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An Airbnb billboard in Seattle. (GeekWire Photo).

The Seattle City Council approved a new tax on short-term rentals Monday, taking the first step toward regulating hosts who rent out their properties using sites like Airbnb and VRBO.

The amended legislation will tax short-term rental operators who rent out entire units $14 per night and hosts who only rent out part of their homes — such as a spare bedroom — $8 per night. That’s a slight change from the $10 per night flat tax that was initially proposed in September. Councilmember Mike O’Brien said he expects the tax to bring in approximately $7 million annually but that number could fluctuate as other details are hammered out.

The tax is part of a set of regulations designed to prevent property owners from operating Airbnbs and other short-term rentals as if they were hotels — part of a broader effort to ensure an adequate supply of long-term rental stock for the city’s permanent residents. The Council voted Monday to separate the tax from the other regulations in order to pass it more expeditiously.

Despite championing the legislation as chair of the Planning, Land Use & Zoning Committee, Councilmember Rob Johnson hoped to delay voting on the tax until the Council was prepared to vote on the entire package, arguing that “the regulation and revenue pieces are inextricably linked.”

Johnson was voted down by a majority of the Council and the per-night tax was approved Monday.

The regulatory component that was separated from the tax would limit Airbnb hosts to no more than two units each and require them to obtain special licenses. The remaining regulations will be discussed in committee.

Airbnb has been working with the city to come up with a set of regulations that let homeowners earn extra cash by renting out their properties on a short-term basis, while keeping as much long-term rental stock on the housing market as possible. The city is mired in a housing affordability crisis, driven by an influx of newcomers, many of whom have been drawn to Seattle by the promise of high-paying tech jobs.

At the same time, Airbnb has become ubiquitous in Seattle and other cities. The rise of short-term rentals combined with Seattle’s highly competitive housing market has spawned an entirely new business model in Loftium. The Seattle-based startup helps homebuyers with their down payments on the condition that they rent out a portion of their home on Airbnb and share some of the profits with the company.

Loftium CEO Yifan Zhang doesn’t expect the regulations to significantly impact the company’s business but does hope the city will reconsider the nature of the tax.

“Personally, I feel like the flat tax is regressive … A small percentage fee would be much more fair,” she told GeekWire in a previous interview.

The fate of the additional regulations remains to be seen. As for the tax, it will help fund development projects and affordable housing.

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