The City of Santa Fe has a short term rental ordinance that attempts to regulate and control the activity of leasing a dwelling unit for a period of time less than 30 days. There are several reasons why many think this is necessary and just as many people think it may be invasive of property owner’s rights and their ability to make money on an asset they own. You may or may not already have a strong opinion about this matter, but what I wanted to mention is that there are some confusing stories and assumptions about this wide-ranging issue that are not black and white even to the casual observer.
Some of you may own or manage or know about a property that is leased as a vacation rental and its quite possible there are issues not raised in this post that deserve to be considered.
Santa Fe, through its Mayor and other City leaders, promotes the City Different as a wonderful place for tourists and visitors to see and enjoy all we have to offer (and spend money!). We all seem to welcome the film industry as an influx of non-residents beyond the typical tourists, plus we have some very popular events that draw thousands of out-of-town visitors here during the busiest season for tourists. Motel and hotel rooms are often sold out during Indian Market. On occasion between July and September, any decent lodging can be difficult to find. Over the years, websites such as VRBO.com and AIRBNB.com have grown quickly and are now merely the top two “national” sites available to help someone find a room or a house to rent in Santa Fe. Many locally owned and managed companies will help arrange a vacation rental for your next visit. Google vacation rentals Santa Fe and see for yourself.
Most of us welcome visitors and we offer them many great cultural attractions, art galleries and creative venues, restaurants, museums & shops, not to mention top notch outdoor recreational opportunities in the area. Those of us in real estate sales would like those visitors to enjoy their time here and then explore the idea of owning property here. It has happened that way for decades and newcomers to our fair city are a large source of business for many industries beyond just real estate. Yet the City has a limit on the number of short term rental permits they issue, despite the increase in tourism we are enjoying due to the economic recovery we are all very happy to take part in.
Many property owners might want a permit to use their property as a short term or vacation rental, but are told there is a waiting list and they may have to wait a year or two until their property can get approved. They might decide to market their property on one of those websites mentioned above and take their chances that a neighbor will not contact the City to report unauthorized rentals (based on the ordinance mentioned above). It is possible that there are twice the number of short term rentals out there as there are permits in existence. That seems high, but there is no foolproof way to check. Why not build a bigger tent and get more or almost all of the property owners into the program instead of being blind to that sort of underground economy that has grown to meet demand? Should the City do something to bring in the outsiders and enroll them in the program with an expanded number of permits? Maybe an amnesty program and/or the first year free for existing but not enrolled landlords to get in the program?
What is happening is not fair on many levels. Those denied the opportunity to rent their home for short term use might struggle to stay afloat in this town, The cost of living is a serious issue for many in Santa Fe. Should hotel and motel ownership be paying taxes and employing thousands of New Mexicans to then have to lose the occasional customer to a mom and pop rental available in a residential part of the City? The large events that fill up rooms around Santa Fe are usually in the summer months. They are rarely full once outside the summer stretch, but the bricks and mortar have to be there to accommodate us.
There is another major or minor issue: lodgers tax and the municipality tax that the City might be imposed on someone that realizes income from renting a room or an entire home. Should that income be taxed? Nobody escapes taxation completely and I am just referencing a City or Lodgers tax. No mention here of the Internal Revenue Service and how they would treat the income a property owner would get from their vacation rental. Is this a IRS tax loophole also?
What can you find online? How about a sweet detached guest house that has a full bath and a small but functioning kitchen? Would you pay $100 a night for that? Does the party running the ad mention that gross receipts tax is added on? Or lodgers tax. And if they collect such a tax, do they actually pay it to the State of NM? How is that audited?
Any gross receipts taxes paid in Santa Fe go into a fund that is distributed to various State departments. That includes money flowing back into the City of Santa Fe from the taxes paid. Without those funds, the City has to do the same job but with less money. Its not as if there are fewer visitors and therefore fewer demands on services. The demand is there but we are all a bit shortchanged by the lack of accountability and flow of funds to pay for what needs to be done. Street lights, environmental enforcement, safety officers ready to help with a disturbance or accident, food service inspections, animal control… you get the idea. There is always something you can think of that affects you directly.
Back to square one, the City website says 424 short term rental permits exist. I might be able to learn the number that are on a waiting list and will report if I do. Has that total changed since the ordinance was made law? How many units are actually used as short term rentals in the City, regardless of how many permits exist? Some units are in a commercially zoned area and are not subject to permitting. Others are outside the City limits and not subject to any such ordinance. Not only does the City attempt to regulate this event of dwelling unit use, so also do subdivision and development restrictions. How do those apply?
Is all of this even a problem? I guess it depends on what your perspective is. And whom you answer to.