By. Brent Wilson, Field Officer

As a part of their mission, the Thomas Jefferson Planning District Commission (TJPDC) has a Legislative Liaison who represents the interests and positions of the region’s localities before the state legislature and other state policymakers. Much of this effort occurs at the General Assembly during January-March of each year as well as, during the off season, attending legislative study committee meetings and other meetings of interest to local governments.

david-blount-photo-credit-charlottesville-tommorow

David Blount

David Blount serves as the TJPDC Legislative Liaison (serving Albemarle, Fluvanna, Greene, Louisa, and the City of Charlottesville).  In this role, he annually prepares and presents the TJPDC legislative agenda proposal to local elected officials and requests their input and in time their endorsement.   Tuesday night it was Greene County Board of Supervisors opportunity for review.

Surveys have been collected from all the counties and Charlottesville to help develop the legislative priorities for 2017.  Blount plans on getting information in real time as opposed to reporting at the end of the process. He also wanted to review the 2016 legislative plan since there are two new Supervisors on the board since he last met with the Greene Board of Supervisors.

The Top Priorities of the 2016 TJPDC Legislative Plan were:

1) public education funding

2) equalized revenue authority

3) state mandate and funding obligations

Related to public education funding, Blount commented that the General Assembly had raised funding back to 2009 levels and he hoped the state would protect that investment. The main issue for the 3rd item was that the state should not impose unfunded mandates and shift costs to localities.

Blount will present each of the member localities an updated draft program in October and requested that they respond to him by November.

He addressed several issues that will impact next year such as the state revenue gap of $1.2 billion. His understanding is that the budgeted 2% pay raises will be delayed along with dipping into the “rainy day fund” to help close the shortfall. clip_image002

In addition, Blount addressed the Airbnb bill , wireless infrastructure (cell towers), standard of qualities in education and the Virginia Retirement System (VRS). The VRS rate of return the past year (of 7%) is actually above the past two years rates. Chairman Bill Martin agreed with the three priorities and committed to working with Blount’s schedule.

Brent Wilson is the Greene County Field Officer for the Free Enterprise Forum a privately funded public policy organization.  The Free Enterprise Forum Field Officer program is funded by a generous grant from the Charlottesville Area Association of REALTORS® (CAAR) and by readers like you.  To support this important work please donate online at www.freeenterpriseforum.org