Spokane Journal of Business

Short-term rentals, long-term fix

Scores of vacation home operators aren’t licensed; city seeks compliance

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-—Mike McLean
Donna deBit, assistant city planner, says she believes most vacation rental operators in Spokane aren’t aware of the city’s licensing requirements. Only eight such operators had secured licenses as of last week.

The planning department for the city of Spokane is trying to get the word out that short-term rental operators using online home-stay networks such as Airbnb and VRBO are required to obtain licenses from the city and state.

The Spokane City Council adopted a short-term rental licensing ordinance last year.

Donna deBit, assistant planner at the city’s Development Services Center, says Airbnb often has more than 100 listings for lodging in Spokane, yet only eight short-term rental operators had purchased licenses as of last week.

“There’s still a lot of rentals in Spokane that haven’t come to get a license, and it’s time for those who’ve gotten one to renew it,” she says. “Not a lot of people know about the license or that they need to get one.”

DeBit says Spokane is the only jurisdiction she knows of in Spokane County that requires short-term rental operators to obtain such licenses, although it’s becoming more common throughout the country for cities to regulate them.

Short-term rentals, which are sometimes known as vacation rentals, are defined in the ordinance as individual dwelling units, including single-family residences, duplexes, apartments, and condominiums, or bedrooms within them that are rented to overnight guests for fewer than 30 days.

The ordinance was created due to zoning complaints, deBit says, adding, “Whether complaints were from neighbors or other lodging providers, I don’t know.”

Toni Hansen, executive director of the Spokane Hotel Motel Association, says that organization wasn’t involved in creating the ordinance, but it supports such regulations to help keep competition fair.

“The issue is not about somebody renting out a room occasionally,” Hansen says. “It’s about when someone jumps over the line and becomes a business that’s not regulated like ours.”

One concern here, she says, is whether short-term rental operators are paying their share of lodging and tourism-promotion taxes.

Local lodging taxes apply to most hotels and motels. On top of regular sales tax, Spokane-area hotels are assessed a lodging tax rate of 1.3 percent of sales in addition to a 2 percent tax assessed by the Spokane Public Facilities District.

Hansen says the hospitality industry is watching efforts to regulate short-term rental operations in markets where it’s a bigger issue, such as in San Francisco and New York.

Keith Kelley, owner of Vintage Rentals LLC, of Spokane, was in the stakeholders group that helped draft the short-term rental ordinance.

Vintage Rentals has operated Lillie’s, an ornate vacation rental home at 1503 W. Indiana, for four years, although the company plans to sell the property next month.

“We were always registered with the state and the federal government for business,” Kelley says. “But the city didn’t have a process for a business like ours to register.”

When conventional lodging providers complained about the lack of regulation regarding vacation rentals, a group came together to work on a fair ordinance, he says.

“The final ordinance is not too onerous to navigate,” he asserts, adding, however, “It definitely has greater tax implications than those for traditional rental properties. Our endeavor was not to take advantage of an opportunity not to pay taxes.”

The goal of the group was to create a progressive, business-friendly ordinance that allowed vacation rentals to coexist with conventional lodging, he says.

Kelley says vacation rentals have been operating long before the internet and Airbnb. He contends that competition between vacation rental operators and hotel-motel operators is overstated.

“They are two different markets,” he says. “There’s a lot of reasons people need to stay in a home. Hotels aren’t designed to be super family friendly when everyone’s in the same room.”

Spokane’s short-term rental licenses cost $150 for the first year and $100 for renewals.

DeBit says the license fee is the same whether the operator rents out one bedroom or an entire residence.

Short-term rental licenses obtained after Sept. 30 in any given year are good through the end of the next calendar year, deBit says. License renewals for the next calendar year are required before the end of December.

Short-term rental operators are required to notify abutting neighbors about their operations as part of the licensing process.

“So far, it’s been working,” deBit says. “The ones who’ve gotten licenses have followed through with (notification) documentation.”

Short-term rental operations are prohibited in properties within certain homeowners associations, she says.

“A homeowners association’s bylaws might not allow it, and that overrides these regulations,” she says, adding, however, “We haven’t run into that yet.”

Though many apparently nonlicensed short-term lodging operations are visible through sites such as Airbnb, deBit says the city isn’t currently “headhunting” for violators.

“We have a complaint-based enforcement system,” she says. “If neighbors are calling, we take action and send code enforcement out.”

She advises, however, “It’s cheaper to get a license and renew it rather than risk getting fined.”

A violation of the short-term rental license requirement is a civil infraction subject to fines of $125 to $250 depending on the severity of the violation, according to the ordinance.

DeBit says short-term rental operators also need to get a city business license.

Unfortunately, she says, there’s no one-stop shop for both licenses.

“We issue and renew short-term rental licenses,” deBit says. “Business licenses are regulated by the Washington state Department of Revenue.”

Spokane short-term rental license applications can be submitted at the city’s Development Services Center on the third floor of City Hall. Business licenses can be submitted online or by mail to the state Department of Revenue.

The general business license fee for doing business in Spokane is $113 plus a $10 to $20 per-employee fee and a $19 application fee charged by the Department of Revenue.

Marianne Bornhoft, a real estate agent with Windermere\Manito LLC, says she’s been contacted by two officials in other cities who are considering using the Spokane short-term rental ordinance as their model for regulating home-stay rental operations.

Bornhoft, who, like Kelley, was part of the stakeholders group that helped shape the ordinance here, says growing competition between vacation rental operators encourages them to keep their properties in top shape.

“If you’re going to be in competition, you’re going to do whatever it takes to make sure everyone is happy,” she says.

Bornhoft asserts such ordinances help prevent potential land-use conflicts in communities.

“I think it has a positive impact,” she says.

Some people are buying and fixing up homes here just to market them as short-term rentals, she says.

“I have one client who bought a neglected property that was literally falling down, and she restored it,” Bornhoft asserts. “The neighbors like that.”

The client’s property attracts people from all over the world to Spokane, she claims.

Regulated short-term rentals also provide a source of tax revenue, she says.

“The state is diligent about going after people who aren’t paying taxes,” she says. “We want to be part of the economy and do the right thing by being licensed.”

Mike McLean
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Deputy Editor Mike McLean has worked his entire journalism career in the Inland Northwest. Mike, who also lives to reel in fish and crank up music, has worked for the Journal since 2006.

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