Short-term gains exacerbate housing market

As the availability of housing for island residents year-round continues to decline, the benefits of a growing demand for short-term rentals have been reaped by the six cities through strong tax collection. excise duty for such holiday stays.

Reasonably priced and reliable rental accommodation for winemakers, who inhabit the island 12 months a year, ceased to exist, forcing eyes to turn to local governments in a hailstorm for any effort to increase access to affordable housing.

The Housing Bank Island-Wide Approval at the six town meetings this spring, originally presented by the Coalition to Create the Martha’s Vineyard Housing Bank, demonstrated recognition of the housing crisis and indicated possible relief for teachers, hospital workers and first stakeholders forced out of the housing market..

Since Martha’s Vineyard real estate trends tend to follow those of its sister island, Nantucket – where the median home price is $2.7 million of 2021 – offers a glimpse of what the Vineyard may soon face when it comes to affordable housing.

The Martha’s Vineyard Housing Bank, which would be funded by charging a 2% fee on real estate sales over $1 million, involves no use of short-term rental income, although it was briefly considered and then dropped A few years ago. .

But while the The Housing Bank Review Committee is working to work out the details of the Housing Bank Act before it can pass the state legislature, the housing crisis remains acute and dire.

Following the Approval in 2018 of the Short Term Rental Tax Bill, which was signed by Governor Charlie Baker and made effective in July 2019, revenue from the tax on short-term rentals goes into each city’s general fund, indistinguishable from the municipal level from which the taxes originate, and not earmarked for any particular use.

With the Rent Tax Act, short-term rentals — like Airbnb — are taxed by the state of Massachusetts the same as hotels and hostels — at a rate of 5.7%. Administration of the local short-term rental tax is optional, with tax rates set at the discretion of municipal governments, not to exceed 6%.

Vineyard Haven, West Tisbury and Oak Bluffs charge the maximum, while Edgartown, Chilmark and Aquinnah have a 4% charge – a vacationer renting an Airbnb-listed home will have to pay between 9.7 and 11.7% on their rental.

The state defines a short-term rental as “an occupied property that is not a hotel, motel, lodging house, or bed and breakfast establishment, where at least one room or unit is rented by an operator through the use of advance reservations”. Short-term rentals are not limited to the type of accommodation, but exclude timeshares, properties rented “through unlimited rentals” and month-to-month leases. Rentals under $15 per night are not taxed.

The law on room occupancy tax, now amended, does not oblige municipalities to differentiate between the type of rental that generates the most revenue; subsequently scramble local data that can help understand the rental market on a larger scale.

According According to the Massachusetts Department of Revenue, between fiscal years 2013 and 2019, traditional resort tax revenue on the island grew 6.67% each year, peaking at $2.1 million in 2019.

In 2020, the tourist tax collected by the cities of the island has increased dramatically – by 63%. After hitting $5.5 million in rent taxes in 2021, wineries raised $8,631,200 in the recently closed 2022 fiscal year, including $5,775,393 from rent tax in short term, as confirmed by the State Department of Revenue.

Although not a requirement, the City of Oak Bluffs files a rental tax per type; shed light on the difference between collecting taxes on hotels/inns and short-term rentalss. The city’s traditional lodging revenue for FY21 was $257,863, topped 127% by the short-term rental tax, reaching $1,162,644.

FY22 showed growth for Oak Bluffs hotels and inns by the $637,283 in room taxes collected by the city, but did not come close to short-term rental revenue, which amounted to $1,694,716.

Following The Times’ survey of island city officials regarding where the money was going, city administrators in Oak Bluffs and Edgartown — the cities with the highest tax collections on the short-term rental over the past two fiscal years, $2,857,360 and $3,824,773, respectively – both pointed to accumulating “historical data” on collections first before using it for an expense particular.

Oak Bluffs Town Administrator Deborah Potter has expressed reluctance to commit to allocating the town’s additional room tax to a specific purpose. “There’s a lot of variability in short-term rental income,” she said, “It’s still a fairly new component. It’s something we still have to track, probably for another year. or two before you start really relying on some of that revenue to be strong and consistent.

Potter said it’s possible the COVID-19 pandemic has had an effect on the flow of short-term rental revenue, so it’s unclear whether or not the upward trend will continue. This is despite the fact that the Short Term Rental Tax Bill only came into force less than a year before the onset of the COVID-19 pandemic; before which the city did not have the means – and the records – to determine how much money was generated from short-term rentals before taxation.

Edgartown Town Administrator James Hagerty said while there have been various discussions among town officials about how to appropriate the money after the local tax was enacted in 2019, the income was not distributed for any purpose.

Year-round and shoulder-season residency changes, much of which are related to COVID-19, add precariousness to the market and revenue stream, Hagerty explained, echoing Potter’s sentiment.

“The question is whether the numbers will increase or stay [the same]?” he said. Therefore, it is necessary to have “a long historical database to know or predict in the future how much [tax money] we’re going to get.

” Allocate [short-term rental revenue] prematurely without a conservative mentality,” Hagerty said, “could end up hurting [the town] long-term.” The collections kept the city “afloat during COVID,” he said, adding “it got us to a point where we didn’t have a structural deficit in our budget.”

Hagerty said last year the room tax had been put into a capital stabilization fund but “we don’t give it all away, we save it”.

At the April town meeting in Tisbury, voters received – and ultimately approved – an article of mandate authorizing a $750,000 waiver of Proposition 2 ½ for unspecified use, coincidentally only $5,179 more than the city had received in short-term rental income.

Tisbury town administrator Jay Grande told The Times the waiver was to “provide a cushion” to prevent the town from being “financially against the wall”.

He said there have been no discussions among Tisbury officials specifically regarding the use or allocation of short-term rental taxes.

BBecause returns are pooled with traditional accommodation tax when they enter the general fund, the process by which short-term rental tax funds can be used and distributed remains unchanged from before the amendment. excise tax – subject to voter approval at municipal meetings.

In July, there were 934 short-term rentals registered with the state accommodation operator registry in Edgartown alone. This is in addition to 590 residencies recorded at Oak Bluffs, 439 at Vineyard Haven, 221 at West Tisbury, 275 at Chilmark and 93 at Aquinnah.

With current island-wide accommodations — including entire homes, private rooms, and shared rooms — available on Airbnb averaging $1,934 per night through July 29, and the third week of August offering a “relief” with averages of around $1,165 per night, the towns of Martha’s Vineyard will continue to receive substantial payments from transactions.

In July, a week’s vacation for a family of four in August costs approximately between $11,971 and $12,189 and, depending on the municipality, generates between $1,058 and $1,276 for its associated city.

Via its website, the Martha’s Vineyard Chamber of Commerce estimates that approximately 63% of residences on the island are seasonal. Little data indicates how many have since become available for year-round rental, but history suggests they are rare.

Seasonal homes that remain closed during the off-season months as well as the 2,500 short-term rentals recorded on the island with prices too high for many people all year round – and offering no help in finding affordable housing – finally force the winegrowers to face the truth: the local community and its teacherspolice, municipal employees, business owners, restaurant and retail workersartists, fishermen, Hospital staffand the elderly population is pushed back and overpriced.

In an interview with The Times, the CEO of Island Housing Trust, Philippe Jordi, stressed the importance of looking at the economic impact of investment properties – buyers of a second or third home who buy houses on the island for the sole purpose of renting them out for short term stays.

Unlike owner-occupied rentals, where resident owners can rent out a guesthouse for extra income, investment properties do the most damage. “It facilitates something that’s happened but much more ubiquitous,” Jordi said, given the ease that comes with just posting a rental on the internet or through an app.

Jordi said the People’s First Housing Bank initiative suggested distributing some of the room tax collected to the city’s affordable housing trusts – a concept that was essentially blocked by some councils, unwilling to part ways with the influx of money.

Jordi said the goal would be to leverage some of the excess funds to secure additional affordable housing funding from the state. The caveat being that the state views city support and involvement favorably; otherwise, initiatives aimed at having a real impact on the availability of housing throughout the year are not implemented.

The short-term rental market “absolutely has a huge impact” on the housing market in general, Jordi said. Speculative investments made for lucrative passive income have in effect hampered opportunities for island residents to obtain stable year-round housing, he explained. “We are losing ground because of this.”

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