Landscape has changed for short-term vacation rental operators in Berkeley

Like many cities, Berkeley, California, has struggled in recent years with how to deal with its booming (and, until recently, illegal) short-term rental market. The city estimates 1,000 to 3,000 short-term vacation rentals in Berkeley.

This new industry — fueled by easy-to-use platforms such as Airbnb, HomeAway, and VRBO — presents a challenge for cities looking to balance competing interests. These include the rights of homeowners to generate extra revenue from their properties (and for the city to get its share of those revenues in the form of taxes) along with the desire to maintain affordable housing stock for long-term residents and protect neighbors from disturbances.

Earlier this year, the Berkeley City Council approved new laws to legalize and regulate short-term vacation rentals. More recently, the city entered into an agreement with Airbnb for the online vacation rental platform to automatically collect taxes on Berkeley bookings.

If you’re a short-term vacation rental owner in Berkeley, it’s a new world. It’s important for you to be aware of the new rules and regulations and your obligations.

Under the new law, short-term rental hosts must register with the city and start collecting a 12 percent transient occupancy tax from their guests. They must also pay the city a monthly enforcement fee and follow new rental day limits and rules on notifying neighbors.

Registration

All short-term rental operators will be required to register with the city by Jan. 15, 2018. A nonrefundable fee of $220 will be charged for all registrations. In order to be eligible, a unit or property must be:

• The operator’s primary residence
• Approved for short-term rentals by the property owner
• Covered by liability insurance of $1,000,000

A property is not eligible for short-term rentals if it:

• Is a Below Market Rate unit
• Has had a no-fault eviction within the last five years
• Is an accessory dwelling unit (such as a mother-in-law apartment) that was built after April 1, 2017, or has been used as a long-term rental since April 1, 2007

In addition, short-term rentals are only allowed in certain zones of the city.

Transient occupancy tax collection

Short-term rental hosts are required to collect a transient occupancy tax of 12 percent of the total amount paid by the guest (not including refundable deposits, which should be listed separately on the bill). Hosts must submit the lodging taxes they’ve collected to the city monthly, no later than the last day of the following month.

Although short-term rental hosts have until January to register with the city, they’re required to submit lodging taxes on any rental revenues they’ve received dating back to Sept. 1 of this year.

While the agreement between Airbnb and Berkeley will make lodging tax collection easier for Airbnb hosts, operators need to be aware that they’ll still need to collect and remit any lodging taxes Airbnb isn’t automatically collecting as well as lodging taxes for bookings through other rental platforms, such as HomeAway or VRBO.

Monthly enforcement fee

Hosts are also required to pay a monthly enforcement fee they must pay themselves rather than passing on to guests. This is paid monthly when the host submits short-term rental taxes to the city. The fee is calculated as 2 percent of the amount paid by guests to the host.

Keep in mind that Airbnb does not collect the monthly enforcement fee for its hosts, so you’re responsible for paying that to the city on your own.

Limits on rental days per year

If the host is not present during rental periods, the limit on rental days is 90 per year. Hosts who are present during rentals have no limits on how many days they can offer short-term rentals. Hosts should keep in mind, though, that in Berkeley, someone renting a residential rental unit for 14 consecutive days or more may be considered a tenant with certain rights.

Neighborhood notification

Short-term hosts must also notify residents of all adjacent properties when they establish themselves as a short-term rental business. Notification includes contact information for the host as well as for a local contact if the host is not present. Hosts must also give guests a letter from the city about rules on smoking, noise, and recycling.

The city has also created a hotline residents can call to voice complaints about short-term rentals. Properties that violate the city’s short-term rental laws can be cited or “declared to be a public nuisance.”

Number of Airbnb deals growing

The Airbnb deal with Berkeley is one of the latest in a series of agreements with communities around the world. Airbnb has entered into more than 300 such deals globally. In California, the company has deals with around 30 communities, including recent additions Pacific Grove and Davis. San Francisco was among the first cities to make an agreement with Airbnb for lodging tax collection.