Booking a stay through AirBNB or other similar platforms has become very popular among travelers. Instead of settling for a crowded hotel, you can find relatively inexpensive properties that offer so much more. But in some communities these short-term rentals (STR’s) have become a problem and Lafayette is no exception. This has left many to question the practices surrounding STR’s and whether some are even operating legally.
Short Term Rentals Provide Lodging to Travelers
There are few that would argue that this online industry didn’t spring forth as an alternative to lodging in hotels. These sites specifically target individuals who travel, whether for business or pleasure. Very few properties in the Lafayette area can be booked for longer than a few weeks at a time. This distinctly makes them Short Term Rentals as opposed to rent/lease agreements.
At a recent Lafayette Board of Zoning and Adjustment hearing, John Pastor, a co-founder of the Lafayette Tourism and Lodging Association (LTLA), suggested that if AirBNB’s were not available in Lafayette the city would “lose sixty-one thousand (61,000) travelers.” Thus, making it clear that even local industry leaders recognize that the industry targets “travelers.” In Louisiana, there is a name for people in the business of lodging travelers. They are called “innkeepers.”
The Louisiana Civil Code Article 3232 states: “Those are called innkeepers, who keep a tavern or hotel, and make a business of lodging travelers.” The Civil Code even goes on to define what exactly a “traveler” is. Louisiana Civil Code Article 3235 states that the term applies to “strangers and such as being transiently in a place where they have no domicile, take their board and lodging at an inn.” It is important to understand that this portion of the code does not govern the tenant – landlord relationship. That relationship is covered under other sections of the law that is clearly distinguishable. One involves a transient lodger, while the other involves someone taking up residence. When it comes to Short Term Rentals we are dealing specifically with “travelers.”
Short Term Rentals Are Operated to Make Money
Even if you have never booked lodging through a Short Term Rental site, it probably won’t come as a surprise that they want money in return. That’s right! Free lodging isn’t offered on their website. You must pay for that service. And you must pay them because they are operating a business to turn a profit. In recent years both the Louisiana Supreme Court (Edwards v. Landry Chalet Rentals, LLC) and the Federal Fifth Circuit (Hignell-Stark v. City of New Orleans) have opined that STR’s are private businesses pursuing commercial ventures that seek to “compete in the market for lodging.”
The operators of these Short Term Rentals don’t dispute this fact either. At a Lafayette Board of Zoning and Adjustment (BOZA) hearing many owners made statements affirming what everyone should already know, it is a for-profit industry seeking to make money on travelers.
Erin Bass, an STR owner who is also affiliated with LTLA, stated: “…I just want to ask you to consider, you know, what your decision tonight could do in terms of, you know, putting a lot of us out of business.” Leon Ferguson told the Board “Vote no to zoning changes and don’t kill a cottage industry.” Tyler Albrecht said “My AirBNB is a legitimate business… As a business, I do carry insurance on it and it’s accurate [sic] to my house and we do pay taxes.” John Pastor indicated “… two hundred forty (240) guests a day, eighty-seven thousand (87,000) a year… If you remove AirBNB… you’re going to destroy the FIT market. You’re going to destroy modern tourism and travel, and the industry… you’re going to lose sixty-one thousand (61,000) travelers… if you take it away, you’re going to open yourself up to $3.5 million in revenue and lawsuits…”
Residential Vs. Commercial Property Taxation
Although STR’s are being operated as commercial ventures, unlike other innkeepers operating in Louisiana they aren’t being taxed accordingly. The anomaly which surfaces is a result of most STR’s operating on AirBNB, VRBO and similar platforms primarily being “residential properties”, which are taxed differently from “commercial properties”.
For example, Bass Family Properties, LLC, owns a property which has been operating as a Short Term Rental since about 2017. It also happens to be the principal place of business for LTLA. According to the Lafayette Parish Tax Assessor Parcel Report the property has an assessed value of $108,490, with the lot being valued at $19,390 and the single-family residence valued at $89,100.
Those numbers when inputted into the Assessor tax estimator tool available online reveal that if the same property were taxed appropriately as a commercial venture, it would generate 41% in additional revenue! In this specific case, it ends up being about $500. Multiply that number by the approximately 600 STR’s currently operating in Lafayette. That results in a sum total of approximately $300,000 in additional tax revenue per year. Should this be considered a gratuitous donation of public funds?
To be clear, we aren’t advocating that anyone should be paying higher taxes. The point is, government shouldn’t be in the business of picking winners. It’s the same concept we presented in our article, Your tax dollars built this RaceTrac.
What about other taxes?
Property taxes are not the only taxes for which Short Term Rental operators are liable to pay. According to Louisiana Revised Statute 47:301 a “dealer” includes “any person who leases or rents tangible personal property for a consideration, permitting the use or possession of the said property without transferring title thereto.” And persons who meet the definition of a dealer are subject to the payment of sales and occupancy taxes.
One such example of this can be found in the case(s) surrounding RPJ Hospitability, LLC, a company of which the son-in-law of Nanette Cook (2/10) has interest in. As we detailed earlier this year, RPJ owns and operates the Maison Mouton Bed and Breakfast, which received special privileges by the Lafayette City Council and which Nanette Cook voted in favor of despite a clear conflict of interest. As it turns out the Lafayette Parish School Board has a judgment against RPJ for failing to pay these taxes.
According to court records, Ravi Daggula applied for a Hotel/Motel tax account with the Lafayette Parish School Board on behalf of RPJ in June of 2017 and was issued a Sales and Use Tax Registration Certificate. The records also indicate he paid taxes between August and November of 2019 which average out to $895 per month, before ceasing to pay any further taxes. According to the tax balance statements filed into the record, RPJ is responsible for $58,749.91 in unpaid taxes, interest, and penalties. We may never know how many other Short Term Rentals out there are not paying these taxes.
Residents Fight BOZA over Short Term Rentals
There has been an ongoing fight against Short Term Rentals by some residents and it isn’t about taxes. It is about quality of life. Residents in a quiet neighborhood in Lafayette have been fighting with BOZA for several years over the issue. They argue that the decision of BOZA to allow the continued operation of commercial businesses in their residential neighborhood has adversely impacted them. Residents filed a lengthy appellate brief with the District Court in May of 2021 over the BOZA decision. However, the appeal was dismissed last November by Judge Tommy Frederick.
For those who are concerned about the impact of Short Term Rentals in their neighborhoods, they will have to wait to see if the City Council will take any action. Thus far it has been a long-term problem for many residents. But as long as they operate Short Term Rentals should not be allowed to avoid paying the same tax rates every other commercial business is forced to pay.