Guest Opinion: A simple solution to the vacation rental issue | SkyHiNews.com

Guest Opinion: A simple solution to the vacation rental issue

John Erwin
Guest Opinion

I enjoyed the article by Anna Winkle in the Feb. 13 Sky-Hi News. We owned condos at Beaver Village and went through the transition from minimal homeowner involvement with rental management (working with Kristy Meyer) to extensive owner involvement in rentals.

The same phenomenon Anna wrote about in Grand County is happening all over the country. Both seaside and mountain resort towns and counties are losing scores of revenue to owners who manage their own rentals (using lock boxes and entry codes) so that guests can go direct to their condo from the airport and let themselves in. What I am not seeing in much of Colorado or Grand County is a serious effort to resolve the issue of bringing homeowner's into compliance with the tax laws. The solution is really not all that complex.

We happen to own a condo in the State of Hawaii, County of Kauai. Neither Kauai nor Hawaii can afford to tolerate owners attempting to bypass tax laws, and they have included companies like Homeaway and VRBO in their solution. They have also solved the problem of owners (many Hawaii property owners like us live on the mainland) not being present to deal with issues like a leaky toilet or a broken appliance.

Tourism is the No. 1 industry in Hawaii, and they have two significant taxes to collect from short term renters: 1) A General Excise Tax (GET) 2) A temporary accommodations tax. The two taxes total of 13.421 percent of the net rental. We even have to collect the GET on the cleaning fee because it is an excise tax, not a sales tax on goods. At that percentage level, the state and county can ill afford to have owners not submitting required tax revenue. Their solution, while not perfect, consists of several measures:

“What I am not seeing in much of Colorado or Grand County is a serious effort to resolve the issue of bringing homeowner’s into compliance with the tax laws. The solution is really not all that complex.”

• All Listings on VRBO and Homeaway MUST display the owner's Hawaii Tax ID. Hawaii goes out of its way in its many tourist-oriented websites to point out to visitors that they should not be renting from anyone who does not display their tax ID number on a rental website. The state also points this out in visitor publications that are readily available at most airports, ports, etc.

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• Hawaii routinely scans all Hawaii listings on VRBO and Homeaway and notifies owners who are in violation of the above policy. If the owner does not comply, Hawaii will write to Homeaway and VRBO, notify them of the violation and ask that the listing be suspended pending compliance with state law. Hawaii knows who the property manager (PM) is for each condominium property and puts pressure on these PMs to get their owner's into compliance.

• Hawaii mandates that every non-resident owner have an "on island" or local emergency contact person. As an owner I am required to record this information through my PM once a year and I am also required to notify the PM of any changes within 30 days. The name of the emergency contact must be posted inside the condo. This provision just makes a lot of sense to me — there is no way I can effectively deal with issues (like a loose handle on a bike we allow guests to use) from 3,500 miles away. This on-island person can also provide valuable services to our guests with suggestions on where to rent things, things to see, best beaches, etc.

Hawaii stands to lose up to $10,000 a year [per unit] in tax revenue if they do not manage the issue identified in the article. Hence, the emphasis they have put on solving the problem has a strong financial motivation.

There is one area where Hawaii has not had a great deal of success and likely won't unless they spend a lot more money on staff and legal resources. Private home rentals do manage to slip under the radar. Since there often is no property manager involved, the state does not have an easy way to enforce the tax laws through a local PM firm. They can write to the homeowner but they do not know who that person is and Homeaway does not give away owner emails without some type of legal subpoena.

The sad news is that many of these owners collect the taxes, they just do not remit them to the state and county. Having said that, the number of condos available for rent far outnumbers the number of private homes available for rental.

So if Colorado is serious about solving this problem, they just need to look west a few thousand miles — the solution is really not that complicated and the financial gains far exceed the short term cost to get owners to comply with state and county laws.

John Erwin lives in Fraser.

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