Introduction to Baltimore’s Airbnb Regulations
For both hosts and vacationers, the Airbnb regulations in place in Baltimore play an undeniably important role in the hospitality industry. Pretty much every business exists under a certain set of rules and regulations, and Airbnb hosts in the state of Maryland are compelled to abide by them just as anyone in a variety of other industries are. Over the years, government officials, city delegates, housing authorities , and local advisory committees have all had a part to play in the way that short-term rental agencies like Airbnb are operated within the city limits. Airbnbs and other short-term rental accommodations are valuable members in the list of industries that are laboring to aid the city of Baltimore with the expansion of the service-based economy. Weaving through the hoops of navigating regulations can be difficult for many people. This is why I have created this guide to make it easier for you to understand how the laws apply to you as either the host or the guest.
Licensing Your Short-Term Rental in Baltimore
The first step to legally obtaining a short-term rental license in the City of Baltimore is to register online with the Baltimore Housing Authority. Upon registration, potential short-term rental hosts can proceed to submit an application to obtain the required short-term rental license. The registration must contain the address of the property that you will list on your STR listing. The listing must be on either the host’s own website, or on one of the below approved online hospitality platforms:
- HomeAway
- Airbnb
- FlipKey
- Booking.com
- VRBO
Upon completion of the online registration, the applicant must pay an annual registration fee of $20.00 and an Additionally, the applicant must pay an application fee of $100.00 and a one-time inspection fee of $25.00.
The result of the registration and application will be notification from the City approving or denying the application for a short-term rental license. If approved, the license must be renewed every two (2) years and is provided in the form of a certificate plaque, which must be prominently displayed on the exterior of the short-term rental property. The certificate plaque must be visible from the public sidewalk in front of the registered short-term rental location.
With regard to the process of maintaining compliance with the regulations, short-term rental hosts must apply for renewal of the short-term rental license no later than thirty (30) days prior to the expiration of the license. If the license is not renewed timely, not only is the host required to pay a late renewal penalty of $25, now the host is not permitted to operate a short-term rental opportunity until their renewal is processed and approved. Additionally, hosts are required to submit and post in the short-term rental house information regarding emergency contacts; hot water heater and water supply shut-off location; stop sign location; smoke detectors; carbon monoxide detectors; fire extinguisher; floor plan showing exits; copy of page 1 of the lease; 311 contact number; and housing authority contact number.
Zoning and Location Restrictions
In addition to the registration requirement, Baltimore also imposes area restrictions on short-term rentals. Airbnb hosts must be in compliance with local zoning ordinances for a short-term rental and use. Each property falls under a specific zoning code that regulates the type of activities and uses permitted at a property. Typically, the City of Baltimore only permits short-term rentals in properties situated in primarily residential or commercial use areas. Property owners are prohibited from using properties as a short-term rental if located within a different zoning use area.
The location of your property and its primary water or sewer source will heavily influence the use allowed at your property. For example, the Baltimore City Code specifies that certain zoning use areas are permitted to use property for a short-term rental. A full listing of zoning use areas and their applicable code is codified in the Baltimore City Zoning Code and Appendix 1 of the Zoning Code. The Zoning Code further provides that Secondary Water and Sewer Areas may be utilized for short-term rentals.
Bear in mind that each property has a specific zoning use designation determined by the City of Baltimore. Depending on your specific zoning use designation, the City may or may not permit short-term rental use at the property. If the use designation does not permit short-term rental use at the property, the owner cannot legally qualify for a short-term rental permit.
Duties of the Host and Guests
In addition to the registration of the property and obtaining a permit, hosts have certain responsibilities set forth in the regulations. These responsibilities include maintaining the short term rental properties in compliance with the code, conducting background checks, and conducting a safety inspection.
Building Code Compliance. Each owner is required to maintain their property in compliance with the Baltimore City Building Code. The Baltimore Building Code sets forth minimum standards of health and safety for buildings in Baltimore City. The buildings must be maintained in such a condition that they have heating facilities capable of heating all habitable rooms to a minimum temperature of 68 degrees and provide adequate ventilation throughout the building.
Background Checks. Further, a host must obtain criminal background checks (and conviction verification) for any person occupying the property who is over 18 years old. For owners that wish to do so, the Criminal Justice Information System (CJIS) is made available to obtain these background checks and conviction verification. While it is not required to have these checks run through CJIS, if you do not obtain an account from CJIS, you must obtain the background checks through a private or commercial database that will satisfy the requirement that the results be reviewed and maintained in electronic format.
Safety Inspection. Hosts must conduct a safety inspection of their property that addresses the following items: (a) smoke detectors (b) carbon monoxide detectors (c) fire extinguishers (d) stairs and handrails (e) appliances and heating systems (f) hot water heaters (g) electrical service (h) and sewer service. Further, the building inspections office must be notified of the proposed rental date and time prior to the rental period to allow for an inspection and approval or disapproval of the permit application by the city. The building inspection office must approve or disapprove the application within 48 hours of submission.
As further proof of maintaining the minimum safety standards, hosts must hold an annual board of review to determine whether or not the owner met the requirements. If the review board determines that the owner failed in their duties to maintain the safety standards, the board will suspend or revoke the permit.
Taxes Related to Your Short-Term Rental
When it comes to taxes, Baltimore Airbnb hosts are subject to a number of obligations that are meant to ensure a fair playing field between the shared economy and the traditional hospitality sector. Specifically, hosts in Baltimore City are required to comply with Chapter 10, Article 15 of the Baltimore City Code, entitled "Good Business Practices." These rules and regulations require you to obtain a Transient Lessor License, to adhere to certain advertising rules, to provide a written summary of your rules and regulations to renters, and to remit a tax upon your short-term rental income.
This article addresses the taxation issues surrounding short-term rentals. It is broken down into four sections: 1) transient tax; 2) income tax; 3) unemployment compensation insurance tax; and 4) personal property taxes. In each section we explore the tax, how much it is, how it is collected or reported and when it is due.
As discussed in the previous section, the Baltimore City Code requires an individual who rents out her home on a short-term basis for less than 90 days to obtain a Transient Lessor’s License for a fee of $35 per year. The license is valid for one year from the date of issuance. Once licensed, the short-term rental operator must tax the guest an additional 9.5% transient charge – 7.5% city Transit Improvement Tax, plus 2% state short-term rental license fee (a new tax introduced Maryland State Legislature on Oct. 1, 2015) – and remit this tax to the City on a quarterly basis along with their Transient Lessor Tax Form. If fewer than 40 rentals are projected for the license period, a $5 per unit reporting fee applies. In addition to the transient tax, operators should check with the Maryland State Department of Assessments and Taxation to determine if they must also collect the 6% Maryland state sales and use tax on rentals of 90 days or less. These taxes may be reported on the same form as the City’s transient tax.
Like many other states , Maryland imposes an income tax on businesses operating within the State. In 2016, the income tax rate ranges from 2% for the lowest bracket to 5.75% for the highest bracket, and personal income continues to be taxed at these rates on a sliding scale. The income tax is imposed on the Maryland taxable income of individuals, corporations, and partnerships. In general, applicable income taxes are due to the State in full on April 18, 2017, unless an extension applies. Tax-filing tasks may be delegated to a certified tax preparer, who firm will request a signature from the taxpayer at the end of the process to certify that the information contained within the return is correct.
The purpose of Unemployment Compensation Insurance (UCI) is to provide unemployment benefits to eligible ex-employees. Self-employed individuals, or sole proprietorships, are not required to contribute to the UCI fund. For employers with employees, the unemployment tax rate is contingent upon the size of the employer’s payroll, with larger employers expected to contribute more toward the fund than smaller employers. Maryland Appropriated Code Annotated Section 8-604 outlines employers’ obligations with respect to Unemployment Compensation Insurance.
Personal property taxes may be assessed on property used in a business. In recent years, personal property taxes have been eliminated on manufacturing equipment and lots, and businesses may apply for up to $15,000 exemption per year for other property, including furniture; fixtures, computers, and supplies. If you are conducting a business from your home, it is likely that you need to file a personal property tax return to provide the State Department of Assessments and Taxation with notice of the property used for your business. A one-page form is available online and the tax return is due annually by April 15th for all personal property. The DBAT website provides a helpful guide for determining whether the UCI tax applies.
Sanctions for Violating Airbnb Laws
While the prospect of additional income can be alluring, Airbnb hosts must also consider the possible penalties for violating the law, as well as the costs associated with bringing your property into compliance. An Airbnb host could face substantial penalties for non-compliance. The City has the right to impose fines from $250 up to $1,000 per violation, with a minimum fine of $250. In addition to the fines imposed by the City, violation of the registration requirements and posting requirements could result in suspension or revocation of your short-term rental registration, or even permit denial or non-renewal.
While ignorance of the laws is not a viable defense, many hosts may simply be unaware of the full extent of the web of City and State regulations requirement requirements. Registration with the State of Maryland is required for all short-term rental hosts, but many short-term rentals in the City of Baltimore are registered only with Airbnb, or are simply listed on Airbnb with no other form of registration whatsoever. Under City law, all hosts must also register with Baltimore City and obtain a Specific Use License (aka "SUL"), which requires compliance with local zoning laws and occupancy limits. Further, City regulations require that SULs be renewed every two years, with proof of continued State registration, insurance, and mandatory inspections. Many operators in violation of these registration and insurance requirements may be serving as "unregistered short-term rentals," the subject of a $500-per-day citation for each day of non-compliance.
One of the largest out-of-pocket expenses for an unregistered Airbnb host from 2019 was the approximately $200 per day required to cover lodging expenses when the house or apartment was found by the City to be being used as an "illegal short-term rental." The Airbnb host in question was cited for hosting an "unauthorized short-term rental" without the requisite licensing, and as of April 2020 was still including the fees for replacement lodging in his lawsuit against the City. Additionally, the host incurred at least $4,000 in attorney’s fees and legal costs to defend his rights and repurpose the home as an authorized short-term rental, with the possibility of further costs if the court action continues to trial, as well as the stress of managing a two-front legal battle with Noe and the City. In light of the uncertainty due to City restrictions on access to City Hall and the local courts due to the COVID-19 pandemic, it could be months before the case is resolved. Barring extraordinary success, the attorney’s fees already spent will likely only continue to mount as time passes.
A quick search on Airbnb’s website for their Legal Terms and Conditions also reveals that the Airbnb platform itself may incur substantial costs related to the operation of a short-term rental that is not compliant with all applicable laws. While the Legal Terms explicitly state that Airbnb does not collect taxes required under applicable law, as a convenience to City residents it does also register itself as a tax collector and collect short-term rental taxes for its short-term rental customer using its platform. The Airbnb guest referenced in the preceding paragraph was charged $283 in additional occupancy taxes alone on an $856 booking, which covers the room rental, cleaning expenses, and the price of a bottle of liquor. With $283 of the total going to taxes, the Airbnb hosts in this case were paying, to some extent, for the price of being a short-term rental outlaw.
Recent Amendments and Modifications to Airbnb Laws
As the sharing economy grows in popularity, so do local, state and federal regulations seeking to control short-term rentals. In Baltimore City, laws regarding Airbnb rentals have changed significantly in just the past few years. This section provides a brief update on the City’s new rental licensing law which requires all residential properties in the City to obtain a use and occupancy permit from the Baltimore City Department of Housing and Community Development ("DHCD").
For any owner-occupant who will be leasing out his or her residence and renting it as short-term accommodations through a hosting platform like Airbnb, DHCD will require proof that the owner-occupant has submitted an application for a single family home use and occupancy permit to rent the unit. MD. Code Ann., Art. 11 § 303(21). If the owner-occupant does not provide this proof, then DHCD may penalize him or her $250.00 pursuant to the newly enacted §6-1B-111 of the Baltimore City Code.
In addition to showing proof of having filed a U&O application, the owner-occupant must also show that he or she is actively residing at the property as his/her primary residence. This means that the status quo of the owner-occupant illegally living elsewhere while maintaining only a mail drop-in Baltimore City is no longer an option. Owner-occupant hosts must have a legitimate primary dwelling in Baltimore City.
However, the owner-occupant renting out his or her home is not the only party that needs a U&O permit. Any person who advertises, books, brokers, lists or arranges short-term rentals must also obtain a U&O permit for each listing . Before obtaining a U&O permit, the broker must verify that the owner-occupant has applied for a U&O permit. MD. Code Ann., Art. 11 § 303(21).
Perhaps most controversial, once a U&O permit is obtained by the owner-occupant and the short-term rental manager, the owner-occupant will be taxed 3% of the gross rental revenue generated. The short-term rental manager will be taxed 5%. In other words, the tax burden is split between the owner-occupant and the short-term rental manager. Md. Code Ann. Tax-Gen § 2-1601(a)-(b).
The split tax increases the likelihood that both the owner-occupant and short-term rental manager will renege on their obligation to pay the tax, i.e. choose not to file their income reports. However, under Baltimore Code §11-1703, both parties are personally liable for the tax. Accordingly, we recommend that all parties entering into a short-term rental listing agreement have the terms of the agreement clearly written in their contract, and that they are both onboard with paying the profit tax.
Although the owner-occupant is required to pay 3% of his or her gross rental revenue, he or she almost entirely escapes liability for any damages caused on the property by the tenants of the short-term rental. The short-term rental manager is the only one that would be liable if suit were brought against him or her. Md. Code Ann., Art. 11 § 111(a). This legislative scheme can be described as strict and quite unbalanced, and has already inspired discussion about seeking judicial relief.