By Bob Katzen
Airbnb, a popular short-term rental company with units in Somerville announced that residents of Barnstable, Dukes and Nantucket Counties earned $40 million in extra income this summer — an increase of 38 percent compared to the same time in 2017 — by sharing their home via Airbnb. The state received no tax revenue from this because a bill that extends the state’s current 5.7 percent hotel and motel tax to short-term rentals offered by Airbnb, HomeAway and VRBO is still stuck in the Legislature.
If the 5.7 percent tax was applied to the $40 million, the state would have received $2.28 million in increased tax revenue. And that’s just from one company’s rentals in one specific geographic location.
Cities and towns also potentially lost money because the bill allows them to impose up to a 6 percent local option room occupancy tax and a local impact fee of up to 3 percent on operators who rent out two or more professionally-managed short-term rental units within a municipality.
The House and Senate approved the bill on July 3 and sent it to Gov. Baker who amended it and sent it back to the Legislature which has yet to act on it.
The measure also leaves the regulation of these rentals including registration, licensing and inspections up to local cities and towns. Other provisions create a central state registry of short-term rentals and require that a city or town dedicate no less than 35 percent of revenue generated from the new local option fee to either affordable housing or local infrastructure needs.
Baker’s amendments include exempting operators who rent out their properties for 14 days or less annually from the 5.7 percent room occupancy tax. He said that without that exception, the bill will require many homeowners who rent out their homes for one or two weeks a year to register as an operator with the Department of Revenue and to collect and remit the room occupancy tax.
Baker also had doubts about the proposed central registry. “I am concerned that the bill threatens the privacy of thousands of Massachusetts residents by requiring the publication of personally identifiable information in a short-term rental registry,” said the governor. “Therefore I propose that we publish only the street name and the city or town where the property is located, and not include the street number of the property.”
Supporters say the bill strikes a balance and levels the playing field of taxes and regulation of these untaxed and unregulated short-term rentals and hotels and motels that are currently regulated and taxed.
Opponents say the bill is simply another example of an anti-business, unwarranted tax and overregulation by the state.
Estimates are that if the bill is ever signed into law, the state will reap $34.5 million annually from the new taxes and local communities which impose the optional local tax will receive some $25.5 million.