A Hidden Tax That Could Price Us Out of Our Homes

Imagine opening your mailbox to find a notice from a little-known government office that could upend your life overnight.

For people from Santa Fe to Saint Louis, that’s their reality, as county tax assessors are increasingly mandating that people who open their homes to guests pay commercial property taxes.

These unfair, illogical reclassifications often hit taxpayers with significant surprise property tax hikes, causing those operating short-term rentals to either pay steep taxes or cease operations – no matter how infrequently they may host guests.

When faced with this decision, many hosts simply shut down operations. By driving responsible short-term rental hosts out of business, tax assessors are restricting the economic opportunities for their own constituents, especially those who rent their homes occasionally to help make ends meet.

This harms hosts, but visitors suffer too. Across the country, short-term rentals go where hotels don’t and provide a flexible and affordable option for travelers. Data shows that in two-thirds of US Census tracts, short-term rental hosts are the primary providers of local accommodation and drivers of local tourism.

And there are even more serious, fundamental concerns. By equating individual homeowners with large hotel companies, these reclassifications directly violate the constitutional rights of local community members.

Some communities are pushing back. In Jackson County, Missouri, county legislators recognized the harms of reclassification and its adverse impact on accommodation availability during the upcoming World Cup Games in Kansas City. This led them to pass a countywide ordinance reversing and temporarily prohibiting the practice.

Other cities, like New York, are learning the hard way about the damning effects the prohibition of short-term rental can have on the costs of lodging as well.

Last year, after severely limiting short-term rentals, New York City’s average monthly rate for a hotel room rose to a record-breaking $417 a night. During that same time frame, a report by HR&A advisors found that this anticompetitive law cost the boroughs outside Manhattan $1.6 billion in projected visitor spending, over 15,700 fewer jobs, and $573 million in worker earnings.

With less options for accommodations, residents lose vital income and tourists pay more. To make matters worse, New York City recently reported a massive decline in job growth for the first six months of this year, in part due to a decline in tourism and a downturn in the hospitality industry.

The consequences of anti-short term rental policies extend beyond rising lodging prices and its threat to tourism. They also remove a valuable relief tool for homeowners, who may be able to weather economic hardships by renting a room or accessory dwelling unit (ADU).

Short-term rentals also provide additional income for prospective homebuyers who need to take on significant amounts of debt to afford a house due to rapidly increasing housing prices and interest rates.

But if offering property as a STR immediately transforms a house from residential to commercial, fewer people will be able to take advantage of the opportunity presented by STRs.

Simply put, renting out a home occasionally does not transform the property into a commercial enterprise any more than a garage sale transforms a home into the local mall or providing music lessons to local kids turns one’s home into Carnegie Hall.

Ultimately, these reclassifications unduly trample on the rights of all homeowners, but particularly those who share their place for a few weeks a year to make ends meet. Making it more expensive for short-term rentals to operate will harm visitors, as well, who will have to pay more for limited accommodations. This has been demonstrated in other cities who have outlawed short-term rentals. This is a losing proposition for everyone involved.

David Williams is the President at the Taxpayers Protection Alliance. Adam Kovacevich is the Founder and CEO of Chamber of Progress.

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A Hidden Tax That Could Price Us Out of Our Homes