This analysis by Alaska Policy Forum looks at an urgent issue for Anchorage, which is considering a new short-term rental tax next week. That may seem like an easy fix for housing, but in reality, it raises serious questions about fairness, effectiveness, and government overreach.

What starts in Anchorage rarely stays in Anchorage: similar policies could easily be floated in Fairbanks, Juneau, Haines, and other tourism-driven communities. Alaskans statewide should pay attention, because what starts as a well-intentioned “solution” in one city can quickly become a costly, misguided precedent everywhere.

Next week, the Anchorage Assembly will consider a proposal to raise the bed tax on short-term rentals (STR) by 5%, creating an STR-only tax that would bring the total tax on vacation rentals to 17%, compared to 12% for hotels.

At first glance, this might sound like an easy way to raise money for housing. But is it really?

Let’s look at what the numbers, and the policy, actually say.

HOW MUCH MONEY WOULD THIS REALLY RAISE?

Based on the city’s own collection data, Anchorage currently raises around $5.5 million from the existing 12% bed tax from short term rental companies such as Airbnb. If that number holds, adding another 5% would raise roughly $2.25 million a year.

That might sound significant, but in the world of housing construction, it doesn’t go far. The average cost of a single home in Anchorage can easily exceed $400,000–$500,000 when factoring in land and construction costs – and government-funded housing projects often cost more.

Even using conservative estimates, $2–2.5 million might build just four to five homes. Is that enough to make a real difference in housing affordability?

Mayor LaFrance’s Housing Strategy is called, “10,000 Homes In Ten Years.”  In ten years, using all of the tax, at best, would build only 50 homes, likely many fewer. Her strategy states it will require public-private partnerships, “to pay prevailing wages,” or union wages, despite the fact that little housing construction is done under “prevailing wages.” This is just one of the usual government-imposed costs and inefficiencies, which makes anything government does much more costly then the private market.

WHERE WOULD THE MONEY ACTUALLY GO?

Right now, it’s unclear. The Assembly has said the revenue would go into a “housing infrastructure fund,” but there are no defined guardrails, no public plan for spending, and no guarantee that the money will be used efficiently, or even on housing at all.

Could this end up functioning as little more than a discretionary fund for future projects? Without accountability, taxpayers are right to ask how this money will truly serve the public.

WHY SINGLE OUT SHORT-TERM RENTALS?

The proposal also raises basic questions of fairness.

Should local homeowners who occasionally rent out their homes – often while visiting family members or due to seasonal work – be taxed at a higher rate than commercial hotels?

Is it fair to penalize one group of property owners while others are exempt? Of those targeted with this tax, 80% have only one listing and most of them are on fixed income (seniors, retired).

In communities like Girdwood, many short-term rentals are seasonal ski homes, sitting empty much of the year. Taxing them more heavily won’t suddenly make them year-round affordable housing.

HAS THIS WORKED ELSEWHERE?

Other cities that have tried similar measures have found limited success. In Colorado, for example, ballot initiatives to tax short-term rentals for affordable housing have struggled to pass or failed outright – often because the numbers simply don’t add up, and the policies do little to solve the underlying problem.

THE BIGGER QUESTION

Anchorage faces real housing challenges — but before voters endorse a new tax, they deserve clear answers.

How much housing would this realistically build?

How will the funds be spent, and by whom?

Why should one segment of property owners carry the cost for an entire city’s affordability problem?

Alaskans have a long tradition of questioning whether government “solutions” truly solve the problem at hand. It’s worth asking whether this proposal is another example of a policy that feels good but doesn’t actually do good.

The views expressed here are those of the Alaska Policy Forum.

TAKING ACTION

— Click here to read the short-term rental tax proposal.

— Click here to contact the Anchorage Assembly.

Click here to support the Alaska Watchman.