The Kenai Peninsula Borough hopes to crack down on technology-based businesses — like Airbnb, VRBO and similar websites — with new compliance software.
Creating compliance with these sites will allow the borough to better monitor and regulate these businesses, as well as collect sales tax.
A quick search on airbnb.com shows hundreds of home, cabins and even yurts for rent, as well as add-on experiences like halibut charters, a guided hike up Mount Marathon, a sailboat tour of Kenai Lake and more.
Earlier this month, many residents testified at the borough assembly against the recently passed bed tax, voicing their frustrations over popular hospitality booking sites like Airbnb and VRBO, which make it simple for residents to put their homes, cabins and properties up for rent during high-traffic summer months.
Airbnb has over 6 million listings worldwide, according to its website.
Marcia Kuszmaul, owner of Juneberry Lodge and president of the Homer Bed and Breakfast Association, said there are more than 1,500 Airbnb listings in Homer, Kenai, Soldotna and Seward, not including the surrounding areas. She said last year in Homer, there were 340 Airbnb listings, and this year there are 429.
“It’s very frustrating to know we’re competing on rates,” she said at the June 4 assembly meeting. “Some of these folks are charging $50 a night. So what do you do?”
Adrienne Sweeney, owner of Homer’s Driftwood Inn, said the growth in Airbnbs has negatively impacted the housing market in Homer.
“In Homer we’re having a housing crisis,” she said at the June 4 meeting. “I have employees who have to move out in May, live in a tent and then get their housing back in September because we have been flooded with Airbnbs and VRBOs who are flying under the radar. They are not regulated. But, if you can’t beat them join them. I have 13 Airbnb listings. We need to be collecting (taxes) — it’s criminal we are not regulating them. It’s a shame we’re having housing issues in my backyard.”
Chief of Staff James Baisden told residents at the June 4 meeting that the borough has included $50,000 in the FY 2020 budget to purchase compliance software to address booking sites that aren’t contributing to sales tax.
“We may be a little bit behind, but I wanted to make sure this group heard that,” Baisden said.
Borough finance director, Brandi Harbaugh, said the compliance software should be implemented by the end of the year.
Currently, the borough’s audit team uses a number of tools and resources to track compliance with local businesses, such as annual field trips to physically canvass communities, online tools used on Craigslist and Facebook and state business license listings.
“With those mechanisms and those tools we’ve used over the years — they’ve been effective,” she said. “With the changes with the electronic technology we have these days — Airbnb, VRBO, those types of things — they’re challenging without memberships. This software will offer us direct access to the properties that advertise on those platforms.”
The software is subscription based, costing approximately $50,00 a year. The software uses the geographic area of the borough to give the borough information they can download and utilize “to prove and show documentation that folks are indeed renting or leasing their rooms, houses, facilities, whatever they may be advertising on there.”
Harbaugh said the borough doesn’t have an estimate as to how much sales tax revenue could be generated.
“The goal is to create compliance and a level playing field for those who may not be registering with the Kenai Peninsula Borough,” she said.
It is also unclear how the 10% bed tax, if passed by the voters in October, would affect residents hosting on Airbnb, VRBO or other booking websites and apps.
While there is no applicable sales tax in Anchorage, Airbnb indicates on their website that guests who book Airbnb listings are subject to the municipality’s 12% room tax.