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Government Affairs
New Vacation Rental Rules & NAR Addresses 1031-Exchanges
By: Max Brandow, RASM Government Affairs Director
Last month, the city of Sarasota finalized rules pertaining to vacation rental properties on homes in the city that reside on barrier islands (such as Lido, Bird Key, St. Armands Circle, and northern portions of Siesta Key). The city passed rules in response to a growth of what some residents allege as “Hotel Houses.”
RASM was involved throughout the ordinance writing process to ensure the rules created the least amount of burden as possible for property owners. The ordinance in its original form called for hefty fines, numerous inspections, unreasonable duties on property owners, and excessive and unnecessary safety requirements. While we argued throughout the process that this ordinance would be unnecessary if the city enforced its current codes and rules (noise ordinances, trash ordinances, parking, etc..), the Commission was intent on moving forward. Luckily, RASM along with a handful of vacation rental owners, were able to help craft the final product into a workable ordinance for property owners.
DETAILS ON NEW VACATION RENTAL RULES
The City Commissioners made slight revisions to the ordinance on second reading, so the final language has not been made public yet, but below are some key provisions to be aware of if you or a client operate a vacation rental in the territory mentioned above. The program is set to start in the beginning of 2022.
Registration program for vacation rentals (less than one month stay), which includes one-time $250 fee. Initial inspection, then one inspection every four years. Agent or homeowner is responsive to complaints and ability to cure violations within a reasonable time. Standard safety requirements: emergency numbers available, smoke detectors, extinguishers, etc. When city officials release the final language of the ordinance, we will share that information to our membership. If you have any questions or want to talk in more detail, don’t hesitate to reach out to me at 941952-3410; maxwell@myrasm.com.
NAR COUNTERS PROPOSAL LIMITING 1031-EXCHANGES TO $500K
Under President Biden’s proposal, 1031 like-kind exchanges only defer $500,000 from taxation. NAR says not to panic, though. There’s time before any decisions are made. President Biden’s recent tax proposal includes a $500,000 limit on the amount of deferred gain from Section 1031 like-kind exchanges. If the proposal becomes part of the official package that moves through Congress, it could present adverse consequences for communities and their economic development, according to Evan Liddiard, director of federal taxation for the National Association of Realtors® (NAR). Liddiard spoke during the Commercial Federal Policy Meeting at the virtual 2021 Realtors® Legislative Meetings on Thursday.
Section 1031 allows investors to defer paying capital gains taxes on the exchange of one investment property if it’s replaced for another property of “like-kind.” President Biden originally proposed during his campaign to do away with Section 1031 like-kind exchanges.
“We’ve been watching this for months now,” said Liddiard. “We’re not panicking, because we still have a long way to go before the proposal moves anywhere.” That said, NAR and other members of the Real Estate Like-Kind Coalition are redoubling their efforts to inform members of congress about the mistake that would result from limiting like-kind exchanges. The organizations have already “had many discussions about the issue with members of Congress, especially on the Ways and Means Committee and the Finance Committee,” he added.
“We keep telling them that most 1031 deals are for mom and pops,” Liddiard said. “Their reaction has been, ‘Then we’ll limit them to $500,000.’ They think that’s going to be the answer. But it’s the big deals – the ones over that amount and many more times that amount – that have the potential to create the most jobs and do the most transformational work in cities and communities.”
The prospect that this move could lead to more draconian changes also concerns Liddiard. “There’s always the ‘camel’s nose under the tent’ idea,” he said. “They put a $500,000 cap on it this year. Next year they come back and lower it again. Then finally they take it away altogether.”
In addition to meeting with representatives and senators, NAR is requesting examples from members about the benefits of 1031s, Liddiard said. •
Source: 1 | National Association of Realtors® (NAR) 2 | © 2021 Florida Realtors® 3 | Lynn Ettinger
