Last Monday, City council members voted unanimously to approve a tax on short-term rentals. The tax will raise an estimated $7 million a year which will contribute to the city’s Equitable Development Initiative. An amendment proposed by councilmembers Mike O’Brien and Lisa Herbold raised proceeds by $1 million by taxing $14 per night for an entire unit and $8 for a private or shared room rather than a $10 flat rate.
The tax is intended to dissuade homeowners from using their properties as short-term rentals instead of providing long-term housing for residents locally. In order to implement the bill, it would cost the city an estimated $2.8 million; $2 million to develop software systems and the remaining for outreach and the hiring of three staff members.
An interesting point to note is that it’s possible for King County or the state to enact the same tax. If this were to happen, city officials would face the decision of suspending its tax and risk losing their $2 million software investment, or double tax the rentals. Now-Mayor, Tim Burgess, originally wanted a provision that would remove Seattle’s tax should the state enact its own, however, a Rob Johnson amendment doesn’t bind the city to that. Instead, it states that the city should deliberate whether or not to stop the tax given that the jurisdiction agrees to give the city the same revenues.
In order to expedite the process, the Council voted to separate the tax from other regulations. The companion bill would create a regulatory framework for short-term rentals limiting the number of rentals to two dwelling units per operator. There will be a few exceptions, including one for existing rental operators. Operators would also have to pay $75 per unit in licensing fees annually to the city, ensuring their rentals are up to code. Platforms like Airbnb and VRBO would also have to pay a quarterly license fee based on nights booked.
Councilmember Johnson, who inherited the companion bill after Burgess left the council to become mayor, hoped to delay voting on the tax until the Council was prepared to vote on the companion bill given that the regulations and tax are intrinsically linked.
The new tax regulations are slated to take effect in January 2019.