Honor System Can’t Keep Up
The Village of Ruidoso, New Mexico, rewrote its short-term rental (STR) ordinance in 2012. The ordinance required hosts to self certify and pay lodgers’ tax. For years, the Village ran on an honor system, trusting hosts to certify and pay taxes on their own.
As the STR market grew on online platforms, like Airbnb, Ruidoso more than doubled the amount of lodging rooms they could offer tourists, who were a main driver of the mountain resort town’s economy. However, Village staff faced growing complaints and concerns regarding the impacts of STRs on their neighborhoods, parking, noise, safety, fire pit regulations, and workforce housing.
The largest challenge for Village staff was ensuring their growing population of STRs pay a monthly lodger’s tax. The Village wanted to provide a customer-friendly solution to hosts. Nearing 1,000 STRs, the Village’s in-house system was no longer viable. “We needed to upgrade to a system that would allow us to handle tax payments effectively and efficiently,” said Stephanie Warren, a short-term rental administrative assistant with the Village.
A Safe, Efficient Solution & a Bonus
Village staff held public hearings to find a solution. They began an RFP process to find a technology partner. After comparing other companies, analyzing workflows, and identifying resources, the Village selected Host Compliance, now a part of Granicus.
“The Village selected Host Compliance due to its ability to help with safety concerns and the neighborhood impacts that stem from STRs. While revenue recovery was not a key consideration in the decision, it was a bonus,” she said.
During this time, the Village also improved their registration process and revamped their STR ordinance, aiming for an educational approach to gain compliance. The new ordinance eliminates self certification, ensuring that hosts meet requirements for safety and business registrations. The ordinance also incorporates new processes developed in partnership with the Host Compliance team.
The Village uses Host Compliance to identify properties and send hosts letters that educate them and encourage compliance. This is an important step to ensuring that every host is registered and knows how to pay taxes. The Mobile Registration and Tax Collection module provides an easy platform for hosts to pay monthly lodgers’ taxes. It also makes it easier for staff to process the payments, solving their largest STR-related challenge.
30% Increase in Compliance & More Tax Revenue
It used to take weeks for the Village to issue permits. It now takes minutes. In their first six months of using Host Compliance, the Village increased STR compliance from 54% to 85%. Since implementation, the Village has processed 601 business registrations from STRs. Today, 92% of STR properties are compliant.
The Village had budgeted $3,000 in STR permit and fee revenue for their first year of use. During their first six months, the Village collected $23,360 — over seven times what they had budgeted. The increase in compliance leads to an increase in taxes as hosts are educated on what they need to do to operate legally.
Since implementation, the Village has collected $637,000 in lodgers’ tax, 70% of which was collected in the Host Compliance system. The Village has seen a 60% increase in the number of hosts paying gross receipts tax. And six months after their new fiscal budget was released, the Village has already collected 75% of the lodgers’ tax for the full year.
“We’ve been very fortunate with the success of our STR program, thanks to Host Compliance. The system helps us pursue our goals of educating hosts and providing a customer-friendly registration process to encourage compliance,” said Stephanie.
