Will RI’s new registry discourage short-term vacation property rentals?

A SCREEN SHOT of some of the Airbnb rentals available in Newport, along with nightly charges. / COURTESY AIRBNB INC.

State business regulators are going to start taking names – and charging fees – of Rhode Island property owners who rent out their homes through websites such as Airbnb Inc. and Vrbo, but the enforcement of the new registry is going to be limited.

The short-term rental registry, mandated by the General Assembly after overriding Gov. Daniel J. McKee’s veto at the beginning of the year, aims to track who is renting out vacation properties, where they are and how many there are.

It is set to launch on Oct. 1, and under the rules proposed by the RI Department of Business Regulation in July, owners who advertise properties for rent on third-party hosting platforms would have to register and pay a $50-per-property application fee, plus $50 every two years to stay on the list.

But Elizabeth K. Dwyer, DBR interim director, acknowledges that the agency has no power to ensure the people on its registry comply with noise ordinances or safety rules, or pay the appropriate state and local taxes.

“It doesn’t really regulate them,” she said. “It’s just providing the information. So if a neighbor doesn’t know what’s going on next door and wants to look the property up, they can.”

Failing to register could bring a fine of up to $1,000, but DBR also has no way to know if someone who is supposed to be on the list is missing. The fees cover the administrative costs to maintain the registry but do not fund proactive identification or enforcement, Dwyer says.

“I think we will find out who needs to be on the list through the people who wanted the legislation – neighbors, police departments who respond to noise complaints,” she said.

She acknowledges that a rental owner who keeps a quiet house and doesn’t have any run-ins with the police could fly under the radar, avoiding the registry and fees.

“That’s true with all kinds of licenses though,” Dwyer said.

Opponents, including Airbnb and McKee, protested the registry because of the cost and paperwork to both rental owners and state administrators. Airbnb did not respond to inquiries for comment.

Evan Smith, CEO and president of Discover Newport, doubted the list or the $50 fee would dissuade people from renting out their properties.

“Fifty dollars is not going to stop anybody, that’s pocket change,” he said. “This is a big business. You’re not selling lemonade. You’re going to get that money back in the first night [of a rental].”

Smith supports the registry to regulate the burgeoning short-term rental industry, which he said has swelled to 20% of Newport’s housing market in recent years.

Keeping a list can also make sure rental owners pay their share of state and local taxes. Smith suspects a “significant” amount of third-party rental owners were underpaying their taxes, and that the registry could increase state and municipal revenue by bringing them to light.

The RI Department of Revenue has not done a fiscal analysis of the new law but reported that short-term rentals and room resellers brought in just under $1.3 million in hotel tax revenue during the first 11 months of fiscal 2022. By comparison, taxes on traditional hotel rooms yielded $21.2 million in the same period.

However, in a written statement explaining the rules, DBR said some third-party rental properties might be withdrawn from the rental market because of the registry. While state estimates indicate there are about 4,000 short-term rental properties in Rhode Island, DBR figures only about 2,600 will be registered in fiscal 2023 because of errors in data, duplicate listings and some properties leaving the rental market.

Public comment on the proposed rules can be submitted to DBR no later than Aug. 27.

So far, there hasn’t been a groundswell of opposition. Ace of Aug. 10, six people had commented, most of them asking questions about how the registry would work.

Dwyer notes, however, that public feedback often ramps up in the final days of the comment period. While the feedback will not change the creation of the registry – which is mandated by state law – suggestions to clarify the wording will be taken into consideration, DBR says.

One point of confusion is already evident: whether the “third-party hosting platform” includes the websites of real estate agents.

Jessica Willi, executive director for the Block Island Tourism Council, did not think the new rule affected the majority of Block Island rentals, which are advertised through real estate agents rather than Airbnb and Vrbo.

But Dwyer’s interpretation of the law was that the owners who advertise with real estate agents also had to register, although she says lawmakers could carve out an exception for them through changes in the next legislative session.

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