So, another inn in the greater Londonderry area has closed its doors. An all too familiar sight these days. By my count, the area has lost at least eight inns over the past few years. Some remain abandoned, deteriorating properties. That’s eight once thriving businesses that paid sales, payroll, and real estate taxes along with providing approximately 100 jobs for the local community who then paid income and real estate taxes, etc.
Juxtaposed against this alarming trend, we also recently saw three new what the state has classified as “internet-based short-term rental” properties appear. Some might call this trend the inevitable “creative destruction” that always follows technological advances, but they would be sorely mistaken. This is destruction, pure and simple. There is nothing “creative” about it. And, what should be most distressing to the general population, it is being done with the tacit approval of the state of Vermont.
We have all heard of AirBnB, the most popular and ubiquitous of the “internet-based short-term rental” websites. Others include FlipKey, HomeAway, and VRBO. Their business model, if you will, is simple “granny aging in place.” Grandpa has passed, the kids are all grown and living elsewhere, and granny needs the additional income that “home sharing” provides to help make ends meet. Nothing succeeds like tugging at your heartstrings! I’m all for it.
The problem is, that’s not the reality. And the local communities are paying the price for this “bait and switch.”
The truth is, in the state of Vermont, over 75 percent of the “internet-based short-term rentals” are not “granny aging in place” but second homes. Even more distressing, some are full-scale businesses run by an out-of-state rental agency. They are not registered with the Vermont Secretary of State. They neither collect nor pay the Meals and Rooms Taxes required, and they are completely unlicensed and unregulated as the traditional inns and B&Bs are.
I recently read a piece in a local weekly where AirBnB bragged about the $850,000 per year in sales taxes it has provided to Vermont over the last two years. Unfortunately, that number pales in comparison to the amount of tax revenue the state has lost due to the wanton destruction of the country inn and B&B industry throughout the state.
By my reckoning, just the eight inns that have disappeared in the greater Londonderry area provided the state with approximately $400,000 per year in tax revenue. Multiply that amount by the number of other local areas that have experienced the same destruction? You get the picture. The amount of lost revenue is far greater than that provided by AirBnB, who, I might add, is the only internet-based rental site to date that provides any tax revenue to the state.
Additionally, the money generated by these rentals is not circulated locally as it is with traditional inns and B&Bs. It’s deposited in out-of-state banks and spent in those communities, not where the rental is located. Even more distressing, add to that the many jobs lost, never to return, and you start to get a complete picture of the destructive effect this trend has had on the local communities.
Now, consider how those few internet-based short-term rentals that do provide some tax revenue to the state really work. As I have been informed by those who use these sites, when you first rent a property, you are provided the cell phone number and email address of the property owner. If all goes well, the next time you rent, you can bypass the internet site altogether. The owner will even reduce the price, making more money in the process. No 3 percent to the website owner, and no 9 percent to the state. And the state has no ability to audit these rental companies.
Vermont has always had a healthy home rental business. But it was limited by law to seasonal rentals of at least 30 days. Ski season condo rentals, summer vacation rentals, etc. The local inns and B&Bs dealt exclusively with the short-term rentals – weekends, holiday periods, etc. Both existed side by side to the benefit of the local community and state coffers. Then, for some unknown reason, the state became mesmerized by the ability of the internet to make rental properties more easily available to more people and concluded a new business model had been invented. Not quite. It’s the same old business model, just with some new bells and whistles.
If all this sounds like sour grapes, rest assured it isn’t. All the hospitality industry has asked of the state of Vermont is a level playing field. We are all for helping granny age in place, and local families that need the extra income participating in “home sharing,” as long as it really is their home and not a vacation house they just don’t use as much as they used to. We only ask that they regulate the “internet-based short-term rentals” that are not a primary residence the same way they regulate traditional rental properties.
After all, we too qualify as “internet-based short-term rental” properties. The whole purpose of state regulations in the first place was to ensure the travelling public that local inns and B&Bs in Vermont met a minimum standard of cleanliness and safety that would be reassuring to them.
For some unknown reason, that rational thinking is now out the window. Unless, of course, you are a traditional inn or B&B. Then all the seemingly rational requirements still apply to you. But, not to the out-of-stater who owns a vacation home across the road from your property and doesn’t seem to use the house as much anymore and now has it listed on one of the internet sites for some additional income. You get the picture.
Written by Tom Checchia, Landgrove, Vt.