Homestay business is booming thanks to Airbnb and local firms. Is it legal?

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Leathers-Snyder Bed & Breakfast owner Susan Lanterman wants the city to level the playing field for everybody running lodging businesses. Photo: Elli Williams Leathers-Snyder Bed & Breakfast owner Susan Lanterman wants the city to level the playing field for everybody running lodging businesses. Photo: Elli Williams

It takes a certain type of person to open up their home to complete strangers.

Woolen Mills resident Leora Brown, a social butterfly whose home is constantly bustling with friends and family, said she had no qualms about registering both her primary home and the two-story, playhouse-like “treehouse” in her backyard on Airbnb, a global online network that allows homeowners to become innkeepers, welcoming guests and turning their properties into income generators.

“You kinda do have to love people to do this,” Brown said, flipping through a guestbook with dozens of notes from visitors scribbled on colorful cardstock, thanking her for her hospitality and lamenting the impending return to the real world. “And I just love chaos. I’ve never liked being here without at least four people.”

The idea of making money and new friends just by letting someone stay in your place has growing appeal, as evidenced by the hundreds of local properties advertised on the Airbnb website, as well as through locally based short-term rental businesses. But as the money and guests flow in, officials in the city and county are investigating whether some of these rentals are violating local zoning and tax laws.

“We know they’re there, and we believe that some of them are not in compliance with city codes,” said City Neighborhood Development Director Jim Tolbert. “We’re looking into it.”

With more than 300 listings in Charlottesville and the surrounding counties, that could be a daunting task.

Homes to hotels 

As a popular tourist destination, Charlottesville is an easy place for a homeowner to turn innkeeper. Local property rental firm Guesthouses has been providing short-term rentals since the 1970s and features a website similar to Airbnb. The past decade has seen the number of such locally operating businesses grow to include Stay Charlottesville (in which C-VILLE co-owner Bill Chapman is a partner) and CollegeWeekends.com, but none compare to Airbnb for sheer volume. The popularity of homestays is due both to the ability they give property owners to bring in extra income with little effort and to the savings they can offer travelers.

A weeknight stay at the Holiday Inn on Route 29, for instance, comes in at $116, while 47 of the active Charlottesville listings on Airbnb offer rooms for less than $75 per night. 

“I really don’t see any downside to it,” said Brown, noting that she’s saved money by traveling with Airbnb hosts all over the place, including on her recent trip to Israel.

It’s been six years since the San Francisco-based Airbnb launched its website, and a recent Newsweek article states that the startup company is valued at close to $10 billion, with more than 300,000 current listings online. In Charlottesville, Airbnb listings range from $15 spare bedrooms in college apartment buildings to $750 a night for a four-bedroom 19th-century downtown manor.

According to the website, Airbnb takes a three percent service fee from the host’s revenue each time a reservation is booked, and tacks on to the guest’s payment a 6- to 12-percent service fee, depending on the price of the rental. Airbnb doesn’t check local zoning regulations to ensure listings are in compliance, nor does it charge money for lodging taxes in every locality, and that’s where the trouble has begun.

Last month, San Francisco officials introduced legislation that would limit the amount of time hosts could rent out their homes, claiming that homesharing creates even more of a challenge during the city’s affordable housing crisis. The new law would restrict short-term rentals to neighborhoods zoned for commercial use, require permission from landlords or homeowners associations, require insurance, and reward neighbors for turning in hosts skating past the rules. The proposal came shortly after Airbnb announced it would begin collecting the city’s 14 percent hotel tax on behalf of hosts, and making a similar agreement in Portland, Oregon. A few weeks later, in New York, the Attorney General’s office filed an affidavit revealing that 64 percent of city listings violated current legislation, and Airbnb removed thousands of New York City rentals from the website.

So what are local governments doing?

Airbnb isn’t just for big cities anymore, and neither is the controversy around it. Charlottesville and Albemarle County officials say they don’t plan to wipe out homestay arrangements, but they are interested in making sure renters are doing everything above board. 

In 2007, the City of Charlottesville adjusted the zoning ordinance to include three types of lodging under the “bed and breakfast” residential category. Inns are the largest, allowing up to 15 rooms; B&Bs can have up to eight rooms; homestays are allowed no more than three guest rooms, and food service is limited to breakfast and light fare for guests.  

According to City Zoning Administrator Read Broadhead, homestay hosts—which is what most Airbnbers would qualify as—must own a property in order to legally rent it out. Registering a home as a homestay in the city costs a one-time fee of $100, and the homeowner must apply for a home occupation permit through the Commissioner of Revenue’s office.

City Commissioner of Revenue Todd Divers said the city has no plan to quash an activity that’s “probably here to stay.” But in addition to abiding by the zoning regulations, anybody who’s providing temporary lodging should be paying the city’s 6 percent Transient Occupancy Tax which, according to the 2013-2014 budget, is an estimated $2,071,553—or, roughly 1.97 percent of the city’s general fund total revenue. (Local taxes aside, there are also state and federal implications. The IRS requires property owners to report all rental income for their properties.)

The Transient Occupancy Tax (or lodging tax), applies to any person paying for lodging for less than 30 days. The tax is collected by the lodging business—which includes the city’s multiple hotels, inns, and bed and breakfasts—and remitted to the city on a monthly basis. Both Stay Charlottesville and Guesthouses pay the Transient Occupancy and sales taxes. Airbnb, however, is a different story. 

“Charlottesville’s an innovative town, and this is innovative and exciting,” Divers said. “But we want to make sure those folks are contributing the way they should be.”

But making sure everyone’s playing by the rules is a tricky task, due to the sheer volume of properties listed on the website. The first step will be to nail down which homes qualify as homestays—which are allowed in every zoning district except mobile home parks—and which ones have crossed over into the territory of bed and breakfasts, which are restricted to four residential zoning districts. 

“A lot of these folks are operating in areas that don’t allow that particular type of activity,” Divers said. “We can’t exactly issue them a business license and start collecting taxes until we know they’re zoned properly.”

As evidenced by legal issues surrounding other businesses in residential areas—like the noise violation battles between the city and restaurants like Bel Rio in Belmont and Black Market Moto Saloon in the Woolen Mills neighborhood—zoning violations can result in legal hoopla and neighborhood outrage over traffic, noise, and excessive activity in what used to be quiet neighborhoods. 

“We want to make sure these people are good neighbors,” Divers said of Airbnb hosts. “We have zoning laws for a reason.”

Albemarle’s current regulations are looser than Charlottesville’s, but spokesperson Lee Catlin said the county, like the city, is starting to think more about it. The Board of Supervisors has already “streamlined the process” of setting up transient lodging, she said, but county staff are looking into establishing more firm guidelines to address safety concerns and issues of lost revenue.

“It’s about creating a level playing field for those in our hospitality industry who are already complying and paying their fair share, and making sure they’re not at a disadvantage to people who have not been doing that,” said Catlin.

According to Albemarle County Zoning Administrator Amelia McCulley, the current county zoning ordinance does not differentiate homestays from bed and breakfasts. In the rural area, any residential property with up to five guest rooms associated with a single-family residence is considered a B&B. Homeowners are supposed to go through a review process with the building and fire code officials, and the zoning department looks at parking.

In terms of existing rentals that may be in violation, though, McCulley said the county “isn’t manned to be proactive, nor has the Board identified that they want us to look for complaints.” 

“We’re responsive,” she said. “Our goal is voluntary compliance.”

  • Thomas Kelo

    Cities trying to crack down on the sharing economy, start up businesses like Airbnb, Uber, and Lyft are the cities where the politicians are bought and sold by special interests. These crack downs are entirely to benefit entrenched businesses at the expense of the local resident consumers and the providers of these new services.

  • r.ralf

    The issue with the Moto Saloon had nothing to do with it being in a residential area. Its problem was that the owner put a music hall in an area zoned M-I. That zoning requires a special use permit for music halls. The owner went ahead and operated illegally as a un-permitted music hall for many months despite having been given warning at the time his certificate of occupancy was issued that he could not do so legally. He then cried like a baby after he got caught breaking the law.

    http://tinyurl.com/MotoSaloonLoftListing

    The airbnb listing shows that he then went on to operate a B & B in a rented apartment in a zone which does not permit that. Either would be illegal.

    The sad part of all of this is that a few people who don’t respect their neighbors and who make a nuisance of themselves can spoil a good thing for everyone else. I’d like to think we don’t need laws regulating any of this stuff, but time and time again someone proves that we do unless we want to deal with chaos next door.

  • Emily

    I love airbnb! We started hosting about a month ago after some really positive experiences as guest. It is a great opportunity to show off our city and tout our favorite locally owned and operated businesses. There is space for lots of different types of accommodations. For example, recently we hosted a vegan cookbook author that spends most of her time volunteering abroad. Airbnb offered her an affordable homestay with a kitchen, a hotel or bed and breakfast would not have worked for her. Play by the rules and live and let live. :)

  • DJCCHV

    I can’t claim inpartiality. I’ve used AirBnB and I have a close friend who opens her house through AirBnB. I would like to point out that there are distinct differences between what their members offer and a regular BnB. They pick and choose when to open their homes. For example, a family with a child away at college might offer that room only during the months that the child is away. They might choose only to rent to internationals. There are all kins of options. And what they offer is also quite different. My last stay with AirBnB involved a labradoodle who took a liking to me and wanted to share my bed as well as shairing the bathroom with the house owner. I could also cook in the kitchen if I wanted.

  • DJCCHV

    The system wouldn’t let me finish. AirBnB offerings may not be up to BnB or hotel standards, but that means they can offer prices that i can afford. It makes it possible for me to travel. And you know what? I often end up in conversations with the owners which involve me telling them about Charlottesville and why it would be a good place for them to visit using some of the money they’ve made with their AirBnB offerings. Consider that if you will.

  • Scott Wiley

    ” As an active host on Airbnb, and member and moderator of
    the local host group, I had several responses. We encourage our fellow
    hosts to comply with all local taxes and licensing. Airbnb automatically reports
    all income for federal and state filing purposes. Your article thus failed to note
    that, by default, we comply and pay the bulk of our tax obligation before we even
    register and submit the city/county portion.

    Many of us are motivated by the “sharing economy” concept as much as for purely generating income. As you noted with Leora, she donates some proceeds to charities, and I have provided free lodging to active military, and families of patients at UVA Medical Center. We also bring people to town that might not normally come, or stay in tradition lodging. Personally, I often choose a travel destination
    based on availability of an Airbnb host to stay with.

    The concerns as expressed by traditional B and Bowner(s) seem somewhat unfounded. The reason I chose to join Airbnb specifically was the public and rigorous evaluation of both hosts and guests. I get reviewed bymost of my guests, 26 so far. This allows them to make public comments, offer private feedback to me, file complaints to the organization if ever needed, and, lastly, provide anonymous ratings on cleanliness, value, location, and accuracy. Prospective guests can then review this detailed feedback to decide where to stay. Airbnb also receives and disburse any funds, so there is never an issue of guest refund delay upon cancellation. I am unaware of anything available to traditional B and B hosts that even comes close to this process of financial accountability, guest feedback, quality monitoring, or conflict resolution.

    Finally, I was disappointed in the headline”Is it legal?” since I failed to find any information in the article to support that as a headline. At most the question locally would be: “Are we in compliance with registration and tax reporting?” By this logic one might propose that the person who sells eggs to friends at work is less “legal” than we are.

    • whoopsupsideyourhead

      Re: the headline asking “Is it legal” and your inability to find justification within the article. What about this part of the article? ““We know they’re there, and we believe that some of them are not in compliance with city codes,” said City Neighborhood Development Director Jim Tolbert. “We’re looking into it.””

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