Midtown Raleigh News

August 10, 2014

Airbnb, Uber prompt outcry from traditional Raleigh businesses

Traditional taxi and lodging businesses are asking Raleigh leaders to crack down on websites like Uber and Airbnb that allow nearly anyone to become a cabbie or innkeeper.

Traditional taxi and lodging businesses are asking Raleigh leaders to crack down on websites like Uber and Airbnb that allow nearly anyone to become a cabbie or innkeeper.

Taxi drivers and the owner of a bed and breakfast have petitioned the Raleigh City Council in recent weeks asking for help. They say their businesses have declined as customers desert them for online services that undercut their pricing by avoiding taxes and regulatory hurdles.

Doris Jurkiewicz owns the Oakwood Inn, the last remaining bed and breakfast inside the Beltline. A few years ago, she’d have a long waiting list for busy weekends like college graduations. Now she has empty rooms on the same weekends, and former guests have told her they’re staying in private homes down the street using Airbnb.

“I’m struggling to make ends meet,” Jurkiewicz said. “It will close if things don’t change. It’s too costly to do business and too hard to compete.”

The cheapest room at the Oakwood Inn costs $139 a night. By contrast, Airbnb user Dexter Tillett typically charges $110 per night to rent his entire two-bedroom house – just a few blocks away in the Mordecai neighborhood. He’s one of more than 40 Airbnb hosts the site lists in Raleigh.

Tillett says he leaves the house and stays with his mother whenever a guest arrives. “If I rent my place out for 12 nights, I pay my mortgage,” he said.

With payments running through Airbnb’s website, Tillett’s guests don’t pay the local sales or occupancy taxes that Jurkiewicz must add to her bills. And his house doesn’t get fire or health inspections.

“It wouldn’t be a problem if (Airbnb rentals) were held to the same rules that govern my home,” Jurkiewicz wrote to Mayor Nancy McFarlane.

Wake County Revenue Director Marcus Kinrade said Airbnb rentals should be paying the same taxes as traditional lodgings.

“I don’t see how they would be exempt,” Kinrade said. “The problem we would have is finding them. It doesn’t list the address or anything that would allow us to track down and inform these people” that they owe taxes.

Earlier this year, Airbnb agreed to collect San Francisco’s 14 percent hotel tax on all its rentals in the city. Kinrade said Wake could consider a similar effort, but there’s no guarantee the company would agree.

“It would be similar to getting Amazon to pay sales tax,” he said.

Tillett says he’d rethink his rentals if he faced taxes or other regulations.

“I think lawmakers and regulators are going to crack down on it eventually, and it’ll be more troublesome to do what I’m doing right now,” he said. “While it’s hot, I’m going to take advantage of it.”

Ride apps avoid rules

City and county officials could have a harder time regulating ride-sharing apps like Uber and Lyft. Both services launched in Raleigh this spring and use smartphones to pair riders with willing drivers. Anyone who passes a background check and owns a car can sign up as a driver.

But before the services rolled out, the N.C. General Assembly last year passed legislation that says cities can’t “regulate and license digital dispatching services for prearranged transportation services for hire.”

In other words, the maximum fares and licensing that Raleigh and other cities require of traditional taxis likely can’t be applied to Uber and Lyft. The provision was inserted into a much larger regulatory reform bill and drew little notice or discussion at the time.

Still, McFarlane has asked city attorneys to investigate any regulatory options Raleigh might have. About a dozen taxi drivers appeared at last week’s city council meeting to ask for help.

“You should lawfully abide by the rules for taxi regulations if you want to be one of us,” said Lee Churchill of Express Taxi.

Churchill says she’s concerned that Uber and Lyft pose safety risks. While the city conducts backgrounds checks and inspections for licensed cab drivers, the online services are policing themselves.

“They are a major liability risk,” she said. “I believe it’s nothing but a scam. It’s put the entire public at risk.”

Both Uber and Lyft conduct background checks on potential drivers and monitor them by asking riders to rate their experience.

Not inspected

Similar concerns are being raised about Airbnb rentals. “These facilities are not inspected by health departments, and they don’t have to have fire and safety in place,” said Lynn Minges, president of the N.C. Restaurant and Lodging Association. “The guest checks in, and they’re not sure who they’re staying with.”

Minges said her organization is forming a task force to review the Airbnb trend and make recommendations to local government.

Meanwhile, the popularity of Airbnb, Uber and Lyft continues to grow, and traditional business models aren’t sure how long they can hold on.

“I believe it’s to put the taxicabs out of business,” Churchill said of her new competition.

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