MOVHA is spearheading new legislation for dedicated residential property tax classification designation for short term rentals.
Several county tax assessors have interpreted the state tax code that short term rentals are a commercial use and should be classified as such for property tax assessment purposes.
This change in classification has dramatically increased property taxes for many short term rentals with the tax rate going from 19% to 32%. In addition, the reclassification to commercial removed the residential cap on value increases, and those county tax assessors aggressively raised values on short term rental properties.
This change effectively increased property taxes for most short term rental property owners in those counties, some seeing up to 200% increase overnight.
MOVHA and supporters are seeking to pass legislation to protect short term rental property as a residential classification for property taxes as we firmly believe short term rentals are a residential use of the property. The same activities that happen during a 3 year stay and a 3 month stay are the same residential activities that happen during a 3 night stay. This use has been tested and upheld in several courts across the country.
The long term effect of this recent change in several county assessors’ interpretation of state tax code will be highly detrimental to tourism and investment in the State of Missouri, including loss of jobs and businesses, creating a downward spiral effect in local economies.
Several properties in the St. Louis City area have already ceased being used as short term rentals due to this unsustainable increase in property taxes. One Property alone in St. Louis had been generating $19K in Sales, Lodging, etc from Tourists. When property taxes increased from $8K/yr to $20K/yr, the home shuttered.
The State, County and City now lose the $31K ($19K+12K) they were receiving and the home goes back to generating only the baseline of 8K/yr in property tax. A total loss of $31,000 to taxing entities for a single property.
It doesn’t take long for the net loss of tax revenue to hit 7 figures and make a significant impact on city and state revenue.
Short term rentals create service jobs for local communities for cleaning and maintenance, with many people able to have their own small business servicing these properties and supporting their families.
In addition, there will be a loss of travelers who want to stay at a short term rental when they travel to Missouri. The travel trends show that travelers want short term rentals as an option, and they will travel to another state with lower taxes for their vacations if the cost of visiting becomes too high.
This then affects the restaurants, attractions, and shops in each town as the number of visitors declines and less money is spent at the establishments, which equals less tax revenue from these sales.
Thus those establishments would then employ fewer people so the business can survive. Fewer jobs in a town means people move elsewhere, to another state, selling their homes. But with few jobs available, the market for new folks to move to town is slim, and property values begin to go down since demand goes down.
In conclusion, this increase in property taxes may look appealing to county tax coffers, but in reality, it is highly detrimental to the viability and health of a sustainable county who values a robust local economy and the wealth of tourism.
