POLITICS & POLICY

Regulating and Taxing Airbnb in Massachusetts: The next test for the legislature?

Measuring impact:

A single mother from Marblehead hosts on Airbnb to help with her daughter’s college tuition. A Plymouth baby boomer offers a private room with shared bathroom to defray her mortgage. In Brookline, a 23-year-old graduate student rents an ‘extended stay’ through Airbnb to avoid committing to year-long lease.

According to Airbnb data collected by Airdna, a company that provides data and analytics to vacation rental entrepreneurs and investors, there are 16,694 active Airbnb listings in Massachusetts. Ten cities and towns make for the most popular destinations: Boston, Cambridge, Somerville, Provincetown, Nantucket, Brookline, Jamaica Plain, Allston, Dennis Port and Dorchester.

The business seems to offer a win-win solution. While the hosts are happy with the extra income, renters talk about the savings and convenience.

“I charge $125 per night in-season with a two-night weekend minimum, and a three-night minimum on holiday weekends,” said Judy Wayne of Marblehead. “The season begins in April and slows down in November, although I am getting repeat guests and some have booked the Christmas week already.”

The Plymouth host, who asked to remain anonymous, started hosting in April, charging $80 per night. She says steady business has earned her between $4,000 and $5,000.

For each booking Airbnb takes 13 percent from the guest and 3 percent from the host.

“Apart from the added income, we have been able to meet some great people through Airbnb,” she said.

For Alex Viking, 23, who is pursuing his graduate degree in Journalism at Boston University, the platform provided a solution to a problem shared by many students.

“When my year-long lease in Allston was about to expire, I wasn’t sure whether I would stay in the area or not after graduation. Since my program is three semesters, another year lease in Boston was daunting,” he said. “An extended stay through Airbnb offered me the flexibility to stick around.”

Viking pays a little over $1,000 for his one-bedroom Airbnb accommodation in Brookline, including all utilities, Internet and a cable connection. The option of an “extended stay” rental on Airbnb came as a surprise to him.

“Funny enough, my Airbnb’s minimum stay was four months, and advertised itself to graduate students specifically. I’m not sure how common, or popular this sort of thing is elsewhere in the area, but it worked for me,” he said.

In addition to helping renters and their guests, Airbnb also claims to have a positive impact on many cities and towns.

An Airbnb poll of 500 likely voters in Boston conducted this summer by David Binder Research found that 60 percent of respondents think that Airbnb is “very good” for the city and that 75 percent of respondent’s support allowing residents to rent out their home through Airbnb.

“When voters are introduced to information about how Airbnb hosts in Boston use the money they make on the platform, they become even more convinced that Airbnb is good for the city, its residents, and its rise as a world-class city,” Airbnb’s Boston policy team touted in a memo last month to the State House News Service.

Wayne believes Airbnb has been good for her town of Marblehead, which she says benefits when she refers guests to various restaurants and stores.

“When I began hosting there were not many Airbnb hosts in the area, but now there seem to be plenty. Marblehead has many other commercial bread-and-breakfast’s but I provide an alternative to the high prices and the usually heavily booked hotels, which are few in this small seaside town,” she said.

According to the host in Plymouth, the town is experiencing a boom in tourism with the need for accommodation increasing as the town prepares for 2020 celebrations of the 400-year anniversary of the Pilgrims arriving in Plymouth Harbor.

“I have heard that there are going to be thousands upon thousands of tourists passing through every day in 2020,” she said. “I doubt if there will be enough hotel accommodation to accommodate every one. I think Airbnb will be really essential with helping the tourist industry at that time.”

But not everyone is happy with the growth of Airbnb and other Internet based short-term rental services. Complaints have been registered by unhappy neighbors, a threatened hotel industry and local officials who believe that Airbnb’s de facto hotels should face the same type of regulation.

Janet Knott, media and policy director at the office of Councilor Salvatore LaMattina, District One (East Boston, North End, Charlestown), noted that Airbnb units are depleting housing stock in Boston and raising safety issues.

“We received a call from a constituent in East Boston who noticed that people are going in and out of an apartment at 2 a.m. and 4 a.m. in the morning and there was a problem with the fire exit,” Knott said.

In the absence of any statewide regulations, LaMattina is currently working with the mayor’s office to come up with a policy toolkit for Airbnb.

“Every town seems to have a different idea of how to deal with Airbnb. So hopefully in Boston we will be able to come up with some positive ways to work with Airbnb as well as our constituents to eliminate some of the public safety issues. And perhaps register Airbnb hosts with the city, so that the city knows who exactly is renting their units,” Knott added.

The state Legislature will reconsider a bill in the upcoming legislative session that would apply a 5.7 percent hospitality tax to “transient accommodations” (including Airbnb and similar companies like VRBO and HomeAway), bringing those taxes up to the same level as state hotels.

The bill was filed by Rep. Aaron Michlewitzm, D-3rd Suffolk, and Rep. RoseLee Vincent, D-16th Suffolk, earlier this year, but it failed to make progress during the last legislative session.

Airbnb is open to the regulations, releasing an ad last month that makes clear the company’s desire to collect and pay hotel, tourist and occupancy taxes at the state and local levels.

“Here at Airbnb, we’re committed to working with the commonwealth to develop new common-sense home sharing rules,” the narrator of the Airbnb ad says. “We’re working with policymakers to ensure our community can pay their fair share of taxes and we support rules that protect affordable housing and maintain our neighborhoods.”

According to Airbnb, in 2015, a typical Boston-area host’s income for 48 days a year, was $6,400. Airbnb also said Boston could have collected $3 million in hotel, tourist and occupancy taxes from Airbnb rentals in 2015.

However, the people who use Airbnb are concerned about increased taxes, standing against the legislation until further clarifications.

“I will be declaring my income from Airbnb on my 2016 tax return, which I will be paying taxes on already. I would not be happy to pay any extras to the town,” said the baby boomer from Plymouth.

Judy Wayne, the Marblehead host, fears that if the legislation passes it will likely put people like her out of business.

“I believe that paying state and federal taxes on my earnings is sufficient and if Airbnb wants this so much, the multimillion-dollar company should defray these costs by paying them for the host,” she said.


Understanding proposed policy:

It isn’t often that a worldwide company makes a pitch to tout let the public know of its eagerness to pay state and local taxes. But that is the strategy for the web-based rental agency Airbnb, which does tens of millions of dollars in business across Massachusetts.

Unlike other web businesses, such as Uber, that have fought state and local regulation, Airbnb has been open to taxation, even buying ads stating its willingness to collect and pay hotel, tourist and occupancy taxes at the state and municipal levels.

“Part of what the goal of the company is, is to become legitimate. And one of the ways to do that is to become a good corporate citizen. It takes away a critical argument that our competitors have made that we don’t play by the rules, we don’t pay taxes and we are sort of pirates,” William Burns, director of policy for Airbnb, said on The Codcast, a podcast by Commonwealth Magazine, on Dec.16.

Airbnb’s public relations move comes as the state considers ways to reduce the impact the company is having on the hospitality industry and the tax revenues traditional hotels and motels provide the state.

The state Department of Revenue estimates state and local government have lost between $30.3 million and $45.5 million in tax revenues as a growing number of people chose the short-term rentals offered by Airbnb over staying in traditional hotel rooms.

“Platforms like Airbnb have changed the industry by increasing the volume of short-term rentals. The state currently levies the room-occupancy tax only for hotels, motels and lodging houses, effectively creating a competitive advantage for Airbnb and similar platform-based rentals,” said Phineas Baxandall, senior analyst and communications director of MassBudget (Massachusetts Budget and Policy Center).

According to Airbnb, Massachusetts is their fourth largest market in the US, with Boston and Cambridge being their two biggest destinations in the state. In 2015, Boston host’s the average income for renting 48 days a year was $6,400 in Boston.

Airbnb also claimed that during the summer of 2016, its guests contributed $145 million in economic activity to Boston’s tourism industry.

A study on Airbnb revenue released this year by the American Hotel & Lodging Association (AH&LA), shows that during the 12 months from October 2014 through September 2015 – 83 percent (of an approximate $48 million) or almost $40 million – came from operators who listed their property for more than 30 days per year. More than half of Airbnb’s Boston-area revenue, almost $25 million, came from operators who listed properties for rent more than 180 days per year.

 This raises concerns within the hospitality industry that certain Airbnb rentals are in fact operating as de facto hotels.

“Unregulated hotels operated in residential properties are disruptive to communities, and pose serious safety concerns to the millions of tourists who visit our state annually, and to the residents who live and work in our neighborhoods,” Paul Sacco, president and CEO of the Massachusetts Lodging Association, said in a press release in June.

Sacco also noted that the rise of individual hosts represents a large and growing revenue stream for short-term online rental platforms like Airbnb and a challenge for policymakers trying to protect communities and ensure a level playing field for businesses in Massachusetts.

In Massachusetts, hotels, motels, lodging houses, and bed and breakfasts that rent four or more rooms pay a 5.7 percent tax on short-term (90-day or less) rentals.

State law allows cities and towns the option to levy an additional occupancy tax of up to 6 percent (6.5 percent in Boston) on top of the 5.7 percent. The commonwealth levies an additional 2.75 percent excise tax on such rentals in Boston, Cambridge, Chicopee, Springfield, West Springfield, and Worcester for construction and renovation of convention centers, which typically draw overnight guests to these localities.

Policymakers have indicated they want Airbnb to contribute to his revenue stream. House Speaker Robert DeLeo has announced the next legislative session will take up the issue of the short-term rental business led by Airbnb. In October he asked Rep. Aaron Michlewitzm, D-3rd Suffolk, to draft a summary of the “major issues” associated with the industry.

Earlier this year, Michlewitz and Rep. RoseLee Vincent, D-16th Suffolk, filed a bill that would impose an excise tax on short-term residential rentals at the rate of 5 per cent. The bill later was adjusted to apply a 5.7 percent hospitality tax to “transient accommodations” (including Airbnb and similar companies like VRBO and HomeAway), bringing those taxes up to the same level as commercial hotels.

“When we were going through this stuff in mid-to-late ’14 and then filing it in early ’15 not many people understood what Airbnb was, what some of these other short-term rental online portals were,” Michlewitz told the State House News Service in November. “I think now that we’ve seen the issue kind of grow and evolve, we have a better grasp on it now and I think we’re a little more equipped to try and do something a little more substantial than previously.”

In anticipation of legislative action, Airbnb representatives have been meeting with legislative leaders. Records filed with the secretary of state’s office show Airbnb has retained Boston law firm Nutter McClennen & Fish LLP to lobby policymakers.

Massachusetts wouldn’t be the only state to tax Airbnb. In 2013, Oregon became the first state to pass laws requiring short-term residential rentals such as Airbnb to pay room-occupancy taxes and similar fees.

As of July 2016, the company collects and remits taxes in 10 additional states, including Alabama, Connecticut, Florida, Illinois, Louisiana, North Carolina, Pennsylvania, Rhode Island, South Carolina, and Washington.

According to Airbnb’s website, those levies are included in the price paid by guests, without deducting it from the payout to hosts except the service fees that Airbnb normally deducts.

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The legislative debate:

Massachusetts lawmakers have mixed feelings about imposing taxes and regulations.

Rep. Paul Heroux, D-Attleboro believes that the issue of taxing Airbnb is an important one for the state.

“Since Airbnb is a business venture, there is no reason why Airbnb should not pay its fair share. For example, if Airbnb increased traffic to Massachusetts because of increased accommodation possibilities, then that is extra traffic the state must deal with and it should be reflected in state revenues,” said Heroux.

Other lawmakers are leery of imposing a new tax that could hurt small businesses and individual renters.

“I am always skeptical about the prospect of imposing a new tax or increasing taxes,” said Rep. Betty Poirier, R-North Attleboro. “The proposal the Senate put forward earlier this year to tax Airbnb was so overreaching it would have hurt many small bed and breakfast operations.”

But Poirier agrees some taxation may be called for.

“It is unusual and thus interesting to have an industry seek to be taxed,” she said. “I do believe we should be focused on finding ways to alleviate the burden imposed on the state’s taxpayers and making the commonwealth a more welcoming place for businesses to grow and create new jobs.”

Legislators are also concerned about other aspects of the Airbnb phenomena, including evidence that some people are hiding behind residential ownership to run full-time rental operations.

“We have buildings and properties that are condos or apartments that are being rented out that aren’t ever being lived in,” Michlewitz told the Statehouse News Service. “And what is the effect of the housing stock in our cities and towns that is having? Especially for me personally – obviously in downtown Boston where housing stock is vital and the cost of living is very expensive.”

Janet Knott, media and policy director at the office of Councilor Salvatore LaMattina, District One (East Boston, North End, Charlestown), noted that LaMattina is very concerned that Airbnb units are depleting housing stock in the city.

“He is completely against one person buying a complete building and turning all of the units into Airbnb host units. We received a call from a constituent in East Boston who noticed that people are going in and out of an apartment at 2 a.m. and 4 a.m. in the morning and there was a problem with the fire exit,” Knott said.

In the absence of any statewide regulations, LaMattina is currently working with the mayor’s office to come up with a policy toolkit for Airbnb, including a requirement that Airbnb hosts register with the city.

“Every town seems to have a different idea of how to deal with Airbnb. So hopefully in Boston we will be able to come up with some positive ways to work with Airbnb as well as our constituents to eliminate some of the public safety issues,” Knott added.

What could be the possible regulations be?

Apart from taxes, lawmakers throughout the country are also considering applying more comprehensive health, safety, and zoning regulations to these rentals.

Philadelphia officials have capped the number of days’ individuals can host within a year to 180 days. Chicago requires hosts to obtain different licenses based on how they are renting their homes.

According to Airbnb’s Burns, his company could share data with the city and notify hosts when they would need to register. He also noted, in the The Codcast, that it is important for the company to be thought of as a partner, providing data and attending hearings as the Legislature moves forward on the question.

“We want to be sensitive to and a partner with cities and states as they deal with how home sharing works. We want to work with the mayor and the city council to make sure that moving forward we are not having a negative impact on affordable housing in the city of Boston,” Burns said.

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CHINA TOWN, BOSTON – A cheerful crowd celebrates the 2016 Chinese New Year, at China Town in Boston city. Numerous groups performed the traditional Lion dance, an auspicious ritual in Chinese culture, to chase away ghosts and evil spirits, and since the monsters, ghosts, evil spirits and giants. Clashing cymbals, a gong and drums accompanied the lively scene, along with fire crackers. Photo by Shraddha Gupta.

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Social media, blogs and citizen journalists have taken over Indian journalism by storm. The news and controversies that unfolded within India in 2015, has left the nation divided with strong opinions. Not only is the public retorting in disappointment, but the media is continuing to fall apart in standards, distorting facts and presenting falsely sensationalized stories, to attract more than ever commercial attention. This is the age of a raging ‘media chaos’ in Indian journalism.

It all started on a revolutionary note, when the ‘Nirbhaya’ rape case of 2012, became a national movement, with both the media and the public acting as one united voice. Social platforms and media coverage brought the entire country together, fighting for justice and safety for women. This marked the rise of ‘New-Media’ in India. A media, that had the power to shake the government, challenge the lawmakers, and stood hand-in-hand with the people.

Creative by Shraddha Gupta; Content source: Thomson Reuters Foundation

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Seasonal hiring stays upbeat, indicating steady holiday business

Worcester Telegram Story: By Shraddha Gupta

WORCESTER – A happy, holiday vibe is spreading around the city of Worcester. Christmas trees, wreaths and glittering lights are ornamenting the streets, announcing the comeback of the most awaited festive season of the year. While residents are busy decorating their houses, finalizing their lists of christmas gifts and winter chores, businesses across industries are hiring seasonal workers to smoothly function throughout this peak business time of the year.

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Indicators of domestic manufacturing sector report downward trend for U.S. economy in September 2015

ECONOMIC INDICATOR (#6)  STORY: By Shraddha Gupta

A significant economic indicator for the U.S. economy is ‘Manufacturers’ Shipments, Inventories, and Orders’, which provides a broad-based, monthly statistical data on economic conditions in the domestic manufacturing sector. A recent survey, as of September 2015, showed statistics indicating that the entire segment was going through a downward curve.

According to the U.S. Census Bureau, new orders for manufactured goods in September, went down two consecutive months, decreased $4.7 billion or 1.0 percent to $466.3 billion, and followed a 2.1 percent August decrease.

Shipments, were down five of the last six months, decreasing $1.8 billion or 0.4 percent to $477.3 billion. This followed a 0.9 percent August decrease.

Unfilled orders, were down two consecutive months, which decreased $6.2 billion or 0.5 percent to $1,187.9 billion. This followed a 0.3 percent August decrease.

Inventories, also dropped down three consecutive months, decreasing $2.4 billion or 0.4 percent to $645.1 billion. This followed a 0.4 percent August decrease.

While the unfilled orders-to-shipments ratio was 6.88, down from 6.89 in August, the inventories-to-shipments ratio was 1.35, unchanged from August.

As per official statements, the data published in the survey is based on a panel of approximately 4,800 reporting units that represent approximately 3,000 companies and provide an indication of month-to-month change for the Manufacturing Sector.

The companies for which shipments data are currently reported represent approximately 61 percent of the total value of shipments for manufacturing establishments in the 2012 Economic Census, and these companies include almost two-thirds of the manufacturing companies with $500 million or more in shipments in the 2012 Economic Census.

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BUSINESS & ECONOMICS

Earning Stories – Day Two: AMAZON / McDonalds / Google

A new turnaround plan, saves McDonald’s from ugly decline in revenue

McDonalds, that recently reported a refreshing net profit increase of 23% in the third quarter of 2015, has managed to finally recover from an ugly decline in revenue in 2014. The global fast food chain retailer, that was once the favorite of its consumers across countries, has been struggling in the past few years, due to a ‘menu’ that failed to appeal to Millennials who broadly opt for healthier food with ingredients they trust.

Working forward with a new turnaround plan, Steve Easterbrook, McDonald’s President and Chief Executive Officer, said, “As we begin fourth quarter, comparable sales are expected to be positive in all segments. While still in the early stages, we believe our turnaround plan is starting to generate the change needed to reposition McDonald’s as a modern, progressive burger company.”

Comparable sales for the International Lead Markets segment increased 4.6% for the third quarter led by strong performance in Australia, the U.K. and Canada and positive results in Germany. In the U.S., third quarter comparable sales increased 0.9%, the segment’s first quarterly comparable sales increase in two years. The introduction of the new Premium Buttermilk Crispy Chicken Deluxe sandwich and breakfast, including a return to the classic recipe ingredients for McDonald’s iconic Egg McMuffin, contributed to the segment’s performance.

A sales recovery in China following the prior year supplier issue also added to the company’s higher spirits this quarter, with very strong comparable sales performance in China and positive performance in most other high growth market segments. Operating income increased 39% (68% in constant currencies). Looking at the larger picture, a positive consumer response to multiple menu, service and value initiatives throughout most of the segment contributed to the segment’s performance.

Amazon Prime becomes the driver of growth and profits for Amazon.com

E-commerce retail giant, Amazon.com, from a greater short term loss situation, has emerged as a winner with sharp increase in profits of 118% in the third quarter 2015. The company has always claimed to be growing in losses, as it looked forward to future growth with long term investments plans. This once bizarre theory by the company, has today become a success story, as its net income increased to $79 million, from a net loss of $437 million last year.

Amongst the various highlights that have contributed to the collective growth of the company, some significant influencers have been, Amazon’s introduction of four new tablets, including Fire; three new Fire TV devices, all with Alexa integration; launch of Fire TV and Fire TV Stick Japanese customers; and the overall success of Amazon Prime.

Company’d highlights further included the launch of Prime Video for Japanese customers, along with Prime Music in U.K., giving prime members over one million songs and hundreds of playlists to stream and download for free.

Amazon also introduced Prime Day, a full day of sales that offered Black Friday-type of deals, for the first time last quarter. According to reports, Amazon CFO Brian Olsavsky said, Prime Day contributed 2% to Amazon’s revenue growth globally, which resulted in adding more new Prime members than any other day in company history. He said Prime Day will continue to be a part of Amazon in the future and become a bigger part of the company.

Looking forward, the company also claimed that they would continue to reduce prices for customers to keep the increase of sales in the current quarter, including their lower-priced shipping offers, low-priced sales in fast growing categories, and to add more exclusive good for their Prime members to gain customers’ loyalty.

Google credits substantial growth to increased mobile search revenue

Google, the internet giant which has always been on a keen investors radar, reported a prospering 13% revenue increase in third quarter 2015. Earlier in the month of August, the company released it plans to create a new public holding company, Alphabet, and a new operating structure. As effective since October 2, 2015, the implementation of the holding company reorganization was finally made official, with Alphabet now becoming the successor issuer to Google.

According to the official press release, the company credited its substantial growth to an increase in mobile search revenue, complemented by contributions from YouTube and Programmatic Advertising. Further gains were also observed from a 16% revenue increase in Google websites and 13% in advertising revenues.

Research shows, the ‘other revenues’ in Alphabet’s financial statements might also be coming from from Google Play Store and Google’s own hardware. Android is now by far the most widely used mobile operating system in the world, and Google earns money by selling apps and media to those smartphones and tablets. It recently reported that it had sold 20 million Chromecasts, and has its own line of netbooks, phones, and tablets.

The press release declared that, ‘Had foreign exchange rates remained constant from the third quarter of 2014 through the third quarter of 2015, our revenues in the third quarter of 2015 would have been $1,291 million higher with a constant currency growth rate of 21% year over year.’

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“This is a story of Alicia O’Dell, a peek into the various facets of her personality, and her day to day life. She calls herself a nomad, and on a typical day, she is a loner, trying to understand her experiences, and turning them into jewelry designs in her studio. But once her products are ready, she is ready to stage as the Founder of AEO Designs, her self-starter jewelry brand. While she is absolutely focused in her studio, at home (which is another artistic expression of Alicia’s life), she is more of a thinker, and a cheerful, radiant personality to meet and hang around with. This is a synopsis of Alicia’s life, in 10 picture shots…”

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