With each passing day, we see more and more evidence of the fundamental change in the culture and quality of life on the Island caused by the rapid changes in the housing market.
With each passing day, we see more and more evidence of the fundamental change in the culture and quality of life on the Island caused by the rapid changes in the housing market. This has stimulated much discussion of the “housing crisis” and accelerated efforts to address it primarily by building more subsidized housing and allowing much greater density of land use to lower the cost per unit of affordable housing.
Ultimately the current approaches to solving the housing crisis are going to fail and produce many unintended consequences. We need to address the fundamental economic incentives that have reduced the supply of year-round rental properties and sharply raised the prices of homes at the lower end of the market. As recent stories in the Gazette and studies released by the Martha’s Vineyard Commission have made clear, many hundreds of homes have been converted to short term-rental in just the past couple of years — far more units than the entire history of the combined efforts of all the Island towns and nonprofit groups have added to the supply of affordable housing.
One solution that could be implemented quickly with sufficient political will is to change the property tax regimens of the Island towns to acknowledge the reality that owning and operating a house as a short-term rental is a business. The assessments of such properties should reflect their value as income-producing assets. We should also impose a higher property tax rate on homes used as short-term rentals to reflect the burdens they create on the Island communities. If the changes in the property tax structure were designed with proper definitions, we could create a positive incentive for year-round rentals and reduce the demand for lower tier properties as short-term rentals.
Some will argue that this would be unfair to the property owners who benefit from short-term rentals. What is unfair is that year-round Island residents are paying the direct and indirect costs that the short-term rental property owners are inflicting on us to subsidize their investments. The recent imposition of the short-term rental tax doesn’t fix the problem because it is paid by the renters.
A relatively simple realignment of the property tax system would have a powerful impact at the margin in shifting the supply and demand economics of residential property on the Island. The reality is that the Island already has a vast housing supply that can accommodate at least four to six times the year-round population as we see every July and August. Building more houses and adding to density is just going to erode the quality of life and turn the Island into another version of a suburb similar to what happened to Cape Cod.
Ironically, the current affordable housing programs don’t just subsidize the deserving people who win the lotteries for the rentals or low-cost building lots. Economic theory would tell you it also subsidizes wealthy tourists by lowering the cost of labor for the goods and services they buy on the Island.
What we need to do is ensure that enough of the existing housing stock is available for year-round rentals and moderate income ownership, not create another-traffic choked suburb. If the housing bank is put in place, it would be far more effective in supporting the use of existing properties as affordable rentals if we reformed the property tax system as described above. Otherwise, the housing bank risks just adding to the demand.
We need new thinking about how to truly change the dynamics of the rental housing market on the Island and change the economic incentives that are the root cause of the crisis.
Frederick Khedouri lives in Chilmark and is the owner of Martha Rose Fisheries.
Comments
Your rational is flawed in so
Rational Person Oak BluffsYour rational is flawed in so many ways. These rentals employ thousands of islanders in many professions. You obviously aren't in the business. Increased taxes would just be passed on to renters and demand is so high that would not be a deterrent. We have two obvious choices. Change zoning creating more dense, more suburban/urban development or creating a better transportation service with fast ferries from mainland ports that are inexpensive and operate from the early morning to late at night for workers.
Thank you for this well
Jason Delano EdgThank you for this well thought out and rational approach to our housing issues. I would also add that we need to consider banning short term rentals entirely (unless it is your primary home). Many communities have done this across New England and beyond and it has helped block and or remove many homes and investors from the short term rental market.
So you fail to account for
Chris Oak BluffsSo you fail to account for the taxes paid by the owners of STRs. To categorize them as a business entity solves nothing. They won't rent and few will sell. Why not rebate them the tax portions for the schools and pro rate them for their limited use of our police, fire, ambulance, roads, etc. I will never understand why so many just vilify our life blood, I really don't. Maybe if the rental laws were changed to make them a little less tenant friendly, the owners would be more inclined to rent. Maybe if the various commissions actually allowed for building on island more rental spaces could be built. Maybe we should tax businesses on island that are only seasonal. Punish them for closing. In fact, tax any company that does not service year round. Tax, tax, tax, it never works.
Thought provoking piece. It
Mike Brookline MAThought provoking piece. It would be helpful to see the data and the sources, to reinforce the writer’s position, with the key pieces being the reduced stock of year round rentals and the increase in short term rentals. Let’s see the data. Also, I wonder if the tax solution that the writer proposes wouldn’t end up in the same place as the short term rental tax, funded by the renters.
Mike, here is the data:
Carol formerly ChilmarkMike, here is the data: https://vineyardgazette.com/news/2022/10/27/island-sees-significant-upt…
I agree fully with taxing
Richard Oak BlufffsI agree fully with taxing rental properties as businesses. For decades I lived on a dead-end street where every house was owned by either year-round residents or a summer family that are the only occupants of their home. Suddenly a property was bought by a new owner who assured the seller that they saw the house as their summer home. But the new owner consistently rents their house on a one- or two-week basis. The owner makes as much as $6,000 a week in rental income- abut the same as my annual tax bill. Any change in the law needs to be backed up by, for example, checking the activities of brokers who abet the short-term rental market. (The house is listed on weneedavacation.com.)
Thank you, Mr. Khedouri, for
Christine SengeThank you, Mr. Khedouri, for your wise proposal. The house next door to ours was bought by a woman from the mid-Atlantic region, who said she would be using it as her summer home. But she immediately listed it on a on-line rental site, where it is listed as an exclusively weekly rental throughout the year. She is making an enormous amount of money. If she cared about the island, she could have rented this 3 bedroom, 2 bath house on an annual basis to an island family. The MVC and other island governing bodies need to outlaw weekly rentals, and stop people from outside the state from exploiting our island and limiting the housing supply for those who work here.
The MVC has no authority to
Rational Person Oak BluffsThe MVC has no authority to regulate rentals.
I agree with the author, but
David OBI agree with the author, but I also think we should ENCOURAGE long-term rentals by REDUCING the property taxes for those owners who rent for two to twelve months or longer (for both the summer work force and lower income year-rounders) We have plenty of houses on this island for year-rounders - the problem is that few can afford the summer rental rates, which go up 1000% for July and August! Or the house prices if the year-rounder wants to buy.
Maybe the 2% Land bank fee should not be collected (or rebated) if the house is sold to a year-rounder - maybe after proof (registration as a voter? proof of employment?) of a certain period (Years?) of continuous residence (or non-short-term rental), and/or a reduction, rebate or elimination of their property taxes after a similar period. And/Or it could be tied to their income level or employment status (still employed or retired?) as well. I know that Texas does not increase the property taxes on a retired person's residence from the date of initial purchase to their death - we could do that here as well! Or more!
And another thing! We have the summer work force housing problem NOW! It will take years for enough houses to be built to fix it - if we can ever fix it! But there are many smaller 3- and 4-bedroom houses being rented NOW which could be literally turned into bunk houses with 2-4 beds per bedroom, by next summer! - similar to what was (is?) common on western ranches. Is there a way we could encourage that conversion with property tax reductions? Or changes to zoning? Sure, there may be problems, but there could be restrictions on the rentals - high damage deposits, enforcement of noise ordinances, quick eviction for cause, deed restrictions, etc.
Let's get creative with what the TOWNS CAN control and encourage the behavior from owners that would solve the problem and NOT build more houses to clutter up our island. A MAJOR reason people come visit here - and live here - is the bucolic and uncrowded (well, maybe not with the summer traffic!) nature of the island - which more houses will NOT enhance - and in fact, may discourage the very visitors and residents we wish to encourage. And is already driving many residents off-island and discouraging - limiting! - our summer work force.
What was once a serene and
Liz S OB/ New Rochelle NYWhat was once a serene and peaceful summer family vacation respite has become nothing more than a cash cow boasting for absent landlords with rooms and bedrooms filled to and beyond the limit. Perhaps one day the tide will return to its lovely beginning and some other unfortunate island will suffer.
This is a much needed essay
William Joseph James-RobertsThis is a much needed essay at this time, and really hits the nail on the head as to the big picture. There isn't actually a lack of modest sized houses on MV, they're just not available for year rounders to live in. You need to change the financial incentives that are leading to that situation. Building more houses and more "job creation" just perpetuates the cycle, a growth spiral that offers huge profits for a few while the rest fall behind or get driven off island.
So much nonsense in this
Thomas EdgartownSo much nonsense in this article. Socialism at its worst. Progressives love to tell people what to do with their hard earned money. Just stop.
This is not socialism. Look
James Patterson NYThis is not socialism. Look into the author of this article, he is one of the most successful capitalists of his generation. He just knows an issue when he sees it and is trying leverage his considerable financial acumen to do something about it.
This is a good piece. I
Carol formerly ChilmarkThis is a good piece. I agree - those properties absolutely should be taxed at a higher commercial rate; they are not residences, they are revenue-producing businesses. That should be done while organizing for votes in each town to ban short term rentals.
This is a map from the 2016
Elsbeth Todd EdgartownThis is a map from the 2016 which uses 2010 Census data. It could be updated to current numbers and compared. The percentages are broken down into Year-round, Seasonal and Guests of Year Round populations. If updated, it would also be interesting to include how many of these homes are LLCs, Trusts, etc. https://www.mvcommission.org/sites/default/files/docs/denpoppie_taz_201…
If increasing density, then sewering needs to be part of that conversation, especially near watersheds. Tax incentives to rent long-term is a good idea, as the housing is already there for the most part, or as incentives to create longer term housing on existing properties.
Interesting and naive article
John Adams Oak BluffsInteresting and naive article. The writer seems to forget that most of these homes were purchased with mortgages which needs to be paid back every month. Property and other taxes are paid for these homes when for the most part, most Owner’s are there for 4 months out of 12 months. So 60 % of the taxes paid help to support the Island and year round inhabitants.
Also, what is not mentioned in the article is the employment these seasonal rentals provide, ranging from cleaning crew, caretakers, maintenance crew, etc.
Most Owner’s rent their homes during July and August after which they enjoy the Iskand like everyone else. As an owner, if giving the opportunity, our choice will be NOT to rent our home at all.
The current movement to ban
Harold Carmichael MvThe current movement to ban short term rentals on the island will not target people renting their primary homes. This new law will only effect those renting their 2nd homes as a way to block these corporations who are buying up whole blocks in Edgartown etc and converting them to short term rentals.
The world's richest man just
William Joseph James-RobertsThe world's richest man just took on debt to buy Twitter because he was annoyed with it, so I'm not sure the argument "has a mortgage = suffers hardship" is going to persuade as many people as it used to. It's also not the point of this essay. The issue is that houses that used to be, and could be again, housing for people who live here are now overwhelmingly investment properties, and so they are being managed to maximize the value of the investment, not to house people. I really don't care if you choose to take out a loan to finance an investment, that's your business. But that's the key word here: business.
Houses are taxed on their
Albert NAUHouses are taxed on their fair market value, not their income.
The owner pays income tax on a house's income.
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