Kansas City leaves $2 million ‘on the table’ each year by not taxing Airbnbs, study finds | KCUR 89.3

Kansas City is losing $2.28 million by not taxing short-term rentals, according to a new report released by the city auditor.

The report analyzed short-term rentals from July 2021 to August 2022 and noted that the roughly 1,800 rentals represent between 7% and 11% of the city’s overall hotel stock – the equivalent of two downtown convention hotels – city.

Residents of Kansas City are more and more frustrated with the explosion of Airbnbs in their neighborhoods, and what they see as the weakness of city law enforcement against them. Residents have complained about quality of life issues related to unregulated rentals and nuisance guests, leading to issues such as unruly parties, trash, and a lack of parking.

Under a Missouri law that only applies to Kansas City, the city can’t collect congress and tourism taxes on short-term rentals because it excludes rentals from its definition of hotels. and motels – potentially preventing the city from generating millions in revenue.

“It seems like it’s up to us to decide how we should move forward, because we’re basically leaving money on the table,” said 6th District councilwoman Andrea Bough.

The city collects money from the permit application fee that hosts must pay when they authorize their short-term rental with the city. However, about less than 10% of local Airbnbs go through the city’s licensing process.

City Auditor Doug Jones said assessing taxes and fees on short-term rentals the same way the city manages hotels would improve the city’s ability to promote tourism.

“Short-term rentals are an important part of the accommodation industry in the city and are currently not required to pay the same taxes and fees as similar businesses,” he told members of the Board on Tuesday. advice. “The application of these taxes and fees would level the playing field and provide the city with funding for convention and tourism-related activities.”

This audit is the first of two regarding short-term rentals and their impact on Kansas City. A second, analyzing whether short-term rentals comply with city code, will be released in the coming weeks.

Lack of revenue for Kansas City

Missouri law and city code define a hotel as any building with more than eight rooms. Hotel and motel stays generate a 7.5% sales tax for the city.

But city code dictates that short-term rental units can have no more than two people per bedroom, with a maximum occupancy of 8 people per unit. This definition limits short-term rental units to four bedrooms, putting them outside the limits of the 7.5% tax.

The city could also collect $1.50 per occupied room per day through its local hotel, Motel Occupancy Fee, but its definition of hotels and motels is the same as the state, excluding short-term rentals. . The audit found that if the city had applied these occupancy fees on short-term rentals last year, it could have collected more than $350,000.

Money collected from the Convention and Tourism Levy supports the budgets of Visit KC, the neighborhood development and tourism fund, and local convention and entertainment centres. The hotel and motel occupancy fee pays for the T-Mobile Arena.

The city’s options for generating income

According to the auditor’s report, other Missouri cities like St. Louis and Independence may levy taxes on short-term rentals because state law defines Convention and tourist tax differently depending on the city.

Changing Kansas City’s hotel definition — and how the city uses the convention and tourism tax — would require action by the state legislature, followed by a citywide vote. asking residents to approve this change.

The audit recommends that the city pursue changing the state’s definition of a hotel as a legislative priority for the next legislative session.

In the meantime, the city can make immediate changes to its occupancy fees by putting them to a citywide vote. The audit recommends that City Council assess occupancy fees similar to those currently in place for hotels and motels.

5th District Councilman Lee Barnes said the audit shows the city can make a strong case for collecting revenue from short-term rentals.

“I think our citizens, if we put something on the ballot, would accept that we could make these short-term rentals similar to what we have with hotel, motel taxes,” he said. he declares.