Seems like a simple case of fairness to me, but nevertheless, this week a major battle broke out over L.D. 436, “An Act to Require Providers of Short-term Lodging to be Licensed by the State,” sponsored by Sen. John Patrick, Democrat of Oxford County.
The battle, which has been brewing for a few years now, is between those inns and B&Bs who are licensed, who must follow lots of rules, and who pay taxes, against those who rent rooms by the night, who don’t have to follow the rules, and who don’t collect and pay taxes. At least, according to testimony, many do not collect and pay taxes. This is both a complex and simple issue.
I put it this way, in my testimony in favor of the bill. I don’t really like rules or taxes, and it would be nice if the Legislature relieved inns and B&Bs from both, but I know that is not going to happen. So whatever rules and taxes the Legislature decides to apply to those who rent rooms, they should be applied to all who rent rooms, without exception.
Linda and I are now in our fifth year of writing a weekly travel column published every Thursday in the Kennebec Journal and Morning Sentinel. During that time we have gotten to know some wonderful innkeepers. If you own an inn, it is consuming. It is your life; you work very very hard. And here’s the problem.
In your town, even on your street, your competitors may be renting rooms without being licensed, without having to follow the same rules you follow, without collecting the taxes you collect from your customers. They might even be in violation of local zoning laws prohibiting businesses in specific neighborhoods. This is making it increasingly difficult to successfully own and operate inns and B&Bs, particularly in rural Maine.
What’s the problem?
Some of Maine’s best innkeepers were there Monday to support the bill. Frank Isganitis, an owner of The LimeRock Inn in Rockland, noted that, “Fifteen online directories control literally thousands of listings in Maine alone. These units do not require licensing even though they meet the definition of Lodging Place… State law needs to be updated to reflect life in this new world.”
Ted and Lisa Weiss, owners of Hawthorn Inn in Camden, testified that, “On February 22 of this year, AirBnB listed 25 unlicensed properties renting rooms for minimum stays of less than seven nights within the town of Camden… For a town as small as Camden, these listings, just from AirBnB, represent significant revenue siphoned away from licensed, taxpaying properties such as ours.”
Weiss also noted a more serious problem. “I am also sensitive to the safety risks presented by unlicensed properties. Before we moved to Camden, we lived three blocks away from a grant, 19th century private home that was renting rooms without a license. Five years ago, a major fire began in one of the guest rooms and resulted in the death of one of the guests.”
Beverly Davis of Kennebunk, who has owned the Captain Lord Mansion for 37 years, was at the hearing representing the five “Historic Inns of Kennebunkport” along with Sarah Lindblom who with her husband Eric has owned the Captain Jeffords Inn for 11 years. “AirBnB says there are 244 room rentals in Kennebunkport,” said Davis. She noted that three specific issues must be addressed: taxes, licensing, and safety. “This is not about stopping these folks from renting rooms,” she said. “We believe the playing field needs to be leveled. Everyone should pay licensing fees, meet safety codes, and pay the Maine State 8 percent rooms tax.”
Scott Cowger, co-owner of Maple Hill Farm in Hallowell and chair of the Maine Innkeepers Association’s Legislative Committee, as well as a former member of the Maine House and Senate, went through a long laundry list of state rules and requirements for licensed facilities. “We are duly proud of our role of caring for the needs of the traveling public,” Cowger testified. “And we are actually proud of following the rules. We have always wanted to do things right, and there are systems in place, many crafted by the legislature, to make sure that we do.”
“The cost of complying with requirements for licensed properties results in higher prices than unlicensed properties,” noted Cowger, “and this is simply unfair competition.” He also clarified that “this bill does not attempt to license those who are engaged in vacation rentals, such as residents looking to rent their second home or camp out by the week or month to supplement income. This bill does look to level the playing field for those engaged in overnight lodging on a nightly basis, such as licensed hotels, inns, and bed & breakfasts.” He reported that there are more than 1,500 listings in Maine on AirBnB alone, compared to only 1,400 lodging licensees in the whole state.
Maine Innkeepers Association
Greg Dugal, the very effective executive director of the Maine Innkeepers Association, made a good case for the bill, and supported an amendment that Senator Patrick offered to simplify the proposal. “We feel that this is a common sense approach to resolving the problem between the licensed community and the short term or vacation rental community. There are no restrictions at all in this bill on weekly or monthly rentals. (It applies) only to overnight rentals. So it is pretty simple. We define overnight lodging as something less than seven days… Simply put, if you rent for less than seven days you would need a license.”
“There are over 50 state and local jurisdictions looking into ways to regulate short-term rentals,” testified Dugal, “so it is not something that Maine innkeepers just dreamed up.” He also noted that, “Some casual renters collect and remit lodging tax, but many don’t.”
Dugal emphasized to me that his association is open to compromise and dialogue on this issue, and would even support a task force to tackle the issues and bring back recommendations to the Legislature next year. Here is his entire testimony on this issue, if you would like to read it.
Supporters
Lincoln Merrill Jr., president of Patriot Insurance Company of Yarmouth, testified in support of L.D. 436 with some very interesting and compelling information. “When we issue a policy insuring a single family house, we have no expectation that a business is being run there… (If) a homeowner who rents rooms under the online websites like AirBnB, HomeAway, or VRBO does not have the proper insurance, they will find many aspects of their room rental business are not covered when they report a loss.”
“If the homeowner provides transportation to and from the airport to a guest in their personal automobile, this is a business use and is not covered by their personal automobile insurance policy. If they hire their neighbor to collect rent, let in the guests, and clean the room, then the neighbor is probably an employee and the homeowner needs to provide workers compensation coverage. In my experience, this last example is usually a cash transaction and is seldom reported as income or an expense.
“According to our agents, it is likely that many homeowners do not know there is a need to tell their agent that they are running a business and that they may not have insurance coverage,” reported Merrill. “Patriot Insurance Company is asking today that you regulate what are clearly small businesses. We believe a safety issue is present when these businesses are unregulated in areas such as water quality, proper exits, proper lights and signs, sprinklers, fire protection, and food safety. If these businesses were regulated like other lodging facilities, it is more likely the owner will advise their insurance company and we can provide them with the proper coverage.”
Merrill gave an example from his town of North Yarmouth where, “there were three homes listed for nightly rental last Thursday. Two of the homes are in rural residential districts where this use is not allowed. At least one of the homes provides breakfast. It does not appear that any of the homes meet life safety codes that other regulated facilities must. The town advises me that they were unaware of these businesses being operated in town and have not approved, licensed or reviewed them.”
Governor LePage
Holly Lusk, Gov. Paul LePage’s Senior Health Policy Advisor, testified in opposition to L.D. 436. She said, “Significant new state resources would need to be secured to respond to the expected dramatic increase in regulated lodging places.”
“Rather than attempting to create a level playing field for lodging establishments through the creation of additional regulation, the administration is already considering deregulation of lodging establishments,” said Lusk.
Should be interesting to see what, if anything, the governor comes up with!
Opponents
A number of groups representing vacation rental companies were represented at the hearing by professional lobbyists. Debra Hart, lobbyist for Vacation Rental Professionals of Maine, said, “This bill… is not about leveling a playing field. It is pitting one part of the industry against another.”
Josh Tardy of Mitchell Tardy Government Affairs submitted written testimony on behalf of his client, the Travel Technology Association. Matthew Kiessling of that Association wrote that he also serves as Executive Director of the Short-Term Rental Advocacy Center, a coalition that represents short-term rental technology platforms like Homeaway, AirBnB, FlipKey, and others. “Given its growth in popularity, and the tremendous benefits of the industry, it is perplexing that seeking to impose a 7-day minimum stay on short-term rentals in Maine is under serious consideration,” wrote Kiessling.
Melba Gunnison of Cottage Connection of Maine, said that, “People who stay in vacation rentals will not choose another lodging option (in Maine). They will go to another state that will provide vacation rentals on their schedule.”
Patti Hamilton, a Whitefield farmer, said he and her husband rent a small cabin on their farm to guests who want to experience farm life. Most stay for only a few days. “We not only provide a fun cabin stay,” she said, “we provide powerful family experiences… To add costs inherent with licensure and regulations will make this part of our business unprofitable – which will deprive us from valuable income and our guests from a meaningful and rich Maine experience.”
Lon Cameron, who described himself as “a hard-working son, grandson, and great grandson of Aroostook County potato pickers,” opened his “self-constructed tiny house in western Maine to travelers… they don’t want carpeting and wallpaper, nor electricity and plumbing,” he said. “They’re coming in from Boston – or Barcelona – to enjoy a rustic Maine experience in the western foothills. In one year, I’ve met 90 guests from 23 states and nine countries; five are returning to western Maine for repeat stays.”
Like many of the opponents, Cameron was angry about the possibility he would have to adhere to the same rules that govern licensed lodges. “What my guests really require protection from are folks in power deciding what a ‘Maine vacation’ should look like,” he said.
Margaret Krainin, who with her husband owns a real estate and vacation rental company in the Sebago Lake Region, was equally bitter. “I’m going to be very blunt,” she testified. “I think it’s a sad, sad day in the state of Maine when one sector of a vital industry deliberately sets out to destroy another. But that is really what is happening. The Innkeepers Association has brought this bill to you because B&B owners believe vacation rentals are cutting into their profits and they’re determined to stop us.”
“The Maine Innkeepers are not actually seeking to level the playing field with this bill. They’re using ‘harassment by law’ to unfairly handicap their perceived competition,” concluded Krainin.
Conclusion
I don’t think this debate should be so ugly. But there is, for sure, a lot at stake for both sides in this battle. I like the way Frank of LimeRock Inn summed it all up.
“Community is about coming together on what we have in common and laws need to exist where we diverge in opinion in order to navigate to a minimal standard. Government has an awesome responsibility to artfully balance an individual’s right against the consequences of an individual’s actions and their impact on a greater humanity. In Vacationland, any activity that helps promote our communities, our values and our principles is a good thing. But let us remember our state motto, Dirigo, we lead! In a state where tourism is our number one economy, let us lead in embracing this new form of accommodation. But let’s lead by addressing the issue and adapting our standard, creating equality, and licensing everyone. The time has come, and our future and sustainability depend on it.”
Let’s hope the Legislature agrees.
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