NJ Moving to Regulate, Tax Home-Sharing Industry

Michael Booth, New Jersey Law Journal 

The New Jersey Legislature is taking the first steps toward regulating and taxing the burgeoning home-sharing industry, dominated by San Francisco-based Airbnb, even as some towns in the state have taken steps to ban the practice within their borders.

The Assembly Tourism, Gaming and the Arts Committee has recommended passage of a two-bill home-sharing package. The first bill, A4587, would impose state sales and occupancy taxes on the operators of home-sharing facilities, as well as other taxes, depending on the particular municipality.

The second bill, A4441, would allow local governments to mandate that homeowners who want to rent out all or part of their homes via home-sharing platforms register with the municipality, pay a fee and ensure their homes are up to code and properly maintained. Homeowners could face fines of up to $100 a day for failure to comply. The bill also would allow towns to effectively bar home-sharing by setting a minimum 30-day rental agreement.

In regulating the home-sharing industry, most advances are being made by cities, not states, although New York State law bars most urban apartment owners from renting out their homes for stays of 30 days or less. The District of Columbia also has introduced legislation that would impose licensing and tax requirements on home-sharing.

During committee hearings on Feb. 27, Airbnb was the only home-sharing company that took a stance on the New Jersey bills. A representative of Airbnb told the committee that the company supported the first bill, but objected to what he called the restrictiveness of the second.

The sponsors of the package, Assemblywomen Annette Quijano, D-Union, and Valerie Vainieri Huttle, D-Bergen, said the legislation is necessary in order to "level the playing field" between home-sharing operators and the more traditional hospitality industry.

In New Jersey, about 17 towns, mostly those closer to New York, have chosen to bar home-sharing, including Palisades Park, Englewood Cliffs, Fort Lee, Lyndhurt and Glen Rock.

Airbnb had 260,000 rentals in New Jersey last year alone, Quijano told the committee. She is the chief sponsor of the first bill.
"Obviously, there's an appreciation for this as a business model," she said.

Peter Schottenfels, an Airbnb spokesman, said during the hearing that the company takes seriously its obligation to ensure that homeowners who opt to become Airbnb hosts collect and pay taxes and has been working with state and municipal governments to ensure compliance.

"Hosts pay their fair share," he said.

Jersey City and Newark already have reached agreements with Airbnb to collect 6 percent in fees. Other towns, primarily those in Atlantic County, Cape May County and around the North Jersey Meadowlands, are permitted to charge additional taxes and fees. Quijano said those taxes can amount to up 18 percent of a rental charge.

"We want to create a parallel tax structure," she said.

Two major stakeholders in the rental industry—the New Jersey Hotel and Lodging Association and the New Jersey Restaurant and Hospitality Association—support the legislative package.

"Regulation is absolutely necessary," said Joseph Simonetta of the hotel and lodging association. "We receive complaints all the time from people who had no idea that their neighbors were involved in this.

"We welcome companies like Airbnb because they bring people to the state, but they have to be regulated and right now local governments are powerless to do anything about it," he said.

"We're trying to put them on the same footing as lodging facilities," said Marilou Halvorsen, the president of the restaurant association. "This [home-sharing] is something that the consumer wants, but there has to be regulatory and tax compliance."

Schottenfels said Airbnb's objection to the second bill is that it appears to mandate a set of regulations towns must impose if they decide to allow that company and others to operate within their borders.

"It's too restrictive," he said. Vainieri Huttle disagrees, saying the bill allows towns to determine on their own whether to allow the practice.

Airbnb appears to be the only company in the home-sharing industry involved in the crafting of the legislation.

Last year, it retained a lobbyist, Ridgewood-based Awsom Associates for $20,000.

Awsom Associates is led by Robert Sommer, a lecturer at Rutgers University's Bloustein School of Planning and Public Policy who also was the communications chief for the New Jersey Devils of the National Hockey League and a former aide to Democratic Jersey City Mayor Steve Fulop.

It is unclear what role Sommer will play as the legislation makes its way through the lawmaking process. Airbnb officials did not return telephone calls, and Sommer could not be reached for comment.