Putnam Struggles to Embrace Airbnb

With the growing popularity of “homestay” services such as Airbnb, lawmakers in Putnam County are looking for ways to embrace visitors and tourists while making sure neighborhoods aren’t disrupted – and possibly get a piece of the profits via a room occupancy tax.

Cold Spring Chamber of Commerce President Eliza Starbuck told legislators at the county’s Feb. 18 Economic Development Committee meeting that the issue of homeowners renting out their property to virtual strangers via an online marketplace is a contentious one.

“It’s a hot topic in that many citizens feel very polarized by it,” she said. “People are really for it or really against it.”

According to Starbuck, Hudson Valley Patterns For Progress reported last year that Airbnb ranked the Hudson Valley and Catskill Mountains region, grouped together, as 11th out of the 19 most popular destinations for guests around the world… Yes, the world.

In 2018, Putnam County had 19 Airbnb hosts that lodged at total of 8,700 guests, and each earned about $8,700 in Airbnb income, according to data provided by the company, said Starbuck.

In Cold Spring, which likely sees the most tourists in the county, the Chamber of Commerce supports municipal regulations of short-term rentals “if they are clearly defined in applicible zoning codes regulated to protect public health and safety, and the environment, and fairly taxed so they contribute to the region’s economic growth,” said Starbuck.

She said the chamber is particularly concerned that steps are taken to protect residential property used as short-term rentals, as “such conversions deplete the residential building stock, erode neighborhoods, and compete unfairly with the hotel industry.”

In addition, Starbuck said the chamber would like to see a tax collected at the county level on property rentals, consistent to neighboring counties that impose a room occupancy tax between 2 and 6 percent “without seeing a major drop in tourism.”

Putnam Valley Town Supervisor Sam Oliverio said he’d like to find a way to limit the number of Airbnb and other homestay rentals in town.

“What’s happening is that quite a few very wealthy individuals from the New York City area are buying up homes, not living in them, and using them as rentals,” he said. “And that destroys neighborhoods; it increases the prices of the houses.”

Oliverio said he was flabbergasted that a 700-square-foot house on Lake Oscawana recently sold for $1.5 million. “It was a cottage… and yet the individual paid that much money to have that property and the rights to it to rent it out as Airbnb because they’re going to make their money back in a few years,” he said.

Oliverio said individuals rent these properties to host parties and other gatherings, and are not concerned about maintaining the quality of life in the neighborhood.

The supervisor recognized that this particular rental business could be a revenue producer for the town if the town could implement a permitting process with, say, a $1,000 charge per room, inspection fees, and other associated costs, but the owners of these rental properties threatened to sue – claiming they are simply offering up their properties to friends and family.

“Enforcement is the toughest thing,” said Oliverio, noting that the town cannot employ someone to patrol the internet for listings in town. “It’s a mess, and I wish there was some way to control it… And they’re not our local residents, and that’s the thing that fires me up the most. They do not live in the Town of Putnam Valley. They are outsiders buying these homes and renting them.”

Starbuck acknowledged that enforcement is a problem, and suggested a lesser financial burden to encourage compliance.

“The more reasonable the fees are for your permitting, the more likely it is that people will actually permit,” she said. “So $1,000 per room – that almost makes it not worth it to do the Airbnb. If you make it a lower fee, at least that allows you to track it so they are on your radar.”

Legislator Amy Sayegh, R-Mahopac Falls, said the decision to try to regulate home rental properties should be left to the local municipalities.

“I think the towns need to decide whether or not they want Airbnb in there and I don’t think the county should have any say in it whatsoever,” she said. “That said, I think the county should have some sort of room tax so they can be regulated.”

Legislator Nancy Montgomery, D-Philipstown, said she would embrace a room tax at the town level, because as it is the county doesn’t share sales tax with the towns.

“I don’t know that the towns would favor the county taxing it before we let the towns exhaust what they need to exhaust before we enforce that,” she said.

Starbuck, however, said towns and villages can only collect permitting and other fees; taxing can only be imposed at the city, county and state level.

Oliverio said that if the county established a tax, the towns could then go through the booking information and see which homeowners are renting out their properties, and then go after them for the proper permitting.

“I’m not even asking to have that tax shared with us,” he said. “All we need is the information.”

Bill Nulk, chairman of the Putnam County Industrial Development Agency and president of the Putnam County Business Council, said the county – and the towns – need to accept that people are going to continue renting out their homes.

“Airbnb is here to stay – it’s already happening,” he said.

Nulk also said it makes sense for the county to impose a tax on rental property, and designate where the funds go. “It could be well designated so there could be significant fairness to the way it is doled out,” he said.

The Room Occupancy Tax Conundrum

With the opening of Putnam’s first major hotel on the horizon – a Comfort Inn located on Route 121 at Route 6 in Southeast, just off Interstate 84 at the Connecticut state line – county lawmakers are thinking now may be the time to implement a room occupancy tax.

According to Putnam County IDA Chairman Bill Nulk, the hotel is only weeks away from a potential opening.

Senior Deputy County Attorney Conrad Pasquale said at least 48 out of the state’s 62 counties have some sort of room occupancy tax. “So it’s not unusual,” he said at the county’s Feb. 18 Economic Development Committee meeting. “Four percent seems to be about the average.”

However, Pasquale cautioned lawmakers that imposing a room tax may not be as simple as they think, as it is subject to state approval. “It’s not something that we are innately given the authority to have,” he said.

Pasquale explained that the county sought approval for a 4 percent occupancy tax in 2012, which was vetoed by the State Legislature, possibly because there was not enough information as to how the funds would be used, uncertainty as to the practical and fiscal impact of hotels/motels on the county, and a lack of information and support from towns, Chambers of Commerce, and the county executive.

When it comes to whether Airbnb and other home rental arrangements would be subject to an occupancy tax, Pasquale said they would be. However, the homeowner is considered the “hotel operator” and is the one responsible for remitting the tax, not Airbnb.

This is different than “room remarketers,” such as Travelocity, Expedia and other online booking websites, which are now considered the same as the hotel operator because they purchase rooms at wholesale prices then remarket and resell them at a markup.

“So they are required and authorized to collect the tax for the county and then they have to remit that to us,” said Pasquale. “The problem then becomes, what do we do with the intermediaries,” which is Airbnb.

There is no statute requiring them to collect a room tax because they are not the hotel owners, he said.

Pasquale said most counties with a room tax have entered into a voluntary tax collection agreement with Airbnb, which is likely what Putnam would do. This involves Airbnb adding the tax as one of the charges during checkout, which the company would remit to the county on an “honor system.”

“There’s not going to be a whole lot of oversight,” he warned lawmakers. “We’re going to have to be taking them at their word that we are receiving the proper amount of tax dollars.”

However, Airbnb likely won’t disclose any additional information about property owners.

“Airbnb – and I’m using them as an example because they’re the big one – they’re very, very protective of their clients’ data,” said Pasquale. “So the people who are renting out these properties, they are the ones who are actually paying the tax, so while they (Airbnb) will technically have all this relevant information, they will not be disclosing it to the county.”

The other route the county can take – which Pasquale doesn’t recommend – is to follow Ulster County’s example and try to keep track of all the rental properties itself. He explained that Ulster has either purchased the technology to “scrape” all of the online homestay sites, or is outsourcing the work, to see who’s renting out properties and who’s filing returns – a task that is very daunting, and costly.

“I don’t think anybody wants that to happen here,” he said.