A new tax in New Jersey on short-term lodging such as Airbnb rentals is rattling some property owners and renters who worry that it could deal a blow to the state’s multi-billion dollar shore tourism industry by pushing people to consider other destinations.
Democratic Gov. Phil Murphy proposed extending the state’s sales and occupancy tax to transient accommodations like Airbnb and VRBO rentals during last year’s budget process, and it flew largely under the radar as Murphy and the Democrat-led Legislature scrapped over bigger taxes such as income taxes and corporate business rates.
But since the 11.625 percent tax — higher in some towns that have their own fees — went into effect late last year, a group of property owners, some from Pennsylvania and New York, have taken their concerns to lawmakers.
The issue is rising to the surface now in particular because many shore rentals are locked up in January. The new tax law requires property owners who let out their homes, including vacation properties along the state’s roughly 130-mile coastline, to collect the tax from short-term renters. In many cases, this is affecting owners and renters who have long-standing arrangements, or who rent by word of mouth or via informal social media posts.
Denise Payne, 73, has owned a historic home in Beach Haven since 2014 that she also rents out. She says since about October she and handful of other shore property owners banded together to form the New Jersey Shore Rental Coalition to push back against the new tax, which she says is “pretty onerous on renters and not just renters, but the local economy.”
She says if owners pass the tax along to renters, they’ll in turn pocket cash they ordinarily would have spent in the town they stay in.
Michael Jakob, 52, lives in New York and has owned a home in Barnegat Light since 2010 that he rents out during the summer. He says he typically has about three-quarters of the summer weeks booked by February and this year so far he hasn’t had any new inquiries. He said he thinks the tax is a factor.
Jakob, and others, said they use the rental income to pay the mortgage, taxes and upkeep on the homes. Murphy and lawmakers seem to be trading the potential for new tax revenue for lower economic activity, as Jakob sees it.
“It seems to me there’s an unintended consequence that people haven’t thought through, but the impact … it’s a penny-wise pound foolish calculation,” he said.
Vince Farias, 72, is the founder of Farias Surf and Sport on Long Beach Island. He predicted the tax would take a toll on businesses like the one he started and has since sold to his son.
“The extra beach chair, the surfboard, the Christmas present— those things are going to be impacted,” he said.
Just how many people the new tax will affect is unclear. Payne says the coalition estimates that it could be as high as 6,000. A legislative estimate that accompanied the bill found it would bring in an indeterminate amount of cash.
The state’s tourism website estimates overall the shore saw 100 million visitors in 2017 and accounted for about $43 billion in spending.
Murphy’s administration defended the tax as a way to “level the playing field” between hotels, motels and transient accommodations done through online marketplaces like Airbnb, according to a statement from treasury spokeswoman Jennifer Sciortino.
She also pointed out that the law offers short-term renters a way around the tax since transactions through real estate agents are exempt from the tax. That’s a point that rankles owners. Payne called it “discriminatory” and said many owners prefer to deal with their guests directly.
New Jersey isn’t alone collecting these kinds of taxes. A 2018 National Conference of State Legislatures’ report found 39 states collect some kind of tax on short-term rental accommodations.
Still, in New Jersey, which has among the steepest property taxes in the country, it’s little consolation for some renters.
Kathy Coccia, 68, is a retired grandmother from Cranford, New Jersey, and has been renting a vacation house in Avalon along with her husband, daughter, son-in-law and two grandkids for the past 10 years. This year, though, when she called to inquire about renting the shore house, she said she was stunned to learn about New Jersey’s new tax on certain rental properties.
She said she and her family are considering another destination.
“I feel I’m being taken advantage of,” she said. “It’s a lot. New Jersey asks a lot of its homeowners.”
Democratic Assemblyman John McKeon has introduced a bill to exempt the state’s shore counties from the tax. So far the bill has not moved out of committee.