The Short Term Rentals Investigatory Group was formed in June and recently recommended a series of steps the city should take to better regulate rentals.

NEWPORT — A task force studying the impact on the city of short-term rentals through hosting platforms like Airbnb has recommended a series of steps the city should take to better regulate the rentals while also sharing in the economic benefits they provide.

“It is the habitual infringement on existing ordinances that is creating a negative atmosphere and causing disruptions in neighborhoods and the housing market,” says the Short Term Rentals Investigatory Group at the conclusion of its report outlining corrective measures the city should take.

“Short-term rentals have a positive impact on the city in many ways including added industry, increased tax revenue, increased investment in the city, added income for local home owners and an avenue for visitors to experience the city in a way a conventional hotel would not offer,” the conclusion also says.

The city Planning Board formed the Short Term Rentals Investigatory Group in June 2018 and named Planning Board member Jeff Brooks as chairman. He and Melissa Pattavina, the Planning Board chairwoman, signed the report submitted to the board on Monday.

The investigatory group held seven meetings from June through September, and Newport property owners who operate short-term rental businesses participated in the discussions held throughout the summer into September.

People opposed to short-term rentals because of a surge in Airbnb rentals in their neighborhoods also spoke at the meetings.

Home-share short-term rentals from Airbnb alone had 35,000 guests and earned $8.1 million in Newport in 2017, according to data provided by Airbnb and appended to the investigatory group’s report.

All hotels, inns, and short-term rental operators are required to register their “guest houses” with the city, and there were 340 such registrations as of July 1 this year, according to the report.

Those registrations indicated 2,858 rooms that are able to accommodate up to 6,418 guests. Most of those rooms are in large hotels, motels and inns.

But of the total, 241 registrations are for properties offering five bedrooms or less, the report says. Those registered properties accounted for 462 of the rooms available for rent, or only 16.16 percent of the total registered guest rooms.

However, there were 708 active “Entire Home” listings in Newport in the 12 months leading up to July this year, according to data provided by AirDNA, a separate company that provides market research, data and analytics for short-term rentals.

That shows an “extreme disconnect in registered short-term rentals versus unregistered,” according to the investigatory group’s report.

Of the 13,170 residential dwelling units in the city, 7,559 of those units, or 57.4 percent, are rental units and 1,737 of the total units, or 13 percent, are seasonal units, according to the report.

That means the 708 short-term home listings of four bedrooms or less make up 9.38 percent of the total rental market, the report says, and “it can’t be ignored as weighing on the rental market as a whole.”

The investigatory group recommends the city hire a short-term rental administration officer “for managing, handling, enforcing and registering all short-term rentals.” The new officer also could address “many of the day-to-day concerns and questions that arise regarding short-term rentals in the city,” the report says.

The officer would collect registration forms and fees, work with state and local tax offices to make sure appropriate revenues are being received, and police illegal guest houses by reviewing hosting platforms.

The City Council hired Host Compliance LLC, based in San Francisco, in June 2017 to identify all short-term rentals in the city and monitor compliance with state laws, local ordinances and regulations, and to determine whether those rentals are paying room taxes. The company uses proprietary software tools to compare online listings with the city's database of who is registered and who is not registered. The company’s contract extends to 2021 and the new officer would work with Host Compliance, the report says.

Creating a new short-term rental administration officer “would easily pay for itself with registration fee revenue,” according to the report.

The city currently collects a $45 registration fee and that should be increased substantially, according to the report.

“The current registration process for many applicants is quite confusing,” the report says, and it recommends “a clearer registration process.”

The guest house applications should be done online and there should be a unique registration number attached to every guest house permit, the report says.

“If a residence is being advertised for occupancy for less than 30 days, there must be a registration number included in the advertisement,” the report recommends. “If it is not, the listing ad will be removed.”

The registration numbers would make it easier to police unregistered short-term rentals as they are being advertised, the report says. Also, short-term rental regulations could be enforced “without having to catch guests/hosts in the act of exchanging money,” the report says.

There should be at least a $1,000 fine for renting an unregistered unit, the report recommends, and fines should increase for owners who continue to advertise illegally or rent without registering.

Separately, there would be fines for owners of registered units who do not manager the units properly.

The report also suggests several changes in the zoning code to clear up inconsistencies and add clarity.

The report and attached materials say short-term rental businesses in the city would provide the city with increased revenues if the properties were more efficiently monitored.

Airbnb, HomeAway and other online short-term rental platforms collect mandatory sales and hotel taxes from their clients in Newport and send the sales taxes to the state and the hotel taxes to the city.

“Airbnb alone has remitted over $3.5 million in taxes to the state of Rhode Island since 2015, including over $360,000 remitted to the city of Newport as of March 2018,” the report says, citing data provided by Airbnb to the investigatory group in a letter dated July 25 of this year.

The problem the city has, according to city officials, is that each hosting company sends the city a monthly lump-sum check but provides no information on which properties are paying the taxes.

City Finance Director Laura Sitrin has said when she receives those checks, she has no way of identifying the properties that are offering the short-term rentals. That makes effective enforcement of the tax levy difficult.

Airbnb and other companies have refused to give the city any documentation on who is paying what, citing their clients' privacy.

The City Council unanimously passed a resolution in August calling on the General Assembly to pass legislation that would “require third party hosting platforms to file tax returns based on real data instead of anonymous numbers that prevent verification of the information.”

The collection of taxes on hotel, motel, bed-and-breakfast and private rooms is a major revenue source for the city. Sitrin said the city collects in total about $2.3 million annually in lodging taxes.