Borough plans to crack down on short-term rentals flying under the radar

Jun 12, 2019

The Homer Spit.
Credit KBBI DATABASE

The vacation rental market on the Kenai Peninsula is booming, but some say the fledgling industry is going unregulated. There’s concern that apps like AirBnB and VRBO are contributing to housing shortages in popular tourist destinations like Homer and Seward, but the cities on the peninsula and the borough itself are more concerned that the owners of those properties aren’t remitting sales tax.

However, the borough hopes a new piece of software will help it crack down on short-term rentals flying under the radar.

Erik Schreier owns a business called bwellbnb.com in Homer that manages vacation rentals. If someone wants to list their property on Airbnb or VRBO, but don’t want to do any of the work, they call Schreier.

“I handle the listing for them so I do the guest interaction, handle the housekeeping services and basically be the first point of contact for the guests coming in and be that insulator for the property owner,” he said.

Schreier’s business has been made possible by an explosion in the vacation rental industry on the Kenai Peninsula in recent years. According to Airbnb, in 2018, about 15,000 guests utilized the service in Homer alone, and hosts brought in $1.9 million.

The number of listings in Homer grew 525% from 2014 to 2017 and Airbnb’s website now shows over 300 listings in the Homer area, up from 250 in 2017. And Homer isn’t the only one seeing growth.

“So in 2010, we had about, I believe it was 10% listings for our population, and in 2018 we had 42% of our population had a listing of some sort for Airbnb or short term rentals,” said Seward City Planner Jackie Wilde. 

Wilde said that growth has created a problem for the city: making sure all those vacation rental owners are remitting both city and borough sales tax as well as the city’s local bed tax. But the city has found a solution: automated software that tracks vacation rental apps and websites 24/7 so city staff can compare that information to the tax rolls.

“We were able to determine that we had over a hundred lodging establishments that were running, that we didn't even have knowledge of,” she said. “So we went down the line and decided that we would revamp our lodging altogether.”

Seward introduced a permit application this year for all short-term rentals. Wilde said the city has received roughly 90 applications and is starting to write letters to active vacation rental owners who haven’t applied.

“We made sure everybody understood that we were not going to go back and shut people down or hit them for back taxes,” she said. “That we had the ability to do so. But we were going to give you one year to become compliant. That means register with us, let us help you, make sure you're filing your bed tax and doing everything properly.”  

The Kenai Peninsula Borough is now following in the city’s footsteps and plans to purchase similar software. Kenai Peninsula Borough Finance Director Brandi Harbaugh explains that it can be difficult for the borough to track vacation rental listings on their own and compare them to tax rolls.

“We are limited in the amount of staff that we can utilize for this purpose,” she said. “We do currently have a substantial amount of business registered with the Kenai Peninsula Borough. However, as we know, registrations do not always necessarily mesh with number of units.”

It’s unclear just how large that discrepancy may be, but those in the vacation rental business like Erik Schreier say it’s only fair that municipalities track down vacation rentals that aren’t paying their fair share into city and borough coffers.

“I'm very for that, being able to follow that letter of the law to make sure that there is tax revenue coming in, that it is benefiting the community and that it's aboveboard and legit," he said. 

The borough plans to solicit bids from companies that provide vacation rental tracking software next month.