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New holiday rental fees are ‘outrageous’ – landlord

Airbnb (File photograph)

Owners of many holiday rental units will pay more per room than the island’s hotels in the wake of a proposed new Government fee, according to one landlord.

The landlord with a background in economics, who requested not to be identified, described the fee changes as “outrageous” given the fees already paid by holiday rental owners.

“Taxing vacation rental to the same level as hotels, without any concessions, while being unable to keep regular gateway flights to Bermuda appears to be a complete failure of good governance and certainly not a great way to turn our ailing tourism sector around,” he said.

Under the Vacation Rentals (Application and Registration) Fees Act, properties would have to pay a fee of between $1,500 to $2,500 for an annual certificate based on the property’s annual rental value.

However the landlord said holiday rental owners already pay property tax in addition to a 4.5 per cent tax on revenue from the units.

He argued that the additional fee would mean that many units would pay more than the 7.25 per cent occupancy tax paid by hotels.

“A one bedroom vacation rental probably makes approximately $30,000 annually and it will pay 4.5 per cent or $1,350 to the Government,” he said. “That one bedroom will now have an annual $1,500 fixed fee to pay regardless of their revenue.

“If the revenue remains at $30,000 per year the tax amount is now $2,850 – an increase of 111 per cent – which is in effect a 9.5 per cent tax on revenue. That is 2.25 per cent more than a hotel.

“Now assume business is a bit slow for a year or two and that one bedroom earns $25,000 per year. The tax due will be $1,500 plus $1,125 for a total of $2,625 or 10.5 per cent of revenue – 3.25 per cent more than a hotel.”

He added that hotel properties also receive tax concessions from the Government that holiday rental owners do not.

He asked: “If the Government informed the hotel industry that going forward they have to pay a fixed fee regardless of revenue, while that same Government is unable to keep regular gateway flights coming to Bermuda – let alone promise an increase in airlift numbers to the island, what do you think the response would be from hoteliers?

“There is also a local impact because vacation rental owners use the services of local companies such as Belco, cleaning companies, laundromats, retail for supplies, et cetera.

“If those units switch to the local market, the amount of business for these sectors will drop off significantly.”

While David Burt said during his Budget Speech that holiday rentals had reduced the number of affordable rental units in some jurisdictions, the landlord said owners would be dissuaded from putting properties back into the local market by the Government’s increase in stamp duty.

He added that while it had been reported that many landlords had changed their units to holiday rentals because of the lack of protections from non-paying tenants, that issue had still not been addressed.

“Instead of dealing with the root cause and protecting landlords, the Government does the opposite and punishes them with a huge fixed annual fee,” he said. “This is absolute madness.

“Hard working, voting Bermudians who have saved enough to own a piece of the rock and want to rent out an apartment on the local market are not the problem in this situation.

“The Government needs to amend the laws so that local landlords have some kind of security and confidence in re-entering the local market.”

He said that holiday rentals had helped to fill a significant gap in the tourism market left by the closure of the Fairmont Southampton and made a significant economic difference during the pandemic.

He said: “Vacation rentals’s were largely the conduit that introduced digital nomads to Bermuda and vacation rental units make it economically possible for tourists to visit Bermuda for longer periods – sometimes months – all while spending way more money per day than any cruise ship passenger.”

• Are you affected? What do you think? E-mail news@royalgazette.com

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Published March 22, 2023 at 1:28 pm (Updated March 22, 2023 at 1:28 pm)

New holiday rental fees are ‘outrageous’ – landlord

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