Cape Codders Divided Over Rental Tax Proposals

By: Ed Maroney

Topics: Municipal Finance , Real estate

State Rep. Sarah Peake spoke in favor of taxing short-term rentals as state Sen. Jamie Eldridge listens during a public hearing June 10 at Barnstable Town Hall. ED MARONEY PHOTO

HYANNIS Some see it as a dedicated revenue stream that could help Cape communities pay for wastewater infrastructure. Others say it's an unreasonable burden on homeowners just trying to meet mortgage payments and property taxes.

There seemed little room for consensus in the SRO hearing room at Barnstable Town Hall June 10, when hundreds turned out to tell state legislators what they thought of plans to tax and regulate short-term rentals such as those made through Airbnb and similar services. The hearing on one such proposal, House Bill 3454, was hosted by Joint Committee on Financial Services co-chairs Rep. Aaron Michlewitz and Sen. Jamie Eldridge.

The House bill would require registration of all units and establish three “host/occupant” categories. “Residential hosts,” those who rent their primary residence, would be limited to renting no more than 60 days a year and would pay a 4 percent tax to the state plus a local option tax of up to 5 percent that could be imposed by towns. Those who rent units for more than 60 days a year or rent multiple units for short-term stays would be deemed “commercial hosts,” and pay 8 percent tax to the state and, if approved locally, up to 10 percent to their towns, with half of that to be set aside for medium- and low-income housing. “Professionally managed hosts” would be businesses or people who have a rental management system for their units and offer them for no fewer than five nights. They would pay 5.8 percent to the state and, if approved, no more than 6 percent to their town.

The House bill includes strict standards regarding annual inspections and insurance. Gov. Charlie Baker and the Senate have put forward their own versions of the proposed legislation.

Rich Delaney, chair of the Cape Cod Chamber of Commerce's wastewater task force, said the legislation offered one way to help pay for what could be a $4 billion clean-up of Cape waters. Given that systems for the Cape's year-round population could cost three to four times less, he said the legislation provided the “perfect nexus” for seasonal tourists and second-home owners who rent out their house “to contribute their fair share.”

Lower Cape state Rep. Sarah Peake, who rents out through VRBO, criticized the popular website for saying the legislation would put homeowners out of business. She listed several states in tourist areas that already have such laws, adding that the rental companies, not home owners, would pay the taxes.

That was affirmed by Airbnb's representative at the hearing, Allison Schraub. “We do want to be regulated,” the deputy director of public policy for the company's Mid-Atlantic area said. “We do want to collect taxes.”

But Greg Murphy, president of the Cape Cod & Islands Association of Realtors, differed. “You should not make home owners tax collectors,” he told the legislators. He said the proposed tax would deter renters. “If owners could get an additional 10 to 15 percent, they would do so now,” he said, “but the market is price-sensitive.” He warned that “the Cape economy has been built on tourism and second-home ownership.” Without that, health care” and other services on which everyone depends “would dry up.”

John Wolf of Wellfleet said he rents out a small cabin on his property, in part to provide “an opportunity for those who cannot (otherwise) afford a vacation on the outer Cape.” He objected to increased regulation that would interfere with the long tradition of Cape Codders renting out spare rooms to make ends meet.

Paul Sacco, president and CEO of the Massachusetts Lodging Association, had a different take. Home rentals, he said, have become a big business, with Airbnb second only to the Marriott-Starwood chain in terms of rooms they control. “All we're asking is that folks collect taxes and adhere to some rules and regulations,” he said, drawing some sarcastic laughter. “It's not funny,” Sacco said. “The safety of our visitors is very important.”

Wellfleet Town Administrator Dan Hoort, who owns a B&B in Provincetown and was that town's finance director, said filing reports with the state would not be difficult for home owners, and he offered to help any Wellfleet residents with their paperwork. Like other speakers, he wanted assurances that taxes collected would benefit the communities that produced them.

John Muldoon, who rents out property in Chatham, said it's not easy to do so. He noted that on-line companies have been increasing their fees for listings, and said of a potential tax, “It's ludicrous to think that will just be absorbed” by renters.

Hyannis resident Chris Keniley said his 86-year-old mother is able to continue to live in Chatham because the family rents out the house in season. “An 11.7 percent tax on summer rentals (would) come out of my mother's pocket,” he said. Some have said the home rental tax would level the playing field, he noted, then added sarcastically, “Chatham Bars Inn and my mom – that's not a level playing field.”

An amen to that came from Diane Kennedy. “I don't think I could keep my house in Chatham if I didn't have Airbnb,” she said. “We shouldn't be compared to Chatham Bars Inn and the Wequassett Inn.

Cindy Roth, a real estate agent with Kinlin Grover in Brewster, talked about her work with residents who rent their homes, “none of them in there to get rich, all to help maintain their properties.” While not opposed to some level of rental tax, she said the proposed 11.7 percent would be “a huge jump.”

Roth's remarks, which came more than two hours into the hearing, was one of the few to suggest there may be common ground on an issue that has divided many on Cape Cod.

The hearing can be viewed on the Town of Barnstable's website at www.town.barnstable.ma.us