The Airbnb Dilemma – Delaware Business Now

Every time a disruptive technology emerges, we see a backlash from affected industry, followed by scare stories and, later, regulation.

This was the case with ride-sharing services Uber and Lyft, which offer an alternative to over-regulated taxi monopolies. Ride-sharing services responded with self-regulation in hopes that their efforts would not result in the government putting an oppressive hand on their operations.

In the case of Delaware, the state government encouraged the entry of Uber and Lyft, thanks to evidence that their entry into other regions reduced the number of drunk driving cases. Ground rules were established and problems were minimal.

More problematic are app-based accommodation services, Vrbo, Airbnb and others that are touted as a way for small homeowners to rent a room or vacation property. The folks at Airbnb put out press releases about the millions of dollars in revenue going to landlords.

The reality is a little different in Delaware and elsewhere.

Accommodation operators believe that an app-based market segment operates illegal hotels. In popular locations, landlords have driven up apartment rents by converting to Airbnbs that charge high prices for short stays.

There is also Airbnb Watchwhich chronicles the abuse but goes too far in failing to mention that some of the issues discussed affect all types of accommodation establishments.

A year ago, I came across a social media site in northern Delaware that appeared to show a landlord who had assembled homes and apartments to use as Airbnb-Vrbo leads.

By using this approach, the owner escapes the health and safety standards that come with a hotel. Landlords also escape a room tax in Delaware that ranges from 8% (state) to 10-11% in New Castle County.

Regulation could be difficult as overlapping LLCs etc. would make it difficult to apply health and safety issues. A complicating factor comes from rental taxes charged by beach towns.

Still, a tax on all Airbnb, Vrbo transactions would level the playing field to some extent and could pave the way for sensible regulation.

Agree or disagree. Let me know. Just hit return and type away. – Doug Rainey, Content Director.

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