The city of Berkeley could pull in an estimated $800,000 in new taxes on short-term rental units by the end of June, aided in part by an agreement with Airbnb to help collect that money, according to a Nov. 3 memo from the city manager to the Berkeley City Council.
The city estimates there are 1,000-3,000 short-term rentals in Berkeley — found on websites such as Airbnb, VRBO and HomeAway — and has been working in recent years to find a way to regulate them. Under its new rules, approved by council in April, short-term rental hosts must now register with the city and pay a 12% transient occupancy tax, along with a 2% enforcement fee on each transaction, and a $220 annual fee, according to the city website. Hosts must register by Jan. 15, 2018, though taxes will be collected going back to Sept. 1 of this year. Hotel guests already pay the transient occupancy tax, but short-term rentals have not — until now.
Dee Williams-Ridley told city officials in her memo that Airbnb agreed, at the end of October, to collect the transient occupancy tax on behalf of its hosts. Williams-Ridley said negotiations have been underway for several months between city staff and Airbnb, and that a contract has nearly been finalized. According to the city manager’s memo, the Airbnb tax money will begin flowing in December.
The city expects to collect about $800,000 during the current fiscal year, which ends in June, from its overall short-term rental stock. That’s based on a “conservative estimate” of the number of units and rooms on offer in Berkeley, Williams-Ridley wrote. The following year, in 2018-19, the city expects to collect at least $1 million. Williams-Ridley said all the new tax money will go into the city’s General Fund.
The city of Berkeley has been working since at least 2015 to regulate short-term rentals — which have technically been illegal in Berkeley until this year. The issue has been contentious, in part because some property owners have reportedly taken long-term units off the market and offered them on a short-term basis only. Smaller-scale hosts have repeatedly told city officials that short-term rentals must be allowed, in part, because the practice has helped them afford to stay in Berkeley. The city has been attempting to find a way to protect its housing stock and address the concerns of short-term rental neighbors, while also allowing residents who need the income to continue to earn money.
The city sent a letter in August to short-term rental hosts saying they now need to apply for a zoning certificate that would allow them to operate in Berkeley legally. The city also announced eight “how to” sessions to help hosts learn about the certificate application process. (One of those sessions is Tuesday, Nov. 7, from 5-7 p.m. in the city’s Computer Training Room at 1947 Center St.)
The tax money and enforcement fees must be paid to the city on a monthly basis, according to the city. An online payment portal is now live.
According to the city’s rules, property owners are not allowed to offer, as short-term rentals, below-market-rate units; accessory dwelling units built after April 1, 2017; units that have been used as long-term rentals since April 1, 2007; or units that had a no-fault eviction within the past five years.
In addition to the taxes, short-term rental hosts are required to notify residents of all adjacent properties about the rental offerings, and give all guests a letter from the city on booking and arrival. The letter alerts guests to rules about smoking and noise, and provides some basic information about recycling.
The city has also created a 24-hour compliance line, 833-300-0787, to collect complaints about unpermitted short-term rentals or nuisance problems. Learn more about short-term rentals on the city website.
Jasmine Mora, a spokeswoman for Airbnb, said Tuesday that some cities use the transient occupancy tax money to help pay for homeless services, while others funnel it into the General Fund. Mora said hosts want to pay their fair share of taxes, but it can be a hassle to figure out on their own.
Airbnb already collects transient occupancy taxes on behalf of its hosts in more than 300 other jurisdictions, including many in California, according to its website: “This doesn’t change which taxes are due, but automating the process makes tax collection easier for all parties involved.”
According to the Airbnb website, the tax is added to the guest’s bill; it does not come out of the money the host collects. Mora said the company has not seen significant rental rate increases, in the past, when a tax collection agreement goes into effect. That’s because hosts still want to offer competitive prices for the market, she said.
Although the transient occupancy tax will be handled automatically, Airbnb hosts in Berkeley will have to pay the 2% enforcement fee on their own, said Matthai Chakko, city spokesman, shortly after publication.