Ocean City's challenge: Rental violators, Airbnb and now a possible room tax bump

Managing four rental properties in Ocean City, especially during the busy summer months, is almost a full-time job for Anita Ammon.

She started renting her properties by the beach several years before the online service launched in 2008. But joining Airbnb a few years ago has made her rental business more streamlined, Ammon said.

"I do love Airbnb's system — you can screen renters and you can set it to strict, which I do so guests have to have so many good reviews," Ammon said. "We almost exclusively rent to our repeat renters because we've been doing it for so many years. It's worked out really well for us."

With more than 460 active hosts, Ocean City is a popular place for home-sharing services, such as Airbnb, VRBO and HomeAway, especially during the summer tourism season.

While online rental services do take away business from hotels, overall, they contribute to Ocean City's economy, said town spokesperson Jessica Waters.

"It could certainly be seen as a positive because it offers a different experience," Waters said. "Sometimes you want to stay at a hotel, or if you're with a big group, an Airbnb might be better."

But not everyone who uses these online services to rent out their properties follows the rules. As a host, Ammon has the proper licenses and pays taxes each month — like hotels and real estate agencies.

But the people who skirt local government ordinances by not doing so have caused a large, ongoing issue for Ocean City and Worcester County.

Although it is a problem many resort towns face, Ocean City hasn't quite figured out the best solution to these rental violations. In recent years, town officials tried to regulate single-family homes, but that caused an uproar from some local property owners and realtors.

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Ocean City has also been burdened with the challenge of ensuring thousands of individuals have proper rental licenses.

The cost of being in compliance, though, may go up in the coming years. At a recent Town Council meeting, the mayor and council discussed a possible room tax increase from 4.5 percent to 5 percent, which would require approval from the Worcester County Commission.

In fiscal year 2018, more than $15.5 million in room tax revenue was collected by the town. Should this tax bump transpire, Ocean City would see an additional $1.73 million in revenue.

The mayor and council say this added revenue could be used for the town's core services, such as governmental administration, public safety, public works and debt services.

"The core services are important and there’s a cost associated with them," Mayor Rick Meehan said. "I want to make sure we have the funding to cover those core services, and an increase to the room tax is the mechanism to do that."

Skirting regulations is "unfair"

Ammon takes pride in keeping her rental properties well-maintained, which includes following Ocean City's regulations.

For all five of the rental properties she manages — four in Ocean City and one in Baltimore City — Ammon said she has the proper permits and pays taxes. But she knows of many others who don't comply with the town's ordinances.

"It's just really unfortunate because all of that money goes to the town — it's unfair to those of us that are doing it the right way," Ammon said. "It's just unfortunate that so many people go under the radar and don't take the proper steps to get licensed."

In order to keep her prices competitive with Ocean City hotels, Ammon requires her renters to provide their own linens when they stay at her properties. That way she doesn't have to include the cost of a cleaning service in the overall booking price.

Managing her properties, especially during the busy summer months, is no small task. Ammon also has superhost status on Airbnb, which means she is highly rated, responsive and reliable. Airbnb superhosts also receive about 22 percent more from stays and earn rewards as they keep up their status, according to the Airbnb website.

Ammon said each year, her four Ocean City properties are booked from Memorial Day to Labor Day, the traditional beach tourist season. In the shoulder months  of May and September, Ammon still sees many renters, but in winter, her rental traffic predictably slows down.

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During the summer, Ammon said she earns about $1,500 a week for the two Ocean City properties she personally owns. This adds up to roughly $45,000 over the course of 15 weeks, which is the bulk of Ammon's yearly earnings from Airbnb renting.

Even though the sales and room taxes on her rental properties are high, Ammon said it's worth it to see improvements made to Ocean City each year.

"I love Ocean City. I grew up vacationing there with my family since I was a little girl," Ammon said. "I feel good about paying my taxes because I'm contributing to the betterment of the town."

Challenge of rental regulation

While hotels are required to pay room tax, many short-term renters in Ocean City are not regulated or compliant with the town's ordinance.

Short-term rental regulation is not a new issue to Ocean City. Officials in the beach town have worked for years to ensure every rental is properly licensed, but thousands of violators remain.

Online services, such as Airbnb, VRBO and HomeAway, have been part of the larger short-term rental conversation in Ocean City for the last three to five years, Waters said.

With more people using Airbnb to find lodging in Ocean City, the challenge of getting every renter licensed has become more difficult.

To acquire a new license, individuals must fill out an application and pay $141 — $116 for the rental license fee and $25 for the noise permit.

Susan Domagala, the town’s licensing inspector, sent out more than 20,000 letters in April reminding Ocean City property owners without rental licenses that they needed to be up to code.

"We saw a great response from those letters," Domagala said. "About 508 new rental licenses came out of that, so it was a really positive outcome."

About 8,000 property owners in Ocean City are now properly licensed to rent, Waters said.

Despite efforts made by officials, there are still thousands of renters who are violating the town’s code of conduct by operating without a license.

If property owners do not act after the courtesy letters are sent, then citations will ultimately be issued. From October 2017 to September 2018, the town issued about 25 citations to renters without licenses, Waters said.

Those given citations typically pay the fine, along with the license fee they owe, in order to comply with the town’s regulations. Occasionally, property owners will take their case to court, Domagala said.

"Just a friendly reminder that if you’re going to rent your property, we do take it seriously," Waters said. "We’re happy that people have invested in Ocean City; we just want to make sure they’re doing it the right way."

Contact reporter Sara Swann at 302-324-7711, sswann@delmarvanow.com or on Twitter @saramswann.

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