Baltimore’s Airbnb Taxes & Regulation: Helping Make America Great Again?

Thomas A. Firey Jul 19, 2018

Tonight, the Baltimore City Council will hold a public hearing on legislation to impose the city’s hotel tax and licensing requirements on city property-owners who want to rent rooms or residences on Airbnb and other “sharing economy” platforms.


The move would be yet another government intervention in the “sharing economy.” Communications platforms like Uber and Lyft, which help travelers connect with motorists who want to offer a ride in exchange for money, and Airbnb, which connects consumers to property owners who will exchange short-term use of their real estate for money, have helped both consumers in need of rides and rooms, and sellers who legally earn extra money from their underutilized property in a safer, more convenient, more effective, and more formalized manner than through classified ads or simple word of mouth—or leaving those in-demand resources idle. And, it’s worth mentioning, because the platforms formalize these arrangements, they both facilitate tax collection and provide consumer protection.


In short, the sharing economy is a win–win–win situation: consumers get more of what they want in a more-competitive marketplace, sellers have more opportunity to sell what they have, and the public gets a little extra tax revenue. Everyone’s happy.


Well, OK, not everyone. Taxi companies, hoteliers, and large-scale landlords don’t like having the sharing economy cut into their business. They often benefit from cozy relationships with government that give them the market power to charge higher prices than they would in a more competitive marketplace. Take away a businessman’s “Ricardoian rents” (an economics term meaning profits above what one would earn in a competitive market—use it at your next cocktail party) and you get one angry—and politically active—businessman.


Baltimore would not be the first to impose sharing-economy taxes and regulations; some other localities in the United States and around the world have done so. The reasons policymakers give for these interventions run the gamut. Concerning real estate sharing, they claim:


·        Such taxes and regulations are necessary to “even the playing field” between hotels and room-renters (because, I guess, elderly Aunt Mary renting out a room to that nice Johns Hopkins med student or the Jones’ renting out their Ocean City cottage to the young Smith family were kneecapping Marriott and Hilton).

·        Regulations and taxes are necessary to make sure the rental units are safe (because consumers are forced at gunpoint to use Airbnb and pay for units that they discover are unsafe when they check in).

·        The sharing economy causes gentrification (because Mrs. Johnson’s renting out her pre-marriage condo to a young professional is why lower-income families can’t find affordable housing).


As you can guess from my parentheticals, I find these explanations … problematic


But credit Baltimore politicians for coming up with a justification I hadn’t heard before. Advocates of the city proposal have turned the gentrification claim on its head and are claiming real estate sharing contributes to clusters of transient renters.


Problem is, this justification is as dubious as the others. If it is true, then why would Baltimore want to meddle with a private mechanism that provides housing to the very low-income who are at risk of homelessness? Keep in mind that Baltimore already spends considerable public money to help such people. The more interesting question is how many homeless people do Baltimore City politicians think are logging onto Airbnb and using their credit cards to book these properties?


Once you appreciate those questions, you realize the Baltimore proposal isn’t about transients (or consumer safety, or evening unfair playing fields), but about those earlier-mentioned businessmen and their Ricardoian rents. Council politicians are simply glomming on to a good cover-story for rent-granting, Maryland’s top form of corporate welfare.


This makes me wonder, will proponents of these Airbnb taxes and regulation next glom onto this era’s en vogue policy justification and claim the interventions are needed to fight illegal immigration? After all, new arrivals often are “transient” as they search for their place in the economy and society, so the proposal has already blown that dog whistle. Why not just make it official: proponents and city council members can join hands tonight and boldly vow to help make America great again.