Short-Term Online Rental Challenges Continue In Resort

OCEAN CITY — Resort officials are making progress on tracking online short-term vacation rentals to ensure they are paying taxes and properly licensed, but still face challenges with the growing problem.

For well over a year, Ocean City officials have been monitoring the proliferation of short-term vacation rentals in the resort brokered by online platforms such as Airbnb and VRBO, for example. The concern has largely been on two fronts including the apparent lack of room tax collection on one hand and the sanctity of the neighborhoods in which the short-term rentals are located.

During Monday’s Tourism Committee meeting, Mayor Rick Meehan updated members on the town’s progress in tracking short-term rentals offered in the resort through online brokers. While some progress has been made, there are still challenges with determining which have acquired the licenses and which are paying the requisite room tax.

A sample taken during the peak summer identified 600 short-term rentals in the Ocean City area and a sampling of 120 was used to determine if there were any trends on which were licensed and which were paying taxes. Of those 120 sampled, 101 were licensed, representing a compliance rate of 84 percent, which appears to be good news. However, there are still quite a few not licensed and not paying room tax. Meehan said 15 were identified most recently with mixed results.

“We did send a letter to 15 owners we identified who did not have a rental license,” he said. “Ten of them immediately got licenses and five were sent citations with $500 fines. Four of those quickly filed appeals in court.”

Airbnb, VRBO and similar Internet sites enable property owners to rent homes, apartments and even single rooms to visitors searching for accommodations by bypassing the traditional rental companies. Just as Uber has transformed the public transportation industry, Airbnb, VRBO and similar companies have rocked the traditional rental industry with millions of available vacation accommodations across the country.

The working assumption for the last year or so among Ocean City officials has been the majority of the short-term vacation rentals likely weren’t acquiring the requisite business license and, therefore, were not likely remitting the required room tax. It has been a serious concern in a resort with thousands of hotel rooms and condos playing by the rules.

Being mid-September, the volume of listings available for this weekend has dropped significantly. However, on the Airbnb site, there were 68 listings for Ocean City for this weekend from Friday to Sunday, ranging from as low as $70 for a single room to $480 for an oceanside condominium to $1,300 for an entire townhouse with six beds.

Meehan said the challenge in tracking them to determine which are licensed and paying room tax is that the listings generally do not include a specific street address. He said short of actually renting a short-term accommodation offered online, it was difficult to determine the street address. He said the plan was to continue to work with the county, to which room tax is remitted and then returned to the resort.

“We plan to meet with the county,” he said. “We haven’t been able to track who is paying room tax or not.”

With thousands of hotel rooms and condos available to rent through traditional real estate rental operations, the room tax collected represents a major contribution to the town’s revenue stream. However, with the proliferation of non-traditional online rentals, Meehan said a better system is needed.

“The town does send a significant amount of room tax to the county,” he said. “We have to look at ways of working together on this. It doesn’t seem like they have many people working on it. We have to continue to work with the county and hopefully come up with a better system. The bottom line here is creating a level playing field.”

One of the concerns is the online rental operations have become more user-friendly for many potential visitors, according to Ocean City Hotel-Motel-Restaurant Association Executive Director Susan Jones.

“The problem is the Internet makes it so easy to rent a room any time, any place and almost any price,” she said. “It’s so easy to book a room.”

Greater Ocean City Chamber of Commerce Executive Director Melanie Pursel said the online short-term rental companies evolved faster than the traditional rental companies could keep up.

“It started with empty nesters renting an extra room and it turned into this big commercial thing,” she said. “It’s really not fair.”

Councilman John Gehrig said tracking which are licensed and which are paying taxes is only part of the larger problem.

“They outmaneuvered the traditional rental companies,” he said. “If all of the owners paid their taxes and got their licenses, we still have the same problem. The challenges are still going to be there. Even if we’re successful and every rental has a license and pays taxes, that inventory is still in the market. That’s the challenge.”

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.