Homestay hullabaloo: State legislation could bring big change locally

Carolyn McGee, who owns The Inn at 400 West High, says there should be a level playing field for rules and regulations for all homestays. Photo by Eze Amos Carolyn McGee, who owns The Inn at 400 West High, says there should be a level playing field for rules and regulations for all homestays. Photo by Eze Amos

While only about one-third of more than 500 homestays operating in town are compliant with local rules and regulations, the city’s commissioner of revenue, Todd Divers, says proposed state legislation is slowing the process of tracking down offenders and demanding they pay up.

The limited residential lodging act introduced by Virginia Delegate Chris Peace, R-97th, if adopted, would restrict local jurisdictions from imposing their own regulations on limited residential lodging—think Airbnbs, inns and bed and breakfasts—and enable the state to collect and remit lodging taxes, rather than the locality. The state would keep a cut of the revenue as an administrative fee.

“Localities are concerned about a local revenue source being sent to Richmond before making its way home,” Divers says. “Thereby, subjecting it to the whims of a state government facing regular revenue shortfalls.”

In Charlottesville, regulations require those operating homestays to have a special-use permit and a business license. They must also pay a 7 percent transient occupancy tax to the city each time someone rents a room in their home, which they are required to live in.

“Those familiar with how the process works for sales tax are extremely leery of having the state involved in local tax collections,” Divers says. “There is little to no accountability. Localities have a very difficult time obtaining information on a timely basis to allow enforcement against businesses that fail to collect, or fail to timely remit, sales taxes, and the state doesn’t have the time or funding to engage in audits and enforcement on behalf of each locality.”

Divers says it’s important to remember that lodging taxes aren’t taxing local businesses, but essentially taxing visitors. And local homestay operators are allowed to impose an administrative fee to cover the cost of them.

“Most everyone involved would like all of these revenues to remain local,” he says.

Carolyn McGee, the president of the Bed & Breakfast Association of Virginia and owner of The Inn at 400 West High, is one of those people. But aside from doubting the state would responsibly collect, remit and report these taxes, she is most concerned with the number of homestay operators—namely the ones renting on Airbnb—who don’t follow mandatory regulations and the city’s failure to reprehend them.

“I fully support the entrepreneurship that Airbnb can provide,” she says. “However, it has to be fair competition.”

While regulations from the health department mandate minute details such as what time McGee must bake the cookies at her inn, she says she’s aware of numerous Airbnb operators who leave wine and snacks for their guests without any special permits. And they don’t have to follow the same parking and lighting rules that she’s subjected to.

“They’re doing exactly what I’m doing without all the extra finances involved,” she says. “Renting out rooms is the only way I can afford to own this historic home in the city.”

And though the rules for Airbnbers are much less stringent, she says the number of people who don’t follow them could cause trouble.

“I just really believe that smart, common sense, short-term rental rules are needed for everybody and [all homestays] need to be legal to protect Charlottesville from this really rapid growth of illegal properties,” McGee says. “I’m afraid it’s going to take a horrible tragedy in an Airbnb for everyone to get it.”

But Divers says any progress made by the city in regulating these operations has temporarily been halted.

“Right now, we’re not really going at people with a stick,” he says. “Eventually, we will.”

He adds that the city doesn’t want to enact new ordinances that could be nullified by the pending legislation, which will be reintroduced at the next General Assembly session.

Another major concern with the bill introduced by Peace is that it would allow homestays to operate without adhering to local zoning ordinances.

Charlottesville’s zoning ordinance was designed to protect the character of low-density residential areas, according to the city attorney’s office. While people are allowed to conduct “home occupations,” as they call them, they are subject to “reasonable” regulations designed to minimize impacts such as noise, traffic and the visual impacts of commercial use.

Mark Kavit, former North Downtown Residents Association president and current board member, says homestays have the ability to quickly change the appearance of neighborhoods if those zoning ordinances no longer existed.

“You could have a place next door to you, where you have people coming and going and you have no idea who they are,” he says, adding that two realtors have approached him and asked to buy his downtown home to turn it into an Airbnb. “People need to be aware that it’s having a dramatic effect on neighborhoods.”

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