<p>Against a backdrop of rocketing demand for vacation rentals on the Cape and Islands, state lawmakers are anticipating the passage of a sweeping tax on short-term rentals.</p>
Against a backdrop of rocketing demand for vacation rentals on the Cape and Islands and a rapidly expanding online booking industry, state lawmakers are anticipating the passage of a sweeping tax on short-term rentals that could bring up to $18 million to the region by this time next year.
At least three separate proposals now aim to apply a 5.7 per cent room-occupancy tax to short-term rentals in the state, including those offered through online sites such as Airbnb, which arrived on the Island in 2013. A local option would allow towns and cities to add their own levy of up to six per cent, which for the Vineyard could amount to the second largest source of tax revenue after the meals tax.
“This is basically the biggest chunk of money that we will see coming through state policy on Beacon Hill in quite a long time,” said Cape and Islands Sen. Julian Cyr, who has already begun looking at ways to generate support for using the revenues to address longstanding wastewater concerns in the region.
“I think it’s going to be moving quite fast in the coming months,” Mr. Cyr said of the legislative process, which has been years in the making. He expected some version of a short-term rentals tax to become law this year.
The state senate last week approved a $40.8 billion budget that includes a tax on short-term rentals. A final version of the budget will eventually be submitted to Gov. Charlie Baker, who has filed his own proposal to tax short-term rentals.
Summer rental properties on the Vineyard range from $10 a day to $25,000 per week.
Summer rental properties on the Vineyard range from $10 a day to $25,000 per week.
The Massachusetts Lodging Association and others have welcomed the efforts as a way to level the playing field for traditional hotel owners and private homeowners who rent their properties for part of the year. And affordable housing advocates say the measure has the potential benefit of keeping more rental properties in the year-round pool.
But the proposals have rattled nerves in the seasonal rental industry, which has enjoyed an advantage over traditional hotels and inns that pay taxes and must abide by health and safety regulations.
Governor Baker’s proposal would apply only in the case of properties rented for more than 150 days in a year, passing over many rentals on the Vineyard, which has a peak season of only about 10 weeks. But proposals in both the house and senate target nearly all short-term rentals in the state. A more complex proposal by Reps. Aaron Michlewitz and RoseLee Vincent would require health and safety inspections, and additional insurance for owners, among other provisions.
Maine, New Hampshire, Rhode Island and Vermont have all adopted room-occupancy taxes, ranging from seven to nine per cent, with Rhode Island and Vermont allowing towns and cities to adopt an additional one per cent local levy.
In response to a request by Mr. Cyr and Cape and Islands Rep. Dylan Fernandes, a state committee dealing with the Michlewitz-Vincent bill will hold a public hearing for Cape and Islands residents on June 12 from 3 to 6 p.m. at the Barnstable town hall.
Official housing reports at least since 2000 have recommended pursuing some sort of seasonal excise tax on the Island, in addition to the 5 or 6 per cent that most towns now collect on top of the 5.7 per cent state levy, to add to the year-round housing stock. (West Tisbury has opted out of the local tax.)
According to a 2013 housing needs assessment issued by the Martha’s Vineyard Commission, more than two thirds of all new housing on the Island from 1990 to 2010 was for seasonal or occasional use, with seasonal rentals ranging from $1,200 to $45,000 per week. An Islandwide housing production plan drafted this year also recommends a seasonal rental excise tax at the state level. Weneedavacation.com, an online rental agency that caters to the Cape and Islands, says prices on the Vineyard have spiked by 6.3 per cent this year — more than on the Cape and Nantucket, and up to about three times the usual annual increase — in light of high demand. Company spokesman Elizabeth Weedon said bookings are slightly down compared to this time last year, but she also noted a 50 per cent reduction in tourism funding in the region. Overall, she anticipated another strong season.
But looking ahead, she worried that the house and senate proposals would weigh heavily on a growing number of homeowners in the region, including many retirees who rent out their homes for part of the year to make ends meet.
“Most of us here do own vacation rental homes ourselves,” she said, “and we’re just appalled at the effect that it’s going to have on us personally.” She said a new tax would make it impossible for homeowners to raise their rates or charge extra for services like laundry and cleaning next year.
“Their contention that they can pass this on to the vacationers is ludicrous,” Ms. Weedon said of state lawmakers pushing the tax.
But the proposals have drawn broad support in the state, including from the traditional lodging industry which advocates for at least basic safety and health standards, and required registration for short-term rentals.
“More and more people are taking advantage of short-term rentals and opening up pretty much a bed and breakfast for the season,” Massachusetts Lodging Association president Paul Sacco told the Gazette this week. He singled out Airbnb, which he said now trails only Marriott Hotels in terms of rooms available. “We’re not looking to obliterate them, we’re looking for them to be taxed and regulated,” he said. Martha’s Vineyard Chamber of Commerce director Nancy Gardella, who supports some form of taxation in the state, said she understood the concerns about potentially deterring vacationers. But she pointed to much steeper room-occupancy taxes in New York city, where she said tourism has not suffered. “To have other people’s money come back to serve our town and community to me makes a lot of sense,” Ms. Gardella said, noting the Island’s abundance of short-term vacation rentals. “I say we make the most of that opportunity.”
Taxing rental properties could bring an estimated $18 million annually into state coffers.
Taxing rental properties could bring an estimated $18 million annually into state coffers.
But Ms. Weedon said support for the proposals doesn’t necessarily align with existing priorities on the Cape and Islands. “I honestly think there are tons of homeowners who are blissfully unaware of what’s happening,” she said, noting the absence of any kind of association to speak on their behalf. She also pointed out that many homeowners who live out of state feel powerless because they can’t vote in Massachusetts.
Airbnb currently lists 306 properties on the Vineyard, with prices ranging from $10 to $3,650 per night. Weneedavacation.com lists 425 properties on the Vineyard, with a price range of $250 per night to $25,000 per week.
Airbnb, for its part, has welcomed a seasonal rentals tax in the state, in part as a way to help update policies that it says never anticipated the online booking industry.
Will Burns, Airbnb’s policy director for Massachusetts, said the company has tried for at least two years to establish a tax in Massachusetts. “We think it’s important to have a very simple approach,” he said of the various proposals now on the table. He added that a room occupancy tax should apply across the board, regardless of how long a property is rented. “We want to be part of the solution,” he said.
Closer to home, Tisbury officials have drafted a bylaw proposal that would require health and safety inspections for all short-term rentals in town. The proposal was tabled prior to the annual town meeting in April, in light of the state efforts and to allow more time for discussion. And the Chilmark planning board has begun investigating the overall impact of Airbnb and other short-term rentals on the town’s housing market. Island officials have acknowledged a seasonal rental tax as something of a double-edged sword, since it would fall equally on year-rounders trying to get by, and people running larger-scale businesses — either on their own or through an online service.
“I think ultimately we are going to have to do something,” Tisbury selectman Tristan Israel said this week, although he had reservations about how a statewide tax could affect the Island. It might not be a win-win situation, he said, but he agreed the community at large could benefit from the added revenue. Mr. Fernandes shared a desire to use future revenues from seasonal renters to address longstanding problems in the region, including a lack of wastewater infrastructure and year-round affordable housing. “It’s really important to me that a significant portion of the funds come back to our local communities,” he said.
This story has been changed to correct the number of Vineyard properties listed by Weneedavacation.com. The number is 425, not 150.
Comments
OK - I will love to hear the
RT WTOK - I will love to hear the responses from homeowners who say they will be hurt by a tax. Many many would LOVE the opportunity to rent their homes for $300 or $7,000 per night, and say they need it to make ends meet. There are some homes on this island going for $50,000+ per week, and while the local hotel/motel or B&B must pay the local tax to support the infrastructure these visitors enjoy, the homeowners get a free ride relative to the businesses. Fair is fair, and if they want to make from $30k to $500K for a ten week stretch, then they should be willing to contribute to the community services which make living and visiting here appealing.
We pay real estate taxes,
Dg MvWe pay real estate taxes, locale taxes and spend monies to support the island, along with land bank fees and higher cost of living. Locales do more than there part. Most likely, another tax will have the reverse affect and suppress travel to island, along with associated revenues. Last, but not least it will force island families to sell homes and move elsewhere ....off island.
Those taxes and fees are due
Neil Off IslandThose taxes and fees are due as a result of buying a house on the Island. Is it your primary residence or a business?
The $50,000 a week rental is
BobC EdgartownThe $50,000 a week rental is not the problem in paying their fair share. Those homeowners contribute greatly through our charity events and auctions as they are there bidding and or offering all the time. It is the people that rent for less than $10,000 a week that are the biggest moochers off the system. This group normally gives little to none to help the island in anyway. All they do is line their own pocket. They reluctantly use our trades people only when they have to. Let's face it these people are running a business and it's time the business pays the tax. For this reason I support the tax. Many of these homeowners rent their house out for big money then go rent a smaller house to live in which complicates the housing problem here.
I couldn't disagree more with
J EDgarvilleI couldn't disagree more with you about which are contributors and which are a burden.
Profoundly ignorant statement
Patrick Oak BluffsProfoundly ignorant statement with no basis in fact. Everybody is entitled to his or opinion but have the courtesy to actually evidence facts to support your argument.
I can't believe someone is
TL MAI can't believe someone is blaming the people who rent their homes for less than $10,000 a week... Do you have any idea how much tourism the island would lose if homes were rented at $10K and up? That would only hurt the locals who rely tourist during the summer to get by for the rest of the year. I live off the island and when I come for a week, yes I rent a home but I support the locals and do lots of shopping from small businesses. I wouldn't be able to step foot on the island any longer if homes were that expensive to rent. What a shame you see it this way.
Well, I and the various
Den VHWell, I and the various people I rent to every year will definitely be hurt by this tax. My then-partner and I purchased a house in 1985. We separated several years later and I did the Vineyard shuffle for 7 years, watching rents rise and become harder to find, spending one summer in a tent in my mother's tiny yard and one fall in a garage apartment in Seven Gates, offered free-of-charge by a mere acquaintance. Through this all, I promised myself that if I ever regained possession of my house I would rent out rooms at an affordable rate because, well, hey, this sucks! My decent ex eventually sold me back the house at an unbelievably reasonable price, I assumed the mortgage and kept my promise to myself. That first year (1998) we (my son was 9) rented out 2 of the rooms at $150 a month to carefully chosen working people. The rent did rise through the following years, with wonderful people coming in and out of our lives, some returning for multiple years, and all were able to work on the Vineyard, have a friendly, warm and secure place to live and end the season with money in their pockets. Nineteen years later, the rents are $400 and $600 a month, still affordable enough to make a working summer here worthwhile. I'm not exactly raking it in here, well not in money anyhow but I can pay my mortgage, taxes and utilities with just enough left to replace an appliance here and there and pay the occasional plumber, etc. It wouldn't feel good but, sure, I could pass the cost of this new tax on to my renters and still be way below most island rates but what about the next several levels of summer renters-the families who save to come for a week here for whom the raise in rents would be onerous if not simply un-doable. Perhaps they'll find somewhere less expensive to vacation. Eventually, who are we left with?
Let's see, we pay $22,000 a
John Aldeborgh Edgartown, MALet's see, we pay $22,000 a year in property taxes on a house that is 1800 Sqft and cost us less than $100,000 to build 22 years ago, complete with hollow core doors and the original vinyl flooring in the kitchen. Our property taxes are up 10 fold since we built our house on land originally bought by my grandparents in 1939. My wife uses the house from May to the end of August while I work my tail off to pay these ridicules taxes. We don't and never have used the schools, we live on a dirt road that isn't maintained by the town, we have a well and a septic system and there isn't a fire hydrant for miles. What burden are my wife and I on any island infrastructure. So now if I want to rent my house to help pay my highly burdensome taxes the State and Town will take 10%, how is that fair. If we rented our house for the entire summer season we might be able to cover the current taxes, and this is justifiable? The only thing being accomplished is to drive away the middle class people who have lived on and contributed to the island for generations. Where the heck is all this money going anyway.
you have to be sitting on a
Lisayou have to be sitting on a more than $6M property to pay that much in taxes. How is having to pay taxes on a $6M+ vacation home on Martha's Vineyard remotely a middle class problem?
John, it seems you inherited
JLC EDGARTOWNJohn, it seems you inherited a jackpot of land. You must be in a fabulous location to have a tax assessment that high with an obsolete building on it. Public records indicate you are in a VERY exclusive subdivision. Your elite association was investigated by the state for suspected tax evasion shenanigans involving the nature conservancy. You enjoy access to a long stretch of private beach and acres of bucolic common land. If you upgrade your roads and allow town access to them, I think then you could ask the town about services. Do you really consider yourself among the middle class?
I think the point of the tax is to alleviate the burden of providing services to vacationers who use our roads-occasionally after drinking too much, sometimes have parties necessitating a police visit and driving out the working renters. Would you consider putting in a few year round affordable rentals on your property? Maybe it would help with the taxes. #middleclassproblems
Let's see -- Mr. Aldeborgh's
BetsyP KatamaLet's see -- Mr. Aldeborgh's house is assessed @ $1 Million and the land his house is on is assessed at $5 Million; most of his tax bill is for the land he has inherited. Hardly "middle class" issues.
JLC,
A Summer Person Via KansasJLC,
Congrats on the fantastic investment, have you heard of the term Realtor? You should take your profits if the $22k is an noose around your neck, I am sure the wife would want to comment on this transaction or you could be looking for a tighter noose,
Remember one number, 2008, the real estate market circled the bowl, and it could happen again, and I doubt the taxes will drop as much as your Property values could. Nothing wrong will selling at the high. See you all in late June.
John you are land rich, cash
Ken Edg.John you are land rich, cash poor. Join the club you arent alone.
No problem, I will leave a
A summer person Via KansasNo problem, I will leave a pile of money at the Five Corners intersection and the weasels can fight over it
Sounds like they are getting ready to eat the golden goose
Keep it up you'll be eating dog food in the winter
See you in late June
These proposed state taxes
DWJ West TisburyThese proposed state taxes should be coming back to the towns specifically to provide funds for creating more affordable housing, both a statewide and Cape and Islands serious problem.
Funny, where's the plan for
WashAbhored EdgartownFunny, where's the plan for the money coming back? What percentage is coming back? What are the plans? I know maybe they can spend a few hundred thousand on another study or two.
So another tax on all the
PaulliD EdgartownSo another tax on all the other taxes we are paying. This $18m will pay for the legislatures pay increases! No one asks where is all this ones going - roads and bridges are in tough shape, schools falling apart, parks are a mess. Keep voting the same people into office and the taxes will keep increasing all in the name of taking your money for social programs, union incompetence, political hacks, what am I leaving out?
Nothing really. This was
Mike North Carolina - seasonal renterNothing really. This was succinctly and accurately put. The only things you've left out are the three fundamental words behind all short sided tax and spend legislation we always see.. "Democrats", "liberals", and "Progressives". No apologies for the naked truth.
Mike,
A Summer Person Via KansasMike,
Please lay off the coffee
The three "stooges" aren't the problem and I am sure they aren't naked
There are so many conflated
RalphThere are so many conflated concepts in this debate, let me try to address them if I can. First, the idea that rental tax won't impact tourism by using NYC as an example. This is such a bad comparison to begin with, in terms of size and location. But NYC rentals are mostly run by New Yorkers, unlike MV rentals owned by out of staters. Second, the idea that rental owners under-contribute to local infrastructure is ludicrous. Island tradesmen charge overhead that are out of proportionally higher than off-island. Third, this is being pitched as wealthy out-of-towners against struggling islanders, another crazy concept. Let's make no mistakes, this is about hospitality industry with its powerful lobbying (including airbnb) against mom-and-pop rental owners. It's reverse Robin Hood, and a real irony that this is happening in MA. Finally I'll make a prediction, if this law is passed in its most complicated form, I hope the island towns will have the common sense not to enforce it. Its real effect will be driving vacationers elsewhere, rental owners stop using local tradesmen, putting a real hurt on local economy. Let's face it, you got 10 weeks to make income that'll sustain for a year! Is it worth the risk?
I think everyone is missing
Annmarie EdgartownI think everyone is missing the bigger picture. Another tax, possibly 2 on all of us law abiding, stretched to the max taxpayers. I agree playing fields need to be level, but the biggest problem is the lowlife legislators who can't balance a budget and are always looking to dip into our pockets to do it. Where does it end!
First, for those who complain
PatrickFirst, for those who complain about noise disturbances, discourteous renters and other issues that sometimes arise from renters there is a remedy: you contact the police. Their job is to maintain the peace and to enforce the law. Second, people who own property are required by law to have house insurance - in some cases flood insurance. Any issue that a renter may have with a home owner from whom he or she is renting has civil remedies - that's why we have laws. Third, it is a false proposition to think that homeowners that rent their property do not contribute their fair share to the island. Between property taxes, water bills (if on town water), and the money that their renters contribute to the local economy, those owners who rent, contribute. This is just another attempt to inaccurately, and in this respondent's opinion, untruthfully, paint this issue as a battle between the "haves" and the "have nots."
Been saying this for over
Donald N Muckerheide Oak BluffsBeen saying this for over twenty years. The illegal weekly rental is here the working class housing went in the first place. Long over due.
Except, they're not saying
WashAbhored EdgartownExcept, they're not saying the rentals are illegal. They're saying they're legal and now are going to begin collecting tax revenue from them...reaffirming their legality. How will this help working class housing?
This tax will hurt the
WashAbhored EdgartownThis tax will hurt the Vineyard.
1. The homeowners will not pay this tax. It will be passed on to the visitors and make it more expensive for people to come here. This means fewer families will be able to visit, and when they do they will have less money to spend in our local stores and restaurants.
2. This tax almost ensures that all rentals will go through larger off-island rental brokers like AirBnB as the collection, filing, and payment of the tax will most likely be too burdensome for an individual or small realty firm.
3. If the tax becomes too onerous and rents drop that also means that the property values will likely drop and then local tax revenues will also drop. Remember property tax is made up of two components, the tax rate, and the property value. If property values go down the tax rates (for eveyrone) have to go up to raise the same amount of money.
The hotel lobby is one of the groups pushing for this tax as they don't like any form of competition. However, they don't seem to mind paying reduced commercial rates for power, and other utilities. Shouldn't those savings be shared with all people paying a commercial tax?
The homeowners that rent their homes out for a few weeks during the summer are paying federal and state income taxes on the profits from renting, and property tax as well.
There is nothing about this tax that will help the Vineyard. If it were a local tax that was being used to fund our infrastructure and service there may be another argument to be made. I believe the governor has pushed for a tax, but only if you rent for over 150 days a year. That might be a fair compromise if the funds from the tax are kept local.
Washabhored is right. I would
seasonal tisburyWashabhored is right. I would also add that seasonals in tisbury pay an additional 18% in real estate tax over the year round population. This tax is no more than a rental rate hike with no transparency regarding where these state monies will be allocated-- and driven by large companies that are able to drop rates, absorb costs etc...
The short term rental market sustains many folks on this island-- from year rounders to seasonals, the majority of who are not hugely wealthy. The tax will be passed on to renters and will likely affect the rental market which, by the way, only will be passed on to the local economy as less revenue. It also seems ridiculous that a 2-3 week rental will be subjected to the tax--this kind of maneuver is best enlisted at a larger groups and longer term rentals (the governors plan).
Anytime the parasites in
Joseph Paul Uranker Oak BluffsAnytime the parasites in government see a way to take something from the working sector they will try do they can hire more hacks sitting around doing nothing.
It should have read so not do
Joseph Paul Uranker Oak BluffsIt should have read so not do, this is what occurs when you use your iPhone to send a message and not double check it.
I think EZ Pass should be
retired CT, EdgartownI think EZ Pass should be installed at five corners and the triangle, from May to the start of The Derby
In reading some of the
Joan TalmadgeIn reading some of the comments to this article, there seem to be a few misconceptions about the profile of the average vacation rental home and homeowner. The majority of homeowners are not out-of-staters out to make a killing with homes that rent for $25,000+ a week. Conversely, of the 450 Vineyard homes on our WeNeedaVacation.com website, fully 2/3 of the owners live in state, and of those, 40% live on the Island. The average price of our Vineyard homes is $3787 a week. If these people could figure out a way to not rent their homes, believe me, they would. In general, homeowners cannot increase their rent sufficiently to keep up with their rising costs, such as property tax, insurance, maintenance, etc., and asking vacationers to pay an extra 12% without blinking is unrealistic. Unfortunately, it would fall to the homeowners to make up the shortfall.
Bottom line: Homeowners who rent their homes out merely so they can continue to hold onto them feel that this added tax burden may force them to sell. And vacationers, who are already balking at the rising expense of getting to and staying on the Island, will likely opt for a cheaper alternative elsewhere. What will that do to business and town coffers?
I can see both sides of this
Joshua Baker Tuscola, TXI can see both sides of this issue. Either way, I'm glad that my parents moved off the island after 40 years and are now living much more COMFORTABLY up in Maine. I'm glad the cost of living is CHEAP here in Texas. I will always call the Vineyard home, but I could never live there ever again unfortunately. The thing that caught my attention the most is what kind of property is the rental a mere $10 per day? I saw that and was wondering if it was a phone booth, a tent, a shed, or something else. $300 per month for a rental on the island? I haven't see that in decades.
Tax tax and tax some more!
Al Randolph TisburyTax tax and tax some more! Never turn up a chance to suck as many dollars as possible out of every corner of the economy! It's what we need to "spread the wealth" and make things more equal and just around here. There is no problem that can't be solved by cranking up taxes! Pedal to the metal, folks.
Id like to see this tax go to
Ken Edg.Id like to see this tax go to hooking everyone up to a sewer plant . Then you can build more houses. Ill feel better Im not ingesting someone elses crap in my water. Better yet hook us all up to a water plant too.
I rent a property on the Cape
Cape Girl Cape CodI rent a property on the Cape and I report that income on my taxes. I then pay income tax on the money I have made (which basically cover expenses). How is adding an additional rental tax on top of that fair? Isn't that taxing me twice for the same income?
Well, in fact, if you pay
Julia Whiteneck Oak BluffsWell, in fact, if you pay additional tax then you have a higher deduction and pay less in state tax. So, for example, I rent out my cottage for 10 weeks. I get 10,000 for the summer (after paying for amenities, utilities, and advertising plus management fees) to help me cover my $18,000 mortgage plus taxes plus insurance for the cottage. My tax DEDUCTION is $8,000 which is what I pay out of pocket for the privilege of a two-week Vineyard vacation which helps keep a cottage in the family that we have had for almost 30 years. I don't see me being able to get more than the 10k in the future - prices have dropped this year due to several factors, one of them being the increase in Airbnb rentals. So,the town adding a fee is pretty much going to drive me to sell - if I pay out of my "profits" there are no profits according to the IRS, and if I pay based on my rental income, then my deduction becomes $9,000. The state would actually get $62.50 less, and the IRS would get less, although the town *might* get $1000 more. So, you are being taxed 3 times in this case actually: by the IRS, by the Commonwealth DOR, and then by whatever town you live in. And one of the biggest things that weighs on my mind is WHEN is my septic going to fail? Cuz if that goes, I just wouldn't be able to afford to add $40k to my mortgage to rebuild it. But Cape Girl, you are right, more for everyone but the property owner and hopefully you have an accountant who helps you get the maximum deductions!
People who work on the
Rich Vineyard HavenPeople who work on the Vineyard during the summer season will now find they have to pay a new tax. It's difficult enough to find help during the summer, a tax will only further restrict the pool of people who will want to work on the Vineyard.
Add new comment