My wife will be materially participating as the REP for this property btw.

If not much time at all, then no, the rental income is not subject to KC income tax.The IRS defines active participation in an activity of 250 hours or more a year, material participation as 750 hours or more.

What is required is material participation, not substantial services.

What changes would you suggest in terms of increasing landlord participation?

@Christopher FrazeTo clarify, you need to meet two factors:1) More than 50% of the personal services you perform in all businesses during the year MUST be performed in a real estate business you materially participate.2) You must work at least 750 hours in a real estate trade or business.If either you or the spouse qualifies as a Real Estate Professional then you will be permitted to deduct all passive activity losses from your rentals against ordinary income from whatever sources derived.

Assuming that John’s wife is managing the Airbnb Rental and qualifies as a material participant, John Doe’s family can deduct $150k from their w2 income for the year 2022 (Bonus depreciation 100%).This would equal $33,000 in a tax refund for the family.

Really REALLY proud Dad, my "tween" said "Hey, I'd like to do this, what do you think?".

Material participation (there are 7 tests you can use). 

@Jacob Maes There are many syndications that allow non-accredited investors to participate. 

I thought the County could foreclose the way I used to as a GC, but he said no, they cannot.So I am compiling an email list of all interested neighbors and will get started with organizing a group, we'll see who is interested in participating.