Article Seeks Fee On Professionally-Managed Rentals

ORLEANS – Creating housing requires a variety of tools and approaches. In Orleans, that could soon include the assessment of a community impact fee on professionally-managed rentals in town.

Article 5 on the warrant for the Nov. 17 special town meeting seeks adoption of a 3 percent fee “upon each transfer of occupancy of a short-term rental in a ‘professionally-managed unit,’” according to language in the article. 

In a presentation of the article before the select board Oct. 22, Elizabeth Jenkins, the town’s assistant director of planning and community development, defined a professionally-managed rental as “one of two or more short-term rentals operated in the same town by the same operator, and not located within the operator’s primary residence.”

If approved, the fee would go into effect on Jan. 1. Jenkins said that 75 percent of fee revenues would go to support the town’s affordable housing efforts. The remaining 25 percent would go to support local infrastructure projects, she said.

To date, 40 towns in Massachusetts have adopted the 3 percent fee, including Falmouth, Truro, Provincetown and Wellfleet. Collection of the fees would be administered by the Department of Revenue.

The select board has been taking a long look at short-term rental activity in town in recent years as the town tries to incentivize the creation of more year-round housing for local workers and families. The town has established a registration program to better track rental activity in town. An impact fee, meanwhile, could help generate more revenue in support of efforts to create more year-round affordable housing.

“Again, this is another tool that the town of Orleans could put in place to ensure that short-term rentals that are operating in our community are contributing to our larger community needs,” Jenkins told the board.

The article works in concert with Article 6, which seeks to create two “special purpose stabilization funds” to accept fee revenue for affordable housing and local infrastructure projects. Finance Director Darrin Tangeman said Article 6 would require a two-thirds majority vote to create the funds. A two-thirds vote would also be needed to appropriate money to the accounts in the future, he said.

“You can move funds from either free cash or any of our funds based on the determination of town meeting,” he said. 

Elsewhere on the fall warrant, the town is looking to adopt an affordable housing tax exemption through the passage of Article 4. The exemption would be available to any property owner who rents their unit or units year-round on an annual basis to tenants who are income eligible.

The select board would be able to determine the maximum amount of the exemption, as well as the maximum amount of tenant household income up to 200 percent of the area median income in Barnstable County. The board also would be able to set the rate of rent on the affordable units and any other “domiciliary requirements” for the property owner, according to language in the article. 

Talk of adopting the exemption comes as the select board is considering a separate residential tax exemption for the town’s full-time property owners. However, that exemption would not apply to people who rent their property year-round.

Looking ahead to the fall session, Mark Mathison said he anticipated there will be some questions about “process” in terms of how the exemption would roll out.

“I’m sure people are going to be asking ‘What’s the time frame for that to happen? How much money do we have to build into our overlay account to make up for that?’”

Town Accountant Brad Hinote said Harwich has adopted the affordable housing exemption, which is eligible to property owners who rent year-round to tenants to make up to 125 percent of AMI. An exemption of $1,000 is available for owners who rent units that are 500 square feet and under, and $1,500 for units greater than 500 square feet. 

“They’ve had six applications for the fiscal year so far, that’s it,” he said.