David Waugh (left) and Bob Klebba on the steps of the Mendota Lake House B&B. The couple wishes all Airbnb operators would follow city regulations and pay room taxes.
If you do a search on AirbnB for lodging in Madison, you’ll find about 300 available places to rent for a night. You’ll find almost the same number of properties listed on VRBO.com (i.e., Vacation Rentals By Owner).
Now, guess how many of these properties are registered with the city and pay room taxes? According to the city treasurer’s offices, the answer is nine.
Airbnb and VRBO are “sharing economy” services that make new types of financial transactions possible, just like Uber and Lyft have done with transportation. Using Airbnb-type websites, anyone can rent out a spare room, apartment, house or cottage. Many travelers prefer them because they’re often cheaper and are located in hip, walkable neighborhoods like Willy Street.
Madison regulated the service here in 2013, requiring people who rent out rooms to have their properties inspected and pay the 9% room tax that hotels and motels charge.
But so far, few people are following those rules, says city treasurer Dave Gawenda.
“When you build a new Holiday Inn Express on John Nolen Drive, we know you exist,” he says. “But the operators of Airbnb can be under the radar. Up until recently, we’ve relied on self-reporting.”
Airbnb has been reluctant to share with local municipalities information about which property owners are renting out properties. Airbnb did not respond to Isthmus for comment. However, Gawenda notes that the company recently began sharing information about properties in other cities. He’s hopeful the company will do the same here.
If not, it will be up to policymakers to decide whether the city should try to track them down. This will involve staff time, as the addresses and names of each property aren’t given on Airbnb until a room is actually booked.
“Without cooperation by the websites, it means a lot more effort on our part needs to be extended,” Gawenda says.
Ald. Ledell Zellers worries about people not following the regulations. “We’ve got an ordinance; some people are following it, some aren’t. It’s not fair,” she says. “I think many of them simply aren’t aware of the regulations.”
David Waugh, who runs the Mendota Lake House B&B with his husband, Bob Klebba, would like everyone to comply with the rules. Although Mendota Lake House is a traditional B&B, following different city regulations, Waugh also advertises on the Airbnb website.
Waugh doesn’t know how much business Airbnb sends his way, because some people might find his house through Airbnb but eventually book on his own website, which shows a cheaper rate. He does think it provides a valuable service “because it attracts a lot of people who wouldn’t come [to Madison] otherwise, because they know there are places that will be affordable. That’s huge.”
But he faults Airbnb for failing to help property owners comply with laws and pay taxes.
“Airbnb does a poor job of helping people not break the law,” he says. “They’ll tell you you need to follow the rules and regulations in your area, but that’s it.”
The Mendota Lake House is relatively small, with only five rooms. Nevertheless, Waugh says he pays about $18,000 a year in combined room and sales taxes.
Gawenda doesn’t have an estimate for how much the city is losing on room taxes from the unregistered units, but says it could be significant. “Let’s assume there are 100 in the city,” he says. “If we can get all 100 to remit room taxes, my assumption is that the room tax from all 100 would be similar to a 100-room hotel in town.”
Hotel operators in Madison would also like the Airbnb operators to play by the rules. But they’re not opposed to these new types of businesses.
Charlie Eggen, president of the Greater Madison Hotel and Lodging Association, says Airbnb is the way of the future.
“If the consumer wants to use Airbnb, then there’s going to be Airbnb,” he says. “If it’s the world we live in, let’s not fight it. Let’s just make sure it’s safe.”
