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City could regulate, tax short-term home rentals

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Tucsonans who rent their homes to tourists to put some extra money in their pockets might soon get regulated like any other hotel or bed and breakfast.

The City Council unanimously voted to look into how Tucson might regulate and tax short-term rentals within the city limits.

Cities across the country have dabbled in different ways to regulate and capture revenue from a growing Internet economy that’s mostly conducted outside the government’s grasp.

Short-term home and apartment rentals are becoming a significant part of the burgeoning “share economy,” where people use websites to rent their houses, cars, camping equipment or anything else someone might want to pay for.

Forbes estimated direct revenue from the “share economy,” which is mostly unregulated, would exceed $3.5 billion nationwide in 2013.

In Tucson, hotels and other businesses must have permits, inspections, insurance and pay taxes. But short-term rentals aren’t subjected to those regulations.

That’s not fair to businesses who must play by the rules, said Marion Hook, the chairwoman of the city’s Small, Minority, and Women-Owned Business Commission.

The commission recently studied the matter and recommended the city find a way to put some rules in place to put short-term rentals on equal footing with other hospitality businesses.

Hook, who owns the Adobe Rose Inn Bed and Breakfast, said the rules would also protect short-term rental customers and those who rent to them.

Councilman Steve Kozachik, who brought the item to the council’s attention, said talking about regulating the industry doesn’t equate to clamping down on it.

“It’s a legitimate industry and meets a market niche,” Kozachik said. “Nobody’s talking about limiting it. We just need to level the playing field.”

A survey of three short-term rental websites revealed about 2,200 listings for the Tucson region. Prices ranged from about $32 a night to $1,000 a night, Hook said.

With many of the rentals located in the county, Councilman Paul Cunningham said any future city ordinance must be done in concert with Pima County to be effective.

Visit Tucson President and CEO Brent DeRaad, who co-presented with Hook at Tuesday’s meeting, said about 20 percent of tourists to the Tucson region have used a short-term rental.

He said the city would make at least $500,000 a year if it charged similar taxes and surcharges to short-term rentals.

Even though taxing short-term rentals would fill city coffers, DeRaad said regulation would help ensure everyone who visits Tucson leaves with a good impression.

“It’s important to deliver a solid visitor experience. That’s our biggest concern,” he said.

“When somebody stays in a hotel or resort they have a very good idea of what they are going to get. When you’re renting a home, apartment or condo, you don’t know exactly what you’re going to get.”

Councilwoman Karin Uhlich said focusing on the short-term rentals would be a good starting point to explore how to regulate other aspects of the Internet economy.

“Just because you’re in a shadow economy doesn’t mean you don’t have to abide by a minimum-wage law and other laws,” Uhlich said.

While exactly how the city would regulate or tax short-term rentals is unknown, Hook pointed to some examples, such as New York, that have made deals where the online company pays a tax.

Others, like Austin, Texas, designated city workers to scan the websites to track down short-term rentals and make sure they were in compliance.

City staffers will now study what other cities have done and consult, and will report their findings to the council within 90 days.

Contact reporter Darren DaRonco at 573-4243 or Follow on Twitter @DarrenDaRonco

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