Council passes short-term rental tax, pauses on regulation

Operators of short-term rental units and housing advocates weren’t silent as the Seattle City Council referred regulatory legislation back to committee last week.

The council passed tax legislation for $12 per night on a short-term rental unit, and $8 for a room. Short-term rental units include bed and breakfasts and houses and apartments found on sites like Airbnb.

Seattle councilmembers did not, however, vote to pass a council bill that would establish the regulatory licensing framework for short-term rentals and a cap on STRs established after Sept. 30 — two dwelling units — except for certain building types in the First Hill/Capitol Hill Urban Center.

Councilmember Rob Johnson, who chairs the Planning, Land Use, and Zoning Committee, had asked that the linked council bills go back to the committee for more revisions.

Housing advocates and short-term rental operators during public comment said they were ready for the two pieces of legislation to pass, having been involved in their development in committee.

Johnson said tax revenue wouldn’t be collected until the beginning of 2019 anyway, so there was still time to address several issues, such as boundary expansion/shrinking and the potential for the Washington State Convention Center to also begin collecting taxes from short-term rentals.

There was legislation proposed but not passed last session in Olympia to give the WSCC, a public facilities district, the ability to add STRs to what it already collects in hotel/motel tax revenue.

Councilmember Mike O’Brien said the council was already aware there would be no revenue from the legislation in 2018 when it passed out of committee.

“Using that as a reason to pull this from the agenda today,” he said, “I don’t know, is not accurate in my mind.”

Proponents of regulating STRs and a new lodging tax were vocal about a critical need for the housing support the revenue would fund. That is estimated to be $5 million annually, which would go toward the city’s Equitable Development initiative.

Affordable housing isn’t enough, said Patrice Thomas, who spoke in support of the tax during public comment. She said funds need to foster community-based development and stop displacement of people of color, immigrants and refugees.

Housing for All coalition members also asked the council to support a proposed head tax on Seattle’s highest-grossing businesses to support affordable housing and services for people experiencing homelessness.

They came with placards with silhouettes and the names of people who have died on Seattle streets — seventy-eight so far this year, with 14 lives lost in October alone.

Puget Sound Sage put out a report in June 2016 that analyzed the long-term effects of Airbnb and other online short-term rental platforms in reducing the housing supply for residents while increasing options for visitors.

In the two years that the organization has been advocating for taxation and regulation on STRs, the city has lost 2,000 permanent units, said Jessica Jimenez with Puget Sound Sage.

Tammy Morales with the Rainier Beach Action Coalition said there is already a project in that neighborhood awaiting Equitable Development funding when pushing for passage of the legislation.

Doug Fraser said he’d been homeless five years ago, and now he’s a small-business owner. He asked that the tax go forward, and that existing STRs be grandfathered in to protect other small-business owners and their employees.

Eric Friedland said he started the Roy Street Commons, 621 12th Ave., in Capitol Hill as a way to help medical students and traveling nurses, himself practicing emergency medicine.

Friedland was among a number of STR operators that spoke in favor of the legislation on Monday.

As the city council works through this budget season, Councilmember Kshama Sawant argued that knowing whether there would be a new revenue stream was a good reason to address the tax portion of the STR legislation without more delay. Fellow Councilmember Lisa Herbold said the STR issue came up in 2016, was paused, and then came back in April.

“We have really been working on this for quite some time,” she said, “and I’m concerned about a hold, because I do believe there is some urgency.”

But councilmembers split in favor of sending the regulatory side of the legislation back to committee, which Johnson said could be addressed by Dec. 5.

Johnson successfully pushed an amendment on Monday that states the intent of the city to potentially reduce its administrative and regulatory costs by piggybacking on the county, state or WSCC should any of them also decide to impose an STR lodging tax.

The councilmember also had his amendment to switch from a flat $10 per night tax to a tiered system, with a $12 tax for an entire unit, pass over one from O’Brien for $14. O’Brien said he was proposing $14 to increase revenue and ensure there was enough funding for Equitable Development and the administrative cost of establishing regulations and collecting the new tax.

Johnson agreed his proposal meant $700,000 less than O’Brien’s amendment, but felt it was more affordable for visitors, closer to what people pay in hotel/motel tax and would still cover administrative costs and Equitable Development funding.