With the beginning of daylight savings time just a few days away, a signal that Rhode Island’s peak vacation season is just around the corner, state and local officials continue to struggle regulating the burgeoning short-term rental industry in the Ocean State. It’s the subject of legislative commission, local town and city councils, and court cases. Questions abound about the impact on neighborhoods, from noise to parking, to registrations and taxes. State Rep. Lauren Carson, D-Dist. 75, of Newport, chairs a special legislative short-term rental commission that looks beyond the local issues, trying to clean up state and local registration systems that often don’t agree, and taxation, among the issues. The commission’s work, while ongoing, is hampered in part, Carson said, by lingering court cases. The legislature, she said, is reluctant to approve legislation while court cases are pending. Meanwhile, property owners have been challenging communities in court over municipal regulations. There are hundreds, perhaps thousands of short-term rentals in communities like Middletown and Newport, Westerly and Charlestown and scattered throughout Rhode Island. Some communities, like Newport and Westerly, have considerably increased registration fees for the short-term rentals, both to $500, and in Newport, $1,000 for non-home occupied property. In Newport, the funds have been used to hire a short-term rental inspector. WUN : What’s the controversy about the short-term rentals? Carson : “What has happened with the short-term policy world is that it is a moving target. The industry exploded and it’s moving fast.” Five or six years ago, eight to 10 municipalities began enacting policies, resulting in “local fights going on around various municipal policies or policy debates.” Mainly under “my leadership” the state stepped in to determine the role of the state policy and municipal policy. “There is a role for each one and that’s the message that I’m going to really import to my study commission because we’re coming down the home stretch here, in the next two months, in terms of a report. I’m not a100 percent sure of that. I know that there are municipalities waiting to see what we do. There are several lawsuits around … particularly the one in Narragansett which has been very volatile.” WUN : – Who’s brought the suit? Carson: Property owners are suing the town. In Narragansett, the judge put a stay on the municipal ordinance, who “right now there is no municipal ordinance in place in Narragansett for short-term rentals, and they are waiting for the final court case.” That decision, Carson said, is holding up the commission’s work “because that decision is important to state policy.” A few weeks ago in Exter, there was a decision where the property owner was suing the municipality over a special use permit, and “the town won.” The judge agreed that municipalities have the ability to issue special use permits for short-term rentals, and “have the ability to use zoning in order to determine where these short-term rentals are located.” Last year, Carson said, Newport had a similar case, and the city won on the same grounds. Carson said they are now awaiting the Supreme Court decision on the Narragansett case. “We have two decisions that have been made that are supporting municipalities using the authority they already have under state law to manage and govern short-term rentals, particularly in respect to where they’re located, and then we have the Narragansett lawsuit that’s up in the air right now, which is addressing the specifics of the Narragansett ordinance.” There are also issues in Middletown and Bock Island. So those things are out there and they’re happening. There are issues in Middletown, there’s issues on Block Island. “Again, this local percolating things. The local staff are usually fire inspections, parking, noise, those are the things that the municipalities get up in arms about.” In neighborhoods, Carson said, people start going to their town or city councilors “telling them there’s a dark house next door, it’s rented on weekends…. And then the municipality goers to address it and the tool in their toolbox is zoning and these permits.” What does the State Do? Carson : “We have looked at a variety of issues,” including fire regulations. The commission met with fire marshals from Newport and Narragansett, resulting in closing a loophole in state fire regulations that had prevented municipalities from inspecting single family homes that were used as short-term rentals. “So, the fire regs have been changed to the positive.” Carson said the commission also brought in all the municipalities that had different ordinances. The municipalities, she said “raised all kinds of issues with us. They raised the noise, the parking, the neighborhoods, water usage. With a fixed amount of water on the island, “Jamestown is very concerned about the amount of water that is being used,” Carson said. “Their water consumption has gone up in relation to the number of short-term rentals. Tiverton is concerned about the number of sceptics and the fact that a lot of out-of-towners don’t realize how to use sceptic tanks and there’s stuff filling up sceptic tanks.” Carson said the commission also heard from the Department of Planning from the Department of Administration, which said it agreed local communities could approve special use permits. The commission, she said, also heard from the Department of Regulation about insurance issues. “How do we know these homeowners are properly insured? It comes down to whether the property is commercial or not.” Carson said she spoke with her insurance agent and asked if she had a short-term rental in her house whether it was covered. “And she said no.” WUN: Where is the line between municipal and state? What’s the state’s responsibilities in terms of legislation, and what’s the municipalities’ responsibility in terms of local legislation? Carson: Noise and parking, zoning “are really the big ones, which have held up in courts. And fire inspections. The state is collecting taxes, deciding whether they are commercial properties, setting the state rate. Carson: There are about nine municipalities and the state that have registration systems, Carson said. She said when the commission brought the municipalities to meet with the commission “we’d say to them how many are registered on your municipal system and how many registered on the state system for your town and the numbers never agreed.” Short-term rentals are required to register both with the state and municipality. WUN : Are there different fees? Carson: “Oh yes.” The state fee is $25 a year, compared with Newport, which is $500 for owner/occupied short-term rentals and $1,000 for non-owned occupied residences. “They’re making money on this, So, the municipalities don’t want to pull back on these registration systems, and in the case of Newport, they are spending some of it enforcing short-term rental ordinances.” Carson said they found a difference between the number of state and municipal registrations. “I’m hoping that there’s a way that we can merge the registration systems. I think the municipalities need registration for certain reasons and the state needs registration for certain reasons. I would like to see the registration system tied together and I think that’s a technology issue.” Carson also said there is a tax issue … “how the taxes are submitted.” She said now when Airbnb, Vrbo or any one of a number of similar groups secure a rental on their site the platform also collects the taxes. In Rhode Island there are three taxes on hotels and short-term rentals – 7 percent sales tax, 1 percent municipal tax, and 5 percent hotel tax, for a total of 13 percent. Municipalities retain the 1 percent, and the hotel tax of 5 percent is divided among the “municipality, commerce and tourism district, like Discover Newport.” “Whole houses rented in the state of Rhode Island are exempt from the hotel tax,” Carson said. “So, if you rent a whole house in Rhode Island, you are paying the 7 and the 1. That’s all you’re paying for a whole house. If you rent a room you’re paying, 7, 1 and 5, and that’s not really fair. Additionally, she said that when the platforms submit the taxes, it’s in the aggregate, not only individual units. “We have to be able to see it by property,” Carson said. “We don’t know where the money is coming from. The way the submission form is created it’s only by municipality. Where’s the money coming from? We don’t know that. There’s no transparency in the data collection. Carson: “We did pass a bill of mine last year, which required platforms to post the registration number of the properties on the (platform’s) web site, which I call the carrot and a stick. If you’re not registered, you don’t have a number, you can’t go on the platform. … If I own a piece of property and I want to go on Airbnb, I have to show them my registration number before they’ll take me on. So that should at least get part of that problem solved. It’s not the whole problem, just a little piece of it.” WUN: Where do we go from here? Carson: She said the commission was meeting with the Secretary of Housing to discuss housing issues. “We are looking at some home sales. We’re using Narragansett as a case study. The property owners and some of their colleagues have commented more than once that short-term rentals are not taking housing off the market. I don’t agree with that, if you have a thousand short-term rentals in Newport, they are taking year-round housing off the market. There’s a bottom line here. So, we just want to air that issue. She said the issue still to explore are court cases. “I think after that we have to move to some policy recommendations. Again, the Narragansett lawsuit is holding us up because their registration system is in the lawsuit, zoning is in the lawsuit, a lot of things are in the law suit. And the House is not inclined to pass legislation if there’s a pending court decision. I think, if the case is not settled, we’ll be able to do a few little things.”
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