Oak Park’s village board approved a measure to increase taxes on transient occupancy rental units such as Airbnb to support affordable housing.
The Feb. 21 vote was 6-1 with trustee Ravi Parakkat dissenting.
Village records show that Oak Park has 120 of these short-term rentals, compared with one full-service hotel and one bed and breakfast. The tax increase, to 7.5% from 4%, is expected to bring in more than $4.2 million over a 10-year period, a $1.2 million difference over what would have been collected without this change. That $1.2 million will go toward supporting affordable housing.
The new tax will go into effect May 1.
Visitors will pay the increased tax, not Airbnb owners, village president Vicki Scaman said. Regardless, Airbnb owners have said they don’t support raising the tax, citing concerns about losing visitors and the effect on tourism.
Oak Park partially funds its affordable housing efforts through a measure that permits developers to contribute money to the fund in lieu of creating the required number of affordable units, but no such projects are in the works, said Emily Egan, Oak Park’s development services director.
“The only way to make a dent in affordable housing is to add housing,” trustee Cory Wesley, who voted in favor of the tax increase, said “We need lots and lots of units.”
Trustees deliberated over several options, including taxing the village’s hotels and motels along with transient occupancy rental units, as well as ways to slowly increase the tax up to 7.5%.
Parakkat, who dissented, questioned whether the 3.5% jump was too much. Egan said that the staff feels comfortable with the increase as it stands, rather than an incremental model.
Scaman said the village could implement a tax on hotels and motels later, adding that it’s easier to implement that later than doing it now and potentially revoking it in the future. Staff will continue to present more options to fund the village’s affordable housing goals, Egan said.
Oak Park’s hotel/motel tax was originally 2% when established in January 1995, according to the village. It has remained at 4% since it was increased in 2004.
The revenue from that 4% tax has been mostly dedicated to tourism initiatives through Visit Oak Park. In the fiscal year 2024 budget, $209,042 was allocated to the nonprofit. The options presented by staff at the Feb. 20 meeting assumed that annual contribution would stay the same.
In 2023, the 4% tax resulted in roughly $258,000. According to the village, more than half of that total was paid by short-term rentals, such as Airbnb and Vrbo.
According to village officials, 20 users have two or more short-term rentals, and one operator, with a Forest Park mailing address, has 15 licenses. Of the 120 sites, 37 have a mailing address outside of Oak Park, meaning the operator may not live in the village.
However, a lot of the short-term rental operators do have two or fewer units, trustee Brian Straw said, so they are likely to feel the impact of this tax increase more keenly. Parakkat also raised this concern during the Feb. 20 meeting, and said he hopes his worries are misplaced.
The board also examined a diversity, equity and inclusion assessment looking at how the tax would affect different groups. Under the option the board chose, small business operators may have a financial loss from the tax increase, according to the village. But these short-term rentals reduce the supply of available housing in Oak Park, officials said.
That loss of supply may disproportionately affect low to moderate income households, officials said. Additionally, if short-term rentals cluster in one location, it could affect the quality of life for existing residents, officials said.
The public will have access to regular updates regarding the tax increase and revenue collected, officials said.