Council sets the stage for more short-term rental regulations, with tax collection to begin in April

​​The city will soon begin requiring platforms such as Airbnb and Vrbo to collect and remit Hotel Occupancy Tax revenues on behalf of short-term rental properties, marking the first in a number of expected changes in the industry. The change, which goes into effect April 1, is aimed at closing loopholes that have allowed thousands of unlicensed rentals to operate without paying taxes.

While City Council largely agreed on the necessity of tax collection, the broader discussion on STR regulations, enforcement and implementation timelines proved more contentious. Council members debated whether the new policies would open the door for a surge in short-term rentals, how they would impact affordability, and how enforcement technology could be used to identify unlicensed operators.

Along with requiring STR platforms to follow through with hotel tax collection, Council approved two other resolutions that set the stage for the passage in the fall of greater regulations and enforcement mechanisms for STRs. Those changes will in large part hinge on possible moves by the state Legislature this summer that could further limit the city’s options for restricting the operations of STR sites.

Many of the regulatory changes were delayed until Oct. 1, when the Legislature is expected to have concluded.

Development Services Department staff will move forward with the solicitation of software and other tools needed to effectively monitor listings and other relevant data needed to enforce STR sites once the new regulations go into effect. That lead time will also allow the city to revise its licensing fees and other costs, which are currently substantially higher than other cities throughout the state.

Under the new ordinance, hotel taxes will be collected from all STRs via the listing platforms, regardless of whether they are licensed. Council members emphasized that this step was critical to ensuring that STR operators contribute to city services, cultural programs and infrastructure in the same way traditional hotels do.

“Every single day that we’re delayed in working with or getting and acquiring the right type of software, are days that we’re losing out on thousands of hotel tax dollars that support our cultural and art scene and so much more,” Mayor Pro Tem Vanessa Fuentes said. “(T)his motion … is that we expedite these solicitations because it is the number one thing we can do for the enforcement and regulation of short-term rentals today in our city.”

Council Member Marc Duchen expressed caution and a need to move more slowly in selecting the enforcement measures and tools needed to regulate and tax STRs.

“Whether we’re interested in the tax remittance angle of the technology or the enforcement of the quality-of-life issues, or even the enforcement of the potentially new rules that we might be coming up with over the summer surrounding density or whatever other requirements we focus our energy on, I’m really hopeful that we select someone who we think has the right technology in this space to ultimately identify what could be thousands of scofflaws or bad actors or just anybody trying to avoid paying taxes,” he said.

Looking toward the regulatory decisions that will be made in the fall, Council Member Ryan Alter advised staff to make it as easy and inviting as possible for STR operators to complete the licensing process and want to stay in compliance.

“I would just encourage you as much as possible to have at least the license piece be simple. I envision someone who wants to do this, they want to comply, they go online, they try to do it, and all of a sudden they’re asked to do 10 different things and they’re going to say, forget it, I’m just going to list on Airbnb and be done with it,” he said. “The degree to which we can make this … a single transaction that in the moment gets you that license, I think we will see more compliance.”

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