This article first appeared in the Solutions newsletter. Click here to learn more about the newsletter and sign up.
The city has some tricky and consequential choices to make in regulating short-term rental platforms such as Airbnb and Vrbo. Getting this right could mean a bolstered image among tourists, a freedom among St. Louisans to earn cash in the sharing economy, and a mutual grace among neighbors. Getting it wrong probably looks like more party houses, hosts evading taxes, and frustrated neighbors.
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The central choice was covered in the most recent edition of Solutions: how to ensure that all hosts and platforms get permits. Success or failure is likely to flow from compliance with that rule, according to a guide from the National League of Cities, which analyzed 60 ordinances across the country. Without a handle on who’s hosting, the NLC observes, cities have no leverage to incentivize behavior that they want to see.
But even if the city can indeed corral all hosts into its permit system, it still must decide exactly (1) whom to let in, (2) how to punish misbehavior, and (3) how to collect taxes. A perk of being a latecomer to regulation is that St. Louis can learn from other cities who’ve already tried it.
PREOCCUPIED BY THE NON-OCCUPIED
Ah, the quirkiness of the platforms’ early days: a cot in a kitchen, a futon in a basement, a flowery dwelling atop someone’s garage. You can still find such owner-occupied listings. Under Board Bill 33, folks who want to home-share this way would not need to purchase a business license.
Different story for hosts at properties where no one lives, a.k.a. “non-owner-occupied” listings. These hosts would need to buy a business license, the price of which depends on the number of employees. (It’s unclear how this rule would apply to so-called “megahosts” who own a ton of properties.) And more importantly, a single host could run no more than four such properties.
A couple of points here. First, it might be necessary for the city to allow at least some non-owner-occupied listings. New Orleans tried to ban them entirely and got defeated in the Fifth Circuit by out-of-staters who claimed that the ban unconstitutionally discriminated against interstate commerce. As for capping the number at four, William Redington, an intern at the Show-Me Institute, has argued on that think tank’s blog that such an approach seems to be “a solution in search of a problem.” BB 33 already has mechanisms for permitting and enforcement, Redington wrote; those should be enough to prevent hosts from biting off more than they can chew. “If someone can properly run several STRs [short-term rentals] without harming the community,” Redington continued, “why is the government trying to place further restrictions on them and create incentives to subvert the law?”
The intent, according to a spokesperson for Mayor Tishaura Jones, whose office helped draft the bill, is to obviate a different quagmire: the conversion of low-cost residences into purely commercial short-term-rental units. “We are trying to avoid losing affordable housing stock,” the spokesperson wrote in an email.
City planning documents show that currently, listings cluster in the central corridor and Soulard with a smattering aross South City. See below:
PARTY’S OVER
Columbus, Ohio, first passed its short-term-rental regs in 2018 but ran into an enforcement problem, recalls Rob Dorans, president pro tem of the Columbus City Council: Even if a listing became known as a party house or nuisance, the city couldn’t strip the permit until the host tried to renew it. So in 2021, Columbus amended its ordinance by setting up a “three-call rule”: After three calls for service in a 12-month period, the city could suspend or revoke the permit. The thinking there, Dorans says, was this: If there’s a call for service one time, that may be unique to the individuals who were renting. But if you’re getting three calls in a calendar year, chances are something’s going on at that property.
St. Louis’ board bill has a similar mechanism but instead proposes a three-violation rule. The police would track code violations at a short-term-rental; after three accumulate, the permit would be yanked for a year. Each violation would carry a $500 fine. (Hosts would get some opportunity to appeal and rectify the problems.)
BB 33 would mimic Columbus’ ordinance in another way, too: It would grant the building commissioner the power “to initiate revocation in the interest of the public welfare.” I interpreted a term as broad as “public welfare” to be meant to arm the city with a way to enforce the spirit of the ordinance against actors trying to slip through technical loopholes.
When I asked the St. Louis mayor’s office about that interpretation, a spokesperson replied only that it’s “to protect the public in the event that a short term rental becomes problematic in a neighborhood.”
THE TAX, MAN
The city doesn’t predict a windfall from the proposed requirement that hosts buy permits; the estimate in the board bill is $160,000 in revenue from fees. But if the city sets up a robust permit system, it could use the resulting freshet of information to capture tax revenue.
How much? Look at Kansas City. In November, the city auditor there calculated that if short-term rental hosts there had paid the convention and tourism tax in a recent year-long period, the municipality would have earned $2.28 million. Let’s not pretend that such a sum would change the game in St. Louis, but at the same time, the city can use everything it can get.
The critical decision is how to collect the taxes. When the NLC did its survey of 60 ordinances, it found that 5 percent of cities had reached “voluntary collection agreements” with the platforms. In these cases, the platforms gather the taxes owed to state and local jurisdictions and transfer them accordingly. (For now, the city has such an arrangement with Airbnb, the largest platform.)
But the bulk of cities surveyed by the NLC—82 percent—ask hosts to pay taxes directly, i.e., not through the platforms. And that’s what BB 33 is asking hosts to do, according to the mayor’s office.
It’s not a trivial ask. Nashville reportedly tried using in-house resources to enforce its direct-remittance tax system and found that it couldn’t keep up because so many hosts were operating off-the-books. So that city put out an RFP, began using a third-party software called Host Compliance, and saw revenues climb by more than $2.8 million in the first year. St. Louis may or may not go this route.
But however direct remittance ends up looking, the NLC’s guide suggests that cities should “consider how to make that process as simple and streamlined as possible” and should “include clear and concise instructions on how to remit taxes on the city’s webpage and a user-friendly platform to make payments.”
I asked the mayor’s office whether they were contemplating as much. The response: “The nitty gritty of implementation will be hammered out by departments.”
Keep in mind, by the way, that the bill is still in an early form. It will probably change after the Board of Aldermen comes back next month from summer break. Stay tuned.
