The “sharing economy” – wherein private individuals provide services or their private property for a fee – has become a sizeable subset of New Mexico’s overall economy, and it’s growing fast. As we saw with transportation networks Uber and Lyft, the statutory and regulatory environments surrounding such innovative “sharing” services are much slower to change in a right-now world made possible by the Internet.
Such is the case with another sharing-economy service, short-term rental, such as when a person chooses to rent a house for a weekend getaway, rather than a hotel suite, in any number of New Mexico communities. And with the proliferation of online-booking platforms such as Airbnb, VRBO and HomeAway, New Mexico’s short-term rental market has exploded.
According to a January 2017 audit of the New Mexico short-term rental market, Southwest Planning and Marketing estimated there are 4,076 short-term rental properties and estimated 9,296 short-term rental rooms. The scope of the report, which incorporates other short-term rental portals beyond Airbnb, identified that out of the 4,076 short-term rental properties, roughly 76 percent are owned by individuals who own multiple short-term rental properties. In other words, many of these short-term rentals are investment properties.
Airbnb, too, released a report in January that showed New Mexico short-term rentals made an estimated $16.5 million through its platform in revenue for 2016 and saw a 110 percent increase in guest rentals compared to the previous year.
Because of the reach and ease of Airbnb, tourists have thousands of more rooms available to them to visit communities across New Mexico. The only downside to New Mexico’s new-found lodging capacity is that, whereas a hotel is required to remit a lodgers’ tax assessed for a guest’s weekend stay, a property owner providing short-term rental is not.
Such an inequity has occurred because an antiquated exemption in the state’s Lodgers’ Tax Act currently prevents municipalities and counties from properly collecting and administering their respective lodgers’ taxes for short-term rentals with less than three rooms. On the books since 1969, long before someone could book a shared space with a mobile device, the exemption was originally intended to assist small motels and bed-and-breakfasts.
Southwest Planning and Marketing further estimated that New Mexico cities and counties could be missing out on $2.6 million in lodgers’ taxes annually, based on average occupancy rates for New Mexico. Lodgers’ taxes are the means by which communities fund the promotion of their tourism-related attractions, facilities and events.
It’s time to trade in the 1969 model for the 2017.
Companion bills Senate Bill 254, sponsored by Sen. John Sapien, and House Bill 266, sponsored by Rep. Carl Trujillo, aim to remove the exemption and to compel short-term rentals to add their fair share of local-level lodgers’ tax dollars to the tourism-related marketing and promotional efforts from which they already benefit.
The business community, the hospitality industry, convention and visitors bureaus, and local governments have voiced their support for the bills and for removing the exemption throughout the legislative session. Even Airbnb has officially endorsed the bills, after demonstrating a willingness to work with communities to find solutions that work for everyone.
Airbnb has already begun working with a couple New Mexico cities – Taos and Santa Fe – to collect lodgers’ tax on short-term rental properties through its platform. This collaboration demonstrates there is already a willingness for communities, digital platforms and the lodging and tourism industry to find solutions together that are pro-innovation and pro-business.
Both SB 254 and HB 266 have merited decisive approval by the House and the Senate. We urge Gov. Susana Martinez to also support removing the short-term rental exemption because doing so will increasing lodgers’ tax fund revenue for cities and counties, so that they can double-down on tourism and build upon the tremendous success the tourism industry has enjoyed in recent years.