Welcome to our earthly paradise, but pay up, short-term visitors. Ulster County government is within a couple of small steps from doubling revenues from its hotel occupancy tax, commonly known as “the bed tax.” Permission from the state is needed to raise the tax of two percent to four percent. All that’s required is the governor’s pen-stroke and a law from the county legislature.
Much less sure are the prospects for a proposed statewide short-term rental (STR) registration law, which would compel those operating in the dark corners of this growing marketplace to disclose their revenues or face the legal consequences.
County executive Jen Metzger hopes the county legislature will agree to earmark a quarter of the revenue collected from the bed tax directly to replacing money spent from a proposed $15-million Housing Action Fund.
An initial infusion of $15 million appropriated from the robust county fund balance accumulated during the pandemic is intended as the housing fund’s initial seed money. Using governmental income generated by the bed tax periodically to refresh affordable housing for permanent residents certainly has a righteous ring to it.
In addition, the state bill stipulates as previously that ten per cent of the revenues from the Ulster County bed tax will be credited to a special fund to promote tourism.
That will leave the remaining 65 percent of the bed tax for deposit in the general fund.
For every passing month the governor delays the signing of the home-rule bed-tax legislation (she has until December to decide), Ulster County government misses out on about $300,000 in additional revenue — and more during these peak tourism months, when the Housing Action Fund would earmark close to $100.000 a month extra from this source to support affordable housing.
New York counties vary the amount of time required for permanent residency. Ulster County mandates 90 days. In order to be a permanent resident, a guest must stay in a hotel facility for at least 90 consecutive days without interruption.
“[The tax would apply to] any establishment providing lodging on an overnight basis and shall include those establishments designated as bed-and-breakfast and tourist facilities,” the edict from Ulster County’s finance department, collector of the local bed tax has decreed. “This includes traditional hotel and motels, apartment motels, bed-and-breakfasts, vacation and short-term rentals.”
STRs as investment enhancers
According to National Public Radio, property investment companies have been spending a lot of money on real estate in tourist areas, hoping to provide high-priced short-term accommodations “to tourists seeking their own kitchen, some privacy, and a break from cookie-cutter hotel rooms.”
“There’s no question that the short-term rental market has its place, but increasingly private equity is getting into the real-estate market, able to pay more than any resident possibly could,” said Metzger last year. “We need to do the work to assess how much of our housing market is actually not owned by natural persons. In my mind, houses are to be owned by people, not by an LLC, not by companies, not by private equity.”
In exurban areas like the upper Hudson Valley, with a large number of second homes, short-term rentals have become increasingly popular as a means to offset the cost of these vacation or weekend homes.
According to the European data-gathering agency Statista, the worldwide travel, tourism and hospitality industries accounted for about ten percent of gross domestic product until the pandemic, when the share dipped sharply to six percent. It has since quickly recovered to close to pre-pandemic levels.
Housing stock depleted
Country inns at dusty crossroads came first, followed by countryside or mountaintop hotels. Then came resort colonies, and after that roadside motels and chain hotels. B&Bs arrived more recently, and now STRs are proliferating.
Bungalows, cabins, cottages, campgrounds, convention centers. If the money’s going to go to provide housing for us locals, tax ’em all, we say, and then tax ’em some more.
“Our municipalities need the county’s support to regulate these LLCs and greedy out-of-towners buying up large amounts of our housing stock that are forcing out our wait staff, drivers, teachers, and laborers from their homes,” said irrepressible Saugerties legislator Joe Maloney, sponsor of the request for the increase in the bed tax. “Make no mistake, one of the leading causes of Ulster County’s housing crisis is Airbnb, and we need regulations in place to protect our constituents from being forced out of their home towns.”
In 2013 Ulster County reported a million dollars in revenues generated by hotels, motels, bed and breakfasts, tourist and STR facilities. By 2022, that number had increased to $3.633 million, according to the county comptroller’s office. With the governor’s almost-certain signature of home-rule legislation doubling the take and the county legislature then triggering the permitted legislation.
Birth of the bed tax
The language in the Westchester County bed tax enacted in 1988 had provided a model for such county laws. It set a tax of three percent “upon the rent for every occupancy of a room or rooms in the county, except for a permanent resident or an exempt occupant.” Establishments in New York State seeking exemption from the hotel occupancy tax must fill out a form ST-129.
Ulster County first adopted a bed tax of two percent in 1991, with a lower rate for “all-inclusive resorts.” Some surrounding counties now have equal or higher bed-tax rates than the four percent Ulster is currently anticipating.
Because of a lack of data collection by the Ulster County’s finance department, no one has the numbers generated solely by STRs, a problem identified in a 2020 audit. The county is leaving considerable revenue on the table through lackluster enforcement of STRs booked on platforms other than Airbnb, failing to collect tax revenues from 948 wayward properties identified at the time of the 2020 audit as non-compliant.
The home-rule legislation now on the governor’s wait list for signature was carried by state senator Michelle Hinchey and assemblymember Sarahana Shrestha. The bill sponsors made the scope of the law applying to Ulster County clear: “The rate of the tax shall not exceed four percent of the per-diem rental rate, The tax shall also apply to bed-and-breakfast and tourist and short-term rental facilities.”
A state registry?
The Short-Term Rental Registry Act, introduced this year by state senator Michelle Hinchey, is intended to help municipalities track, regulate and collect taxes on vacation rentals. ”Instead of putting the onus on every community and small town to figure this out on their own — there just isn’t the time, expertise and availability to do that,” Hinchey told the Albany Times-Union. “So this is a moment for the state to step in.”
The problem is obvious. Beds in large hotels are relatively easy to find, regulate and tax. When the bed to be rented for a couple of weekend nights is in the house next door to yours, however, it’s easy for your neighbor to pocket the cash and forget the whole thing. Even collecting taxes on B&Bs – something most jurisdictions have learned to do – is as easy as pie compared to collecting taxes on short-term rentals.
Under the Hinchey proposal, property owners would be required to register their units with the Department of State every two years or be subject to a $200-per-day fine.
Property owners in municipalities with vacation-rental registries would not have to file separately with the state, though the bill would require those municipalities to provide registration information so the state can maintain a comprehensive data base, which will be shared with booking platforms like Airbnb and Vrbo. Airbnb already collects and remits taxes in many New York counties, including Ulster County. According to its website, Vrbo presently does so in New York State on a very limited basis.
Data from the registry proposed by Hinchey will be extracted monthly on the number of rentals, where they are located. and the number of nights they were occupied. That report would help municipalities decide whether and how to further regulate vacation rentals.|
The Hinchey bill (S885A) easily passed the State Senate, but its counterpart proposed by assemblymember Patricia Fahy was stalled in the lower house’s housing committee. The Assembly is back in Albany on Tuesday, June 20 to discuss, among other things, housing issues. Assemblymember Shrestha had been advocating for the session “to address our housing crisis, especially tenant protections.”
Hinchey said earlier this year that her staff has had conversations with the governor’s office about the importance of short-term rental regulation.
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