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Legislators predict a policy regulating Airbnb might be next

There was a vigil at Peace and Justice Plaza on Wednesday night, Jan. 28.TK and TK are the proprietors of the TK bed and breakfast and cafe in Pittsboro, about 12 miles south of Chapel Hill.
There was a vigil at Peace and Justice Plaza on Wednesday night, Jan. 28.TK and TK are the proprietors of the TK bed and breakfast and cafe in Pittsboro, about 12 miles south of Chapel Hill.

The house features ladybug doorknobs and a roaming cat. It’s nothing like the more traditional rental options in the Pittsboro area, according to Piper and Clark.

Despite its distinctive flair, their bed-and-breakfast is part of a sweeping trend. It relies, in part, on gaining customers through Airbnb, a website that connects members with hosts who list properties available for short-term periods.

But unlike most Airbnb users, the couple registers their home as a bed-and-breakfast and, therefore, has to pay business taxes on the property.

“A little more power for the government isn’t a bad thing,” said Clark, referring to whether all Airbnb hosts should pay taxes. “An extra $5 or $10 (per night), I would pay it.”

Nationwide, Airbnb rentals are the focal point of many cities’ recent legal woes, as it was reported that more than 70 percent of Airbnb’s listings in New York City in 2014 were illegal. In North Carolina, new legislation could soon limit some of the drawbacks that sharing economy services present — including taxation issues as well as safety and health problems.

N.C. Sen. Floyd McKissick Jr., D-Durham, said the state legislature would likely work during the 2015 session on a statewide policy to regulate companies like Airbnb.

Converging problems

In general, if someone rents out a home for a single occasion, many insurance companies will extend coverage to the renter.

But when someone rents out on a regular basis, many companies will consider this a business use — and the renter will need to purchase either a hotel or a bed-and-breakfast policy, according to the Insurance Information Institute.

“When we were renting out a place (through Airbnb) in New Orleans, the pipes broke,” Piper laughed, rocking back in her porch chair. She and Clark agree that it’s important to not expect Airbnb rentals to have all the amenities of a hotel.

UNC law professor Judith Welch Wegner said there are different risks involved with renting out.

“What if somebody broke in and took your stuff out while you were touring the city? Would you be aware of the status as to what the homeowner’s insurance would be?” she said. “I sure wouldn’t.”

But Michael Munger, a political science professor at Duke University, said despite financial vulnerabilities, few problems with insurance and Airbnb rentals have cropped up.

“Somebody rents an apartment, gets drunk and burns it down — then that hasn’t happened yet,” he said.

Taxation is another dimension of the problem the legislature hopes to resolve, McKissick said.

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“The main concern is the extent to which they should be paying appropriate taxes,” he said. “I have people who are studying what is done in other jurisdictions, which can be insightful as to what we can do in North Carolina.”

So far, cities such as Portland, Oregon, San Francisco and Seattle have implemented licensing fees for short-term rentals, according to a peer-review document from the Raleigh City Council.

Still, Piper does not begrudge other people for not paying the taxes.

“If somebody’s renting out part of their house or something, there’s a risk in there for them,” she said.

Preserving a village feel

In the Chapel Hill-Carrboro area, hundreds of homeowners are using Airbnb to rent out part of their property.

The town of Chapel Hill, known for its ban on bed-and-breakfasts, has a certain identity to maintain, Munger said — but the town shouldn’t be resistant to competition.

“I think that there has been a huge population growth, and there is a lot of people who want to stay in town,” he said.

Continuing to allow Airbnb rentals in the area would alleviate some pressure for construction of hotels, motels and other large venues, said Mark Zimmerman, a Chapel Hill resident and real estate broker.

“Traditional B&Bs and then this more relaxed version of shared economy would enhance the community character,” he said. “There’s a whole different experience offered by these new options, so why not attract those people to Chapel Hill?”

There are a few times a year, such as during graduation, when the town needs more rooms available, Munger said.

“If you’re concerned about the village nature of Chapel Hill, you should be in favor of Airbnb,” he said. “Otherwise, they’re going to have to build more hotels.”

An innovative model

Piper and Clark moved to Pittsboro from Minneapolis three years ago. The couple just recently used Airbnb a few times during a 3,000-mile trip.

“It’s not the sterile Holiday Inn experience, which really gives us the hives,” Piper said.

Airbnb charges hosts a 3 percent service fee per booking, and guests are charged a service fee of 6 to 12 percent. Renting a private room in an Airbnb — versus paying for a hotel room — can save guests 50 percent in some cities.

“Some of what drives people to Airbnbs is pricing,” Zimmerman said. “Some of it is why someone would go to a traditional B&B — they want a small-town feel, to get to know the proprietor. They want a personal experience.”

The option is becoming increasingly popular for students, and UNC junior Natalie Shearin, who is currently studying in France, said she plans to use Airbnb again.

“It’s hard to beat the safety and fun of sharing a room with a couple friends,” she said in an email. “Plus, it’s liberating being able to do what you want when you want, without having to comply with hostel rules.”

With a splash of personality, Airbnb rentals are all the more attractive, Piper said.

“If there’s quirks to it, all the better,” she said.