Hotel And Occupancy Taxes: What Short-Term Rentals Bring to The Table
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By Lisa Sievers
Special Contributor
In the discussion regarding short-term rental regulation in the City of Dallas, one important point has not been well addressed — Hotel and Occupancy Tax (HOT).
What are HOT taxes and why should we care about them?
HOT taxes are collected to directly promote tourism and the convention/hotel industry. In Dallas, 3.5 percent of the taxes go to support museums and cultural institutions via the City’s Office of Arts and Culture, 29.1 percent goes to VisitDallas to promote Dallas as a convention and visitor destination, and 67.4 percent goes to the Kay Bailey Hutchinson Convention Center.
A vibrant cultural scene is very important in drawing visitors and new businesses to Dallas. Visited the Dallas Museum of Art? Seen a show at the Majestic Theater? Been awed by the music at the Morton H. Meyerson Symphony Center? Then you’ve seen your HOT taxes at work. We all reap the rewards from the collection and use of HOT taxes.
The City of Dallas has noted that up to September 2020, 250 hotels had registered for HOT and will provide $40 million in revenue. As of September 2020, about 700 short-term rentals had registered, providing about $1 million in revenue.
The city projects that there are 2,161 short-term rental properties as of December 2020. Why haven’t all short-term rentals registered?
The answer is complicated and twofold: The primary culprit appears to be confusion regarding the city’s complex MuniRevs registration/collection website as well as an assumption that Dallas City taxes, along with Texas State taxes, were already being collected and submitted automatically by short-term rental platforms such as Airbnb and VRBO.
The Dallas Short-Term Rental Alliance, a group of over 400 short-term rental operators and community stakeholders has taken an active role in creating awareness of registration and HOT payments among their host membership.
“We have been working with the city and short-term rental owners/operators to drive registration for HOT taxes,” said Shelby Fletcher of the DSTRA Leadership Committee. “Since October last year, we have held four well-attended educational webinars which have helped increase compliance numbers”.
Leaving Real Money on The Table
The State of Texas has already reached an agreement with several commercial platforms (such as Airbnb, VRBO, and HomeAway) to automatically pay the 6 percent State HOT tax directly into their coffers. In 2018, the State of Texas collected $24 million In HOT tax from the Airbnb platform only. The City of Dallas collects an additional 7 percent HOT tax as well as a 2 percent Tourism Public Improvement District fee in some areas.
The important point here is actually the NUMBER of short-term rentals — and this is where it gets interesting.
The city says there are 2,161 short-term rentals in Dallas. Airdna.co provides vacation rental data and they say there are 3,672 active short-term rentals in Dallas. Another study recently presented to the Dallas City Council said there were 4,100 — maybe even 5,000 — short-term rentals.
Let’s do the math. Checking Airdna.co again for average monthly revenue per short-term rental, that’s $1,625 x 12 months x 7 percent HOT tax. Depending on whose numbers are used, that’s between $3 million on the low end and $6.8 million on the high end for Dallas HOT tax collection.
NBC Nightly News reports vacation rentals are selling out as travel rebounds in 2021. VRBO says fewer than half of their homes are available for July and that they’ve had the strongest start in 25 years. Travelers are choosing homes over hotels. The future looks bright for the travel business!
Not only do Airbnb and other platforms already have agreements in place with the state, but also with several other Texas cities such as Plano and McKinney, whereby they automatically calculate and deposit the HOT tax directly into city accounts. Along with HOT collection, the platforms also offer cities a Law Enforcement Portal to report bad actors as well as a 24/7 neighborhood hotline.
As the cultural jewels of our city continue to struggle to survive during the pandemic, maybe we should be asking the Dallas City Council why several million dollars in potential HOT revenue are being left on the table?
Lisa Sievers has lived in East Dallas for over 30 years. She is an interior designer, having founded her small business 25 years ago. She and her husband own and operate two short-term rentals in East Dallas for which they have over 750 5-Star reviews.
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According to the Texas Tax Code, HOT tax can only be used to promote tourism. Who are among those who stand to benefit the most from increased tourism? STR investors seeking to further commercialize Dallas’s residential neighborhoods.
Meanwhile, funds for STR enforcement (police, code compliance, administrative & municipal court costs) must come out of the general fund (aka local taxpayers’ pockets). Neighbors who don’t want these commercial businesses in their residential neighborhoods are essentially being forced to subsidize the STR industry so that Airbnb, Vrbo & STR investors can profit at their expense.
A recent audit of 1% of the 4100 STRs believed to be operating in Dallas found the cost of responding to 911/311 calls generated by those unsupervised STRs over a period of 7 months cost the city over $520k, dwarfing the amount of HOT tax they paid. Once all costs are accounted for, STRs are a net negative for the city budget and Dallas taxpayers.
https://www.fox4news.com/video/914474?fbclid=IwAR19iEqCisBDj9G0swUfbvkUyMaJsYN55leLg8SzQ_m0GZDVgheuUo3-yV0
This recent audit in Dallas is in line with other studies that have found that for cities and residents, the economic costs of STRs outweigh any economic benefit. Dallas is better off ensuring it has an adequate housing supply and safe, livable neighborhoods for local residents than forcing its taxpayers to subsidize the STR industry.
https://www.epi.org/publication/the-economic-costs-and-benefits-of-airbnb-no-reason-for-local-policymakers-to-let-airbnb-bypass-tax-or-regulatory-obligations/
Btw, this is the 4th or 5th pro-STR piece Candy’s Dirt has posted in the past month or so. When is Candy’s Dirt going to give equal time to the other side of the STR debate – or has Candy’s Dirt just become a propaganda tool for the short term rental industry?
Why short-term rentals are not registering is not confusing. It is par for the course. This is a parasitic exploitative industry that is lucrative because they ignore laws such as zoning, paying taxes and providing life safety features like hotels have to. And don’t kid yourself. Non-owner occupied short-term rentals are de facto hotels and have no place in residential zoning.
As for Texas reaching an agreement with Airbnb and their ilk over collecting HOT, that was no agreement. That was the STR industry throwing that out in an effort to grease the wheels for the their state preemption bills that were before the TX Lege in 2017. The VCA is only beneficial to industry. It does not require them to provide anything but aggregate anonymized data so useless for enforcement. The city of Dallas won’t be entitled to collect back taxes owed.
The cost to the city of Dallas for police, fire and Code response to these STRs can NOT be covered by HOT. This makes STRs a drain on city resources while endangering residential areas. There was another shooting at a STR in Dallas this past week. The Dallas City Council needs to do what is right and protect residents from having their neighborhoods commercialized to benefit the few and the expense of the many.
Good to know where Candy stands. This is the fourth pro STR article posted here.
Just curious, do either of you actually live in Dallas?
Also curious, have either of you actually stayed in a short term rental?
Yes, I do. And I’m not sure why your question about whether or not I’ve stayed in a short term rental is relevant. Even cities like Port A & Galveston that have tons of short term rentals have single family neighborhoods where no short term rentals are permitted so that locals can live in real neighborhoods with real neighbors. You’re trying to paint us as anti-STR when in reality, we just want them zoned to appropriate areas instead of allowing the STR industry to hotelify every single neighborhood in town. Unsupervised commercial businesses don’t belong in single family residential neighborhoods.
Btw, it’s funny you should mention not living in Dallas since the Dallas STR group is being propped up and coached by 5 paid employees, none of whom live in Dallas, from “Rent Responsibly”, a STR industry front group funded by the big STR platforms & other STR industry vendors.
Thank you Lisa for presenting the positive benefits that STR’s can bring to Dallas.
Thanks for laying out clearly the significant income that HOT taxes bring the city – and how much more could be coming in if Dallas just worked worth STR platforms to get all the taxes it is due. I hope this can be done.