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Fair Share? Officials Struggle to Regulate Vermont's 'Sharing Economy'

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SEAN METCALF
  • Sean Metcalf

In early March, Vermont's Department of Financial Regulation issued a consumer alert cautioning people that a "revolution" was brewing in the Green Mountain State. It was referring to the "sharing economy," in which people use online platforms to rent their homes, cars — even their pets — to strangers.

Titled "Be aware before you share," the alert warned potential loaners that they could face major liability if they lack proper insurance. Is it a sign that state officials are starting to clamp down on off-the-books commerce?

In recent years, the sharing economy — variously dubbed "collaborative consumption," the "peer economy" and the "access lifestyle" — has mushroomed into a multi-billion-dollar sector. Supporters say it promotes an "asset-light" lifestyle that's efficient and environmentally friendly. Critics argue that unregulated transactions allow people to evade fees, taxes and safety regulations.

Both sides agree on one thing: Current laws are ill-suited to address the situation.

Two of the biggest names in the business — Airbnb, a company that facilitates renting out spare rooms, and Uber, which lets people use their personal cars as cabs — have generated some high-profile legal battles. Spain, Germany, Belgium, India, Thailand and other countries have banned Uber services. New York's attorney general subpoenaed Airbnb and started shutting down accommodations that ran afoul of the state's rental laws. San Francisco and Portland, Ore., now require Airbnb hosts to register and prove that they live at the residence they're renting.

Both companies are doing business in Vermont, where bartering has long been a way of life. At first state officials greeted them with ambivalence. Now some of them are cracking down.

Labor Commissioner Annie Noonan said her department is investigating Uber in Vermont to determine whether its drivers are employees or independent contractors. Uber argues the latter, but if the labor department disagrees, the company would be obligated to pay minimum wage, workers' compensation and unemployment insurance. The California courts are contemplating the same question in two pending cases: one involving Uber; the other, its competitor, Lyft.

Last year, the state tax department started enforcing the 9 percent rooms and meals tax on Airbnb hosts who rent rooms to guests for at least 15 days during the year. To date, the department has brought in $700,000. The state health department, which licenses lodging establishments, has also begun inspecting some of the places advertised on Airbnb.

Despite these measures, enforcement is erratic: Neither the tax nor health departments could say how many rentals are on the right side of the law. And plenty of gray area remains.

Under the health department's current regulations, drafted in 1975, any place that advertises and provides lodging to the public for more than one day a month needs a license from the department. They're also subject to rules, such as: "Individual cakes of soap ... shall be discarded after being used in a guest room." The department plans to revisit these regulations with Airbnb in mind.

A white paper generated by the Vermont Department of Motor Vehicles concluded that Uber drivers should be considered cabbies under state law. It also pointed out that no enforcement system currently exists to ensure that drivers register and get proper insurance.

Officials emphasize that they don't want to be draconian. "You don't want to stifle innovation," noted DFR commissioner Susan Donegan, who said the consumer alert was simply meant to encourage people to "be smart about it."

Education is the priority, agreed tax commissioner Mary Peterson, whose department published a primer on the rooms-and-meals tax and when it applies.

Awareness campaigns like these do little to assuage business owners such as Doug Sawyer, who runs the Lilac Inn in Brandon. "The state needs to be more aggressive in trying to level the playing field," said Sawyer. He recited a litany of expenses — for taxes, kitchen inspections, fire alarms and sprinklers, to name a few — that Airbnb hosts don't pay.

State tourism commissioner and former innkeeper Megan Smith shares Sawyer's concerns. But to regulate Airbnb, departments need more inspectors and more resources, Smith said. Given the gaping budget gap this year, "It wasn't a time to start that conversation" in the legislature, but Smith plans to address it next year.

Not surprisingly, Burlington has made the most progress in navigating the sharing economy: It hosts nearly half of the more than 1,000 Vermont rooms currently available on Airbnb; it's the only city in Vermont where Uber has officially launched; and it does have an ordinance that aims to regulate local livery service.

Mayor Miro Weinberger said he thinks these companies "offer the promise of real value to Burlingtonians," but also "create real issues." The city shut down an Airbnb operation for the first time last summer. A Wisconsin couple had bought a second home in the South End and started renting it out. After neighbors complained, the development review board ruled that the pair had converted the home into a commercial inn without obtaining a permit.

But the ruling raised more issues than it settled.

The city's zoning code has clear definitions for bed and breakfasts, historic inns, hotels and boarding houses — none of which really applies to Airbnb rentals, including the South End house.

To date, the city's code enforcement department has responded to nine other complaints about Airbnb properties; five remain under investigation, and the rest have been resolved without a DRB hearing.

After the South End case, Weinberger asked City Attorney Eileen Blackwood to conduct a review of how city regs apply to Airbnb and other short-term rental arrangements, and to research what other cities have done. After receiving Blackwood's memo last week, he concluded there's no "off-the-shelf" solution.

Among the findings: Fire and other safety inspections only apply to commercial properties, which means the city doesn't have the authority to inspect most Airbnb spots.

Burlington levies a local gross receipts tax on places that offer public lodging, which, the memo notes, "likely applies to most, if not all, Airbnb listings." Only 14 hosts currently pay it, and attempts to collect money from others backfired. When the city's tax collector used the Airbnb website to inform several hosts that they owed taxes, the company blocked him from the site. To date, none of them has paid.

According to the memo, the city is "contemplating its next steps."

Jordan Davis, whose family runs the Willard Street Bed and Breakfast Inn, is well versed in all matters Airbnb. In a 19th-century sitting room, he rifles through a collection of news stories and notes. "The city needs to catch up with the times," he said — meaning officials need to rewrite Queen City ordinances to address Airbnb properties. But doing so, he admitted, would be a "monumental task."

Part of the problem is that people use Airbnb in very different ways: Some hosts rent out entire unoccupied houses, while others live in the homes and occasionally rent out a room. This makes a one-size-fits-all policy impractical.

"It's not obvious exactly what we should do," Weinberger said. "It's a priority of mine to get moving at a faster pace."

When Uber launched in Burlington last October, Weinberger took the first step, inviting its reps to city hall and announcing that he'd work with them to create a temporary operating agreement. Until then, Blackwood made it clear that Uber drivers needed taxi licenses to operate legally.

Six months later, the agreement is still under negotiation. Uber, which considers itself legal with or without licenses, has continued to operate. For a while the city did nothing, but recently cops have started writing tickets. According to Blackwood, they've issued seven tickets and four warnings so far — mostly to drivers for transporting passengers without a taxi license.

"Burlington is stuck in the mud," said one Uber driver who got two of those tickets. "It's not the hip, progressive city it professes to be." The driver, who asked to remain anonymous, said he runs a small business and drives for Uber to help pay the bills. He said it's been difficult to keep pace with passenger demand, in part because the city has started cracking down on Uber drivers. "I'm a designated driver," he said in a clever reference to Vermont's education efforts to curb its drunk-driving problem. "Please tell me how that service is not sorely needed." He recently got a taxi license to avoid further trouble with the law.

Green Cab co-owner Charlie Herrick is coming at it from the opposite direction: He sees Burlington's enforcement effort as halfhearted. It's unfair, he said, arguing that most Uber drivers don't pay for taxi licenses or commercial insurance policies. His solution: Impound their cars. "I'm dismayed that the city has not enforced the ordinance that's on the books," he said. "Other cities of our exact size have stood firm."

The original print version of this article was headlined "Fair Share? Officials Struggle to Regulate Vermont's 'Sharing Economy'"

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