Petaluma, like many cities in California, has a new law on the books regulating short-term vacation rentals, the houses and rooms that people rent out on websites like AirBnB and VRBO. Many Petaluma homeowners have used these online services to lease space to visitors for many years, a practice that has prompted some neighbors of these establishments to complain about additional traffic and noise from visitors. After all, they bought houses in neighborhoods zoned for residences, not commercial enterprises.
Instead of banning these rentals outright, as some cities have done, Petaluma instead chose the more pragmatic approach of adopting reasonable regulations to ensure neighborhood safety while attempting to capture tens of thousands of dollars annually in transient occupancy tax revenues that the city was leaving on the table. Hosts are now required to obtain permits, just like any other inn operator, and pay a tax on the rooms, much like hotels do.
But a little more than a year after the new law went into effect, city officials are struggling to gain widespread compliance from local hosts, most of whom are disregarding the law and shirking their tax obligation. Amid ongoing noncompliance, the city continues to miss out on a significant amount of tax revenue, possibly as much as $200,000 annually, with little way to identify or crack down on hosts because of the anonymity provided by rental sites, officials say.
After city estimates showed 80 percent of short-term rental operators were failing to comply with the requirements, the city attorney’s office issued a subpoena to vacation rental websites Airbnb and VRBO in December seeking information to identify and contact Petaluma hosts. Though the city asked for that information by early January, neither business has formally responded.
While a lawsuit could eventually be initiated to extract the needed data, a far more efficient and less costly solution appears to be available to the city. In December, Airbnb announced that it would collect transient occupancy tax on behalf of Sonoma County, an arrangement established in hundreds of municipalities worldwide. Under the agreement, a 12 percent tax will be added to guests’ bills and remitted to the county.
Petaluma officials should work to forge a similar deal with Airbnb. Doing so would dramatically increase compliance, make bookkeeping easier for hosts and bring in tens of thousands of dollars in tax revenues the city can surely use.