MINNEAPOLIS (WCCO) — A change in the new year could have some Minnesota cabin owners paying triple for their property.
The larger tax bills are meant to level the playing field in a crowded rental market.
WCCO found the move could ultimately cost families vacationing up north.
In sub-zero temperatures, an icy Lake Superior can still be heard from the streets of Grand Marais.
But, this December it’s a tax debate making the biggest waves.
Mike Larson’s Cascade Vacation Rentals manages 170 properties in Lake and Cook counties.
“It is very concerning,” Larson said.
From small cabins with sweeping views of the lake, to townhomes and condos. Like for a Twin Cities family who frequently rents this two-bedroom when they’re not able to be here. Now, a new tax classification may have them re-thinking that decision.
“They had noted that their taxes several years ago were $3,300. They’ve gone up to $5,800 and this property will probably go up to $17,000,” Larson said.
A property tax bill nearly triple. This past spring, the Department of Revenue sent this memo to Minnesota’s 87 county assessors who have the role of viewing and classifying property based on primary use.
The office says assessors asked for the guidance as the popularity of VRBO and Airbnb rentals have soared. In the past, properties have fallen under a seasonal recreational class. One of the lowest rates in Minnesota’s property tax system.
The memo clarifies the classification to a short-term rental and what’s known as 3-a commercial. The highest rate.
In Cook County, the change will mean much higher tax bills for more than 600 recreational properties, more than 10% of the total real estate value in the county.
Cook County Assessor Bob Thompson is now trying to properly classify rental property in his area.
“Right now we’re in kind of a tough spot,” Thompson said.
He’s watched as corporations buy up properties, remodel and start renting.
“I think any assessor in my situation would have paid attention to that type of activity,” he added.
Conversations from a local hotel owner he says only confirmed his suspicions.
“He told me that in 2019 he had about 800 less nightly rentals of his hotel,” Thompson said.
Meaning people are staying elsewhere. Thompson believes the move is meant to level the playing field.
But, Larson sees serious consequences for his company and for anyone else who rents in a local economy that is nearly 80% dependent on tourism dollars.
“The economic impact is significant,” Larson said.
“Where does it all start? Starts with heads and beds, right? People who are lodging from hotels to condos to cabins like this,” Larson added.
He thinks renters will have no choice but to raise rates or get out of the venture altogether. He’s one of many asking for a pause to give lawmakers a say.
Before the shifting landscape melts options in northern Minnesota.
A spokesperson told WCCO that Governor Tim Walz is open to a new proposal. He believes tax laws may be outdated. Walz says he won’t lead the charge on the issue. But, it looks like lawmakers from that area will.