Ocean City Moving Toward Tighter Rental Regulations

OCEAN CITY – The council this week endorsed measures to ensure all rental properties in Ocean City are acquiring the appropriate rental license and remitting the appropriate room tax.

For the last few years, Ocean City has been working on code changes that will help ensure all rental properties in the resort are acquiring rental licenses regardless of how the properties are rented, whether it’s through a traditional rental agency, online or through the proliferating third-party platforms such as Airbnb, VRBO or similar internet sites. The second part of the equation is ensuring rental properties are remitting room tax and sales tax, which are sent to the county and come back to the resort based on an established formula.

Resort staff has been working with Worcester County officials on both sides of the equation in an effort to make sure the rental housing codes for both jurisdictions jibe. During Tuesday’s meeting, Planning and Community Development Director Bill Neville outlined two proposed ordinances and one proposed resolution to amend the town’s short-term rental housing codes to achieve that purpose.

“This has been an item that’s a long time coming in creation here,” he said. “We have requested Worcester County coordinate their rental housing language with the language in your rental housing code. Since that time, that has happened at the county level which allows us to proceed forward. What is proposed with this is to level the playing field for all housing types in town.”

Neville explained heretofore, the town and county rental codes have not been in sync. He said with the changes the county has made, there is now an opportunity to change that and make sure licenses are being acquired and room tax is being collected, especially with the non-traditional rental formats.

“The idea is to essentially improve the format,” he said. “It applies to all rental properties, but includes the short-term rentals, the online rentals, and the third-party platforms. They all need to have a license and they all need to collect taxes.”

Among the proposed changes are the requirements would apply to all housing types, and rental advertisements would have to include the town’s license control number and require certification of tax payments. In addition, there are sections that apply to fines and penalties, according to Neville.

“The Mayor and Council seeks to improve the compliance of all property owners, hosting platforms and property managers in obtaining the required license for rental housing units, and to assist with the collection of applicable room tax payment by Worcester County,” he said. “To address the unique challenges of monitoring and enforcing these requirements for properties advertised through internet services and social media, town code amendments are proposed to require that all advertisements include the town license control number assigned to each property owner.”

Councilman Mark Paddack asked if the town is diligent in ensuring all rental properties, regardless of how they are rented, are acquiring the appropriate rental license, does the county have similar measures in place to ensure the taxes are being remitted.

“I’m still not sure how the county determines the taxes are being collected from licensed properties and unlicensed properties,” he said. “Whether they are licensed or unlicensed, how do we know the owners are paying their fair share?”

Neville explained the two issues are intrinsically linked, but each jurisdiction has separate responsibilities in the process.

“We have a responsibility to make sure all rental properties have the appropriate rental license,” he said. “The county has responsibility for the tax collection.”

Mayor Rick Meehan boiled the issue down to its simplest terms.

“I think the goal of this ordinance is to bring all of the rental properties into compliance,” he said. “And, to address the issue with regard to preventing third-party rental platforms from renting properties without a license and then, in fact, not submitting the room tax.”

Meehan said the intent is to prevent scofflaws from circumventing the license and room tax remission requirements, whether there is intent on their part or not.

“It’s not a perfect system, but if you’re not remitting room tax and sales tax, you’re breaking state and local laws,” he said. “Our goal is to make sure everybody is aware of that. Ultimately, it is the property owner’s responsibility in our code.”

Meehan said the same rules apply regardless of how one rents his or her property.

“This applies no matter who you rent to or how you rent your property,” he said. “You can rent it to your cousin, you can rent it through a rental operation, or through a third-party platform, but you must have a rental license and you must pay room tax. The of this ordinance in working with the county is to try to put that together to make it work better than it is working today.”

With that said, the council voted 6-0 with Council President Matt James absent to proceed with public hearing notifications for the proposed code amendment ordinances and resolution.

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.