CAMDEN COUNTY, Mo. — Lake of the Ozarks homeowners who rent on a nightly basis will not be subject to new state laws… at least for now.
Vacation rentals have been the subject of controversy at Lake of the Ozarks this spring, and it all comes down to money, with two main issues at play. First, while many of the homes around the Lake are occasionally rented to vacationers, not all homeowners collect and remit lodging taxes to the Tri-County Lodging Association (TCLA). Some of those homeowners claim they have no obligation to pay the tax; others simply stay “under the radar”; while others possibly do not even know about the lodging tax. TCLA uses those dollars to promote Lake of the Ozarks, and as websites facilitating home rentals proliferate, the association has hoped those websites might provide the means for collecting the lodging tax from a greater number of home rentals.
Second, homeowners who offer occasional short-term vacation rentals have found their property taxes skyrocketing, as the Camden County Assessor moves them from residential to commercial property tax rate. That has many upset about the added expense of renting their home.
According to some in the community, proposed legislative language backed by Expedia and many in the lodging industry would have mandated that nightly home rentals across the state of Missouri be subject to similar regulatory requirements as hotels and large resorts.
But not everyone agrees about what that legislation would have actually accomplished… in fact, a range of disagreements emerged, as the issue grew more heated—and complex—at a public hearing on Thursday, May 12, 2016 at the Camden County Courthouse.
Camden County Presiding Commissioner Greg Hasty explained on Thursday how he had hastened to the state capitol in Jefferson City the day before, to voice his concerns about Senate Bill 867, which was sponsored by District 29 Republican Senator David Slater. The bill—which hosted an amalgam of issues ranging from alcohol in airports to the memorializing of a stretch of Highway 50—passed, but only after the portion dealing with nightly rentals was stripped from it.
“Expedia lobbyists were the big pushers behind this legislation,” Hasty said at Thursday's public hearing. “We have to get around the powerful lobbyists to protect the interests of nightly rentals at the Lake of the Ozarks. Our entire real estate economy could have been undermined by not being able to do nightly rentals,” he said.
Commissioner Bev Thomas agreed, saying, “It is very concerning when we have national lobbyists like Expedia trying to dictate how business runs in Camden County… This legislation would make residents [renting their home] have to compete with hotel rooms.”
She added, “If this legislation passes we could see the reduction of property values and a loss in tourism dollars. This could also cause homeowners that rely on rental income to supplement their mortgage payments and real estate tax payments, to be forced into foreclosure.”
Similar legislation is expected to be re-introduced for the 2017 legislative session, as lawmakers seek a way to legally define residential vacation rentals.
At Thursday’s public hearing, Stacy Shore, representing the Lake of the Ozarks Board of Realtors, accused the Tri-County Lodging Association (TCLA) of lobbying for laws that would increase the regulatory burden on residential vacation rentals. Shore says TCLA has been collecting lodging taxes from nightly rentals and then turning around and using that money to lobby legislators to pass laws that could close some of them down. “According to TCLA’s Articles of Incorporation, this practice is a major conflict,” Shore contended.
But TCLA President Jim Divincen said that was not the case. He explained there are online platforms that are not collecting the lodging tax. “We went to Franklin to ask her to pass legislation that would require nightly rentals to get a business license,” Divincen said. “That way we can find the nightly rentals and properly charge them the lodging tax. Other things were tacked onto the bill at the last minute.”
But noting the discord and disagreement about the issue among various stakeholders in the county, Divincen conceded, “We learned to never approach legislators again without contacting the county commission. That was our mistake, and for that… I apologize.”
The TCLA markets and advertises Lake of the Ozarks regionally and nationally to drive tourism and lodging. The lodging tax in Camden County is three percent, but TCLA is planning to ask voters to approve an additional three percent, earmarked to fund television advertising in key target markets.
Shore and others had protested that some amendment language to the bill could subject homeowners who rent their houses to a slew of regulations, including things like ADA compliance and commercial fire codes. Whether or not that would have been the case, Divincen said the TCLA would not support such regulations. “We were never in favor of nightly rentals being required to have sprinklers,” he said.
The number of persons in attendance at last week's county public hearings who operate nightly rentals in a residential district was almost non-existent. According to Hasty, most of the nightly rental property owners are not voters or even residents of Camden County.
Hasty asked citizens at Thursday's public hearing if they had a problem with homeowners that have nightly rentals in a residential zone paying sales and lodging taxes. The majority answered they did not. That second meeting was attended by a crowd one-third the size of the first, on Tuesday, May 10.
Leveling The Playing Field?
Lakeview Resort owner Dan Drake’s family has owned a resort at the lake for 70 years. Drake spoke in opposition of allowing nightly rentals for homes and condominiums in Camden County. Drake warned against the threat of liability suits against property owners, saying he has been sued multiple times by resort guests.
“The first time you get hit with a million-dollar lawsuit, you will lose everything,” Drake warned. He added that he spends a lot of money on advertising to get people to stay at the resort, and on agency inspections and compliance for safety. “People who have no overhead can knock our prices to pieces,” he complained. “We are losing at least 30 percent a year, $300,000 to $500,000 because of nightly rentals and their overhead costs are not the same as ours.”
Lodge of the Four Seasons Resort General Manager Larry McAfee addressed the commission, saying he was not necessarily opposed to residential nightly rentals. “Realtors sold [buyers] on the dream that they can pay their mortgage by renting their home,” he noted.
McAfee, who is on the TCLA board, said there is one type of nightly vacation rentals that he does take issue with. “I have a problem with the nightly rentals that do not pay their fair share of lodging taxes and then they get the same promotional benefits,” he said. “I am talking about a level playing field here. If they want to join a cooperative without paying and get part of that buying power of the marking data base then I have a problem. [The Lodge] just invested $15 million for a renovation project on a $35 million investment. We have 242 employees that count on us to take care of their families. Our workmen’s compensation costs alone are $1 million a year.”
McAfee said he even thinks homeowners who rent should be subject to commercial-type regulations from fire and health departments. “Nightly rentals should play on the same field as us and they should be required to keep their property safe by working with the fire and health departments,” he said, adding, “If they are near the Lake and pulling from a well, it could be contaminated.”
But several citizens disagreed. They pointed out that “leveling the playing field” on a homeowner that rents three or four times a year and treating them the same as a large resort could be debilitating to that homeowner's rental activities.
Hasty reiterated that the county commission had no desire to limit nightly rentals. Nightly rentals in residential zoning are legal, according to the Camden County Unified Land Use Code, unless a property owners association or municipality has restrictions against the practice. “But if they are more than five units then that automatically qualifies them as a lodging establishment and we cannot have a lodging establishment in an R-1 zoning district, by law,” he noted.
State Legislators Weigh In
District 124 State Rep. Rocky Miller says many who opposed SB 867 simply misunderstood it. He thinks some of the amendments that never made it into the final bill would actually have helped the Lake of the Ozarks, without hurting homeowners who want to make money on vacation rentals.
Miller said he never heard from Hasty when the presiding commissioner came to the capitol, but some lobbyists did. He says those lobbyists contended that the protections Hasty sought for nightly vacation home rentals were already in the bill. Miller argues the bill would not have subjected homeowners doing vacation rentals to new regulations—he says he would oppose requiring commercial fire and ADA compliance for residential vacation rentals. Rather, he says, before the bill became controversial it contained a provision that would have required online vacation listing sites such as Expedia, VRBO, and AirBnB to collect and remit any required taxes, such as the lodging tax.
The TCLA has said it would like for online vacation rental websites to do just that, estimating hundreds of thousands of lodging tax dollars are missed every year. That money would be used for advertising the Lake of the Ozarks. But in the end, that amendment was yanked when the bill’s sponsor worried it would tank SB 867’s chances of passing.
Miller said another provision that was ultimately nixed from SB 867 was an amendment that would have clarified how county assessors categorize such residential properties that are sometimes rented on a short-term basis. Currently, Camden County Assessor Kayla Henry says any residences that are available for short-term (less than 30 days) rentals will be reassessed at a commercial tax rate. She points to guidelines from the Missouri Tax Commission, which cites case law as the rationale for such assessment practices. At Thursday’s public hearing, Henry also said she misspoke at the public hearing on Tuesday, May 10, when she said that if a residential property owner submitted information stating that they were not using their property for nightly rentals on Jan. 1, they would not be assessed the commercial rate. Henry retracted that statement the following day.
Miller says Henry is “hamstrung” by a lack of official legislative guidance, and he had hoped SB 867 would provide more clarity, by prorating the assessment rate of the properties as commercial based on the percentage of days in the year that they are used commercially. However, that proposal never made it in the final bill that was sent to Governor Jay Nixon.
Several bills from the 2016 legislative session were aimed at home rentals, including HB 2704, sponsored by District 123 Representative Diane Franklin. That bill would have subjected online homestay rentals to state regulations, including requiring the collection and remittance of lodging and sales taxes. It would also have required homeowners who rent their home to obtain a local business license. But her bill never made it out of committee.
In her Capitol Report newsletter sent at the end of the legislative session, Franklin made the case for why state law should address home rentals. She wrote, “Residential vacation rentals, especially those rented online, are not specifically outlined in state law. These now-failed legislative endeavors sought to define online homestays, provide a legal framework for their existence and grant local governments the ability to regulate as each deem necessary. Taking this approach would mitigate individual lawsuits against cities and/or counties responsible for planning and zoning, thereby reducing potential costs of litigation to online homestay hosts and local governments.”
However, she acknowledged, “I agree that implementing additional taxes and forcing more regulation on vacation rental/residential properties would be a detriment to the Lake of the Ozarks economy. As an advocate for the Lake, I would not support legislation of that nature.”
Franklin’s letter concluded, “I look forward to better addressing this issue in the 2017 legislative session.”
