Fix the hotel tax loophole so low-income people can stay

Referred to as a motel shortage, only 21 percent of the nation’s public and private hotel rooms are set aside for low-income people. Just 8 percent of those available rooms — 9 percent if you exclude military and prison housing — are set aside for travelers who can’t afford to pay full price for their accommodations. That means 66 percent of the hotels in America are making more money by renting their rooms than the government is collecting in taxes from the various hotels.

How much more are they making?

Research by a North Carolina family has turned up shocking figures. Greg Adams’ family looked through tax records of the county’s 160,000 hotels (the average size was 185 square feet). What they found was that more than 22,000 of the rooms don’t fit the definition of a hotel room that could be set aside for low-income people.

Here are some of the findings (PDF) from their calculations:

* 72 percent of the rooms in the nation’s top 75 metropolitan areas can be seen as hotels.

* 81 percent of all hotel rooms are used as high-priced accommodations.

* More than 64 percent of the hotel rooms in the nation’s top 75 metropolitan areas were likely earning well more than $100,000 a year in combined gross revenue, making it all but impossible for room rental taxes to take a meaningful bite out of those bills.

The main factor explaining these staggering numbers is the “incentive charter” in most of the nation’s hotels, which require a special city council resolution for a room to be set aside for low-income guests. And it’s not just in cities like New York and Los Angeles. It’s also common in cities that are reasonably middle class, like Denver, Houston, and Dallas-Fort Worth.

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In short, because these accommodations are nearly always utilized for premium rates, the tax revenue is skyrocketing. It has even become common for hotels to park their guests in the room next door to earn the room tax.

So where did all the rooms go?

The World Travel Market recently announced that the largest beneficiaries of the vacation rental market are business-class hotels with 5,000 or more beds. They’re not expecting this to change, and they apparently aren’t worried that mass travel will stifle their bottom line.

The family is looking for solutions, though. After measuring hotels that specifically aim to be apartments, they found that the lack of affordable housing in many hotel rooms could easily be transformed into affordable units. As they write in their paper:

We believe that the hotel industry could be transformed into an affordable-housing business. We propose that instead of being constructed as hotels, these long-stay accommodations be converted into apartments. We offer an incentive for motel owners to shift their focus away from profits and become middle-class housing owners.

From short-term rentals to long-term availability, folks working in any field need affordable housing. You see it in car sharing to homes on the moon. We don’t say there should be no Airbnb, but we do know it’s possible to make a better version.

David E. Roberts is a writer and columnist in Houston. He’s best known for hosting and editing the well-read Rule Breaker Radio.

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