Inspector General: majority of Montgomery County short‑term rentals unlicensed; county likely missed tax revenue

The Office of the Inspector General told the Montgomery County Council Audit Committee that a review of Airbnb and Vrbo listings found more than 85% of properties identified in 2023 were not registered with the county, and that the county may have missed about $196,000 in transient taxes that year.

"We had 1,472 listings that we found on the two sites…and in the county system, we only found 177," Inspector General Marcy Lamarzi said. "So that is 85% of the properties that were listed on those two sites were not registered with the county." She said that limited enforcement and staffing at the time contributed to the gap.

Why it matters: Montgomery County’s short‑term rental law (adopted around 2017) requires owners to register and pay a 7% transient tax; brokers such as Airbnb and Vrbo remit lump sums to the county without per‑listing breakdowns, leaving finance officials unable to reconcile platform remittances to individual licenses.

The inspector general’s audit (Report 25‑04) used broker lists for calendar year 2023 and a subpoena for those records to compare online listings with county registration records. The OIG identified roughly 1,309 listings that did not match county registrations and conservatively estimated about $196,000 in potentially uncollected tax from those listings in 2023. The report also flagged about 70 hosts with more than one listing, which could trigger additional penalties under the code and add materially to lost revenue over time.

DHCA response and corrective steps: Kimberly Williams, division chief at the Department of Housing and Community Affairs, said DHCA began administering the program after it moved from Health and Human Services and took immediate steps to improve the host‑compliance system, add staff (including an IT specialist), fix back‑end coding issues, relaunch application instructions and document standard operating procedures. Williams said an executive regulation went into effect June 12 and that the number of unlicensed properties fell from roughly 700 in October 2024 to about 330 as of April 2026.

"I feel comfortable saying that we have addressed all of the recommendations at this point," Williams told the committee, while adding DHCA will continue monitoring and updating procedures.

Finance and state role: Finance Director Mike Covey told the committee that large online intermediaries remit taxes in lump sums without identifying per‑listing detail, which makes reconciliation difficult and complicates efforts to confirm that all licensees’ taxes are collected. He said Montgomery County has worked with the Maryland Association of Counties (MAKO) and state officials on a statewide collection program intended to centralize remittances; the state program is expected to change how receipts are reported but — per the audit — full implementation at the state level may not occur until 2029.

Council members asked how residents can report suspected illegal short‑term rentals and whether the county can pursue legislation to require platforms to restrict advertising of unregistered properties. DHCA said code enforcement and newly hired inspectors handle complaint follow‑up in partnership with police and fire when needed; finance said state and federal legal protections for internet companies make direct enforcement of platforms complex and that these issues are part of ongoing state discussions.

What’s next: Committee members asked staff to prepare a memo later this summer for the incoming county executive and the next audit committee that lists unresolved audit items and tracks progress. The inspector general and DHCA said they would continue to exchange status reports, and finance said it will pursue system changes to better reconcile platform remittances with county license data.

The committee did not take a formal vote on the audit at the meeting; members asked for continued monitoring and follow‑up reporting.