N.J. towns, state government move to regulate short-term rentals

Christopher Lang, NorthJersey.com

Short-term rentals offered through Airbnb, FlipKey and other websites have faced little in the way of regulation in the Garden State, but efforts to impose some kind of order on the industry appear to be picking up.

In North Jersey, at least 10 municipalities have approved policies placing tighter restrictions on short-term rentals since July, while others are debating whether to follow suit, concerned that the practice has had a negative impact on the quality of life in residential neighborhoods. The municipal laws require a minimum stay of 30 consecutive days; violating hosts face daily fines – as low as $250 in Woodcliff Lake and up to $2,000 in East Rutherford.

Lyndhurst moves on Airbnb ban

Lawmakers in Trenton, however, are taking a different tack, retooling a bill that would impose sales and use taxes on short-term rentals and pushing separate legislation that would create a host registry. Both represent an attempt, supporters say, to level the playing field between the home-sharing and hotel industries while creating new sources of revenue in the form of sales and occupancy taxes and fees that the state and municipal governments can collect on the stays.

“If you say Airbnb can’t take part in the state at all, or companies like that, you’re really limiting what people want,” said Shane Derris, chief of staff for Assemblywoman Annette Quijano, D-Union, the deputy majority leader and a co-sponsor of the bill that would allow the stays to be taxed. Airbnb, he added, “is popular because it’s needed and, [in] some places, because people just want it.”

Airbnb, founded in 2008 and based in San Francisco, now has more than 2.5 million users worldwide and values itself at $30 billion. While it has transformed the lodging landscape, its fast growth has been met with resistance from communities, states and its rivals in the hotel industry, who say the short-term-rental industry is hurting hotels and the housing market, as well as eroding the quality of life in neighborhoods.

In a statement, an Airbnb spokesman, Peter Schottenfels, said: “We support efforts to help our host communities pay [their] fair share of taxes in New Jersey.”

N.J. bill seeks to regulate Airbnb-type rentals

In October, Fort Lee imposed a 30-day minimum stay for short-term rentals after borough officials found that some Airbnb guests were using hosts’ homes for large parties. Officials in Cresskill approved a similar restriction in August after fielding complaints, mostly about a home on Hillside Avenue. Last month, Ridgewood became the latest municipality to adopt a policy mandating a 30-day minimum stay, with daily fines of up to $1,000 for violators. The Lyndhurst council is also considering placing limits on short-term rentals, and plans to introduce an ordinance at an upcoming meeting.

“These are always tough decisions, because you certainly don’t want to deprive taxpayers and homeowners of the ability to generate income,” said Mayor Mark Sokolich of Fort Lee. “But you have to juggle that with quality-of-life issues. If you’re renting a house in Fort Lee, this isn’t the Caribbean; you’re doing it because you want access to New York City.”

In 2016, Bergen County Airbnb hosts earned a combined income of $2.3 million from about 10,000 guests, according to information provided by Airbnb. A typical host’s earnings were $5,100. The numbers were much lower in Passaic County, perhaps because most locations are a longer ride from New York. Airbnb reported that 2,200 guests visited the county in 2016, generating $369,000 in revenue for hosts, who earned an average of $1,730.

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Hosts say that efforts to impose minimum stays and other restrictions on short-term rentals deprive them of a way of making money, and such moves also risk punishing responsible hosts for the misdeeds of a few.

“Airbnb has certainly helped me pay the taxes, [make] repairs on my home, upgrade my plumbing,” said Susanne Warfield of Ridgewood, who has rented out several rooms in her home for the last two years

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Warfield said she made $14,091 as a host last year. Since Ridgewood adopted its short-term-rental ordinance Jan. 11, she has been wondering how she will make up that lost income.

“Something has to be done, or I’ll move,” said Warfield, a 14-year village resident. “Do I go out and look for another job now? What do I do?”

Warfield said she has asked former guests and her neighbors to submit letters in support of overturning the ordinance and has requested a meeting with village officials to discuss her predicament.

“There could have been a better way with the written language [in the ordinance], to protect the owner-occupied home,” she said. “I pay very high taxes in this town. This is a big nut to carry.”

Generating revenue

New Jersey municipalities seeking to mandate minimum stays for Airbnb guests may be taking a cue from New York, where it has been illegal since 2010 to offer an entire apartment for rent for less than 30 days. In October, Gov. Andrew Cuomo signed a law calling for fines of up to $7,500 for illegally listing a property for rent through Airbnb or one of its competitors. Last month, Airbnb agreed to drop a lawsuit it had filed challenging the new rule so long as New York City seeks to fine hosts found to have violated the law and not fine the company itself.

Sokolich understands that Fort Lee could have benefited from allowing more unfettered access to short-term rentals, given its proximity to New York City. In conjunction with the proposal to give municipalities the option to collect an accommodation tax, it would have given the borough a new source of revenue.

Asked about Fort Lee’s move to effectively pass up a chance to collect that revenue, Sokolich said: “It’s not always about the money. This is a conduit for every bad guy to get to the city. We want to know who lives here. We want to know our neighbors. We take incredible pride [in] providing safety and security for our residents.”

In Jersey City, another population center just across the Hudson River from Manhattan, the local government decided to work with Airbnb. Now anyone who rents an apartment through the site is charged the same 6 percent tax that the city imposes on hotel stays. City officials have estimated that the tax could generate $600,000 to $1 million annually. Newark reached a similar deal with Airbnb in the spring, adding the 6 percent tax on online home-rental services. City officials estimated that the tax would generate $750,000 in the first year.

By negotiating these agreements, Jersey City and Newark, the only two municipalities in the state that have levied a tax on hotel stays, are striving to bring a level of parity between short-term-rental sites and the hotel industry.

Some New Jersey lawmakers are looking to strike a similar balance.

Quijano and Assemblywoman Valerie Vainieri Huttle, D-Englewood, co-sponsored the bill that would tax short-term rentals at the same rate as hotel stays. Earlier this month, Huttle introduced a separate bill that would require licensing and regulation of hosts who rent out their homes or rooms through short-term-rental websites.

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Huttle’s proposal would give municipalities the option to allow residents to serve as hosts or to restrict the practice. Towns would be required to adopt an ordinance in either case. For towns that allow short-term rentals, each host would pay a $50 registration fee year to remain active, with the money being split equally between the municipality and the New Jersey Affordable Housing Trust. The hosts also would have to prove that they have at least $500,000 in property liability insurance or that the same amount of coverage is provided by the website where they listed their property for rent.

The bill also limits hosts to registering one residential unit. Critics of Airbnb in New York have said that commercial operators with multiple listings on the site are helping to drive up the cost of housing in the city.

Hosts who violate the law would face $500 a day in fines while a vacancy is listed on a short-term-rental website.

The measure “ensures that we know who in our neighborhood is renting out their home on Airbnb and other short-term-rental websites,” Huttle said. “This legislation ensures the continued growth of these types of businesses while keeping our neighborhood safe.”

Huttle sees her bill as giving towns direct oversight over short-term rentals. Meanwhile, she and Quijano have been busy updating the bill they are co-sponsoring.

Under that bill, short-term-rental sites would be subject to the state’s 6.875 percent sales tax and a 5 percent accommodation fee from guests on transactions. Municipalities also could choose to charge an accommodation use fee of up to 6 percent, based on the town’s population. It also defines a short-term rental as being less than 90 consecutive days.

“We admire Assemblywoman Quijano’s vision and leadership on this issue,” said Schottenfels, the Airbnb spokesman. “And [we] are proud to have worked with her on a bill that will allow the Airbnb host community to contribute their fair share of taxes to the Garden State.”

The measure is meant to have the freewheeling short-term-rental market operate under rules similar to the ones the hotel industry follows. If it is approved and signed into law, New Jersey would join at least 10 states that have adopted similar policies.

However, the New Jersey Sales and Use Tax Review Commission recommended in November that lawmakers not adopt a bill that would establish a tax on Airbnb-style rentals. The commission, created in 2000, reviews bills that would expand or reduce the state’s sales and use tax.

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In its report, released Wednesday, the commission recommended that lawmakers change the definition of a “hotel” to include Airbnb-style rentals, making accommodations booked through a website or other method subject to the same tax laws.

The commission’s opinion has not halted efforts to secure passage of the bill. Members of Quijano’s staff have met with representatives from Airbnb and those supporting the hotel and lodging industry, Derris said.

The bill was referred to the Assembly Tourism, Gaming and Arts Committee in September. The companion bill in the state Senate was referred to the Budget and Appropriations Committee.

“We are very close to finalizing the updated version of this legislation,” Quijano said in a statement. “My initial bill was intended to highlight the importance of addressing the issue as soon as possible and to bring the different interests to the table. This updated legislation, which I have been working on since July, will make it clear that New Jersey is open for business and ready to keep pace with technological changes facing our economy.”

Derris, her spokesman, said the assemblywoman has been trying to avoid the battles some other states have gone through with short-term-rental websites – battles that have at times led to lawsuits.

By working with stakeholders on all sides, “we're trying to find a middle ground for everybody and something that works in the state,” Derris said. “Naturally,” he added, “everybody is looking to protect what they have and gain a little bit.”

Short-term-rental laws

Several North Jersey municipalities have adopted policies restricting short-term rentals of homes or rooms through Airbnb, FlipKey and other websites, citing quality-of-life concerns. Here is a sampling of policies some towns have approved to curb the short-term-rental market within their borders:

Woodcliff Lake: Approved July 11. Bans rentals of 30 days or less. First offense: $250 to $1,000 fine per day. Second violation: $750 to $1,000 per day.

Paramus: Approved Oct. 18. Bans rentals of 30 days or less. Violators face fines of up to $1,250 per day.

Palisades Park: Adopted Aug. 26. Bans rentals of 30 days or less. Violators face fines of up to $1,250 per day.

East Rutherford: Adopted Oct. 18. Bans rentals of 30 days or less. First offense: $750 per day and/or 10 days in jail. Second violation: $750 to $1,200 per day and/or 30 days in jail. Third infraction: $1,200 to $2,000 per day and/or 30 days in jail.

Fort Lee: Approved Oct. 13. Defines short-term rentals as 30 days or less. Fines of up to $1,250 per day.

Fairview: Adopted Dec. 5. Bans rentals of 30 days or less. Fines of up to $1,250 per day.