A bundle of new regulations is poised to make Massachusetts the first state with a registry of short-term, Airbnb-style rentals — though the rules and their accompanying taxes have produced a bevy of unanswered questions and concerns about economic impacts among the region’s Realtors.
The new regulations, signed into law on Dec. 28 by Massachusetts Gov. Charlie Baker, apply the state’s 5.7 percent hotel tax to short-term rentals in private homes. In addition to paying the tax, property owners who want to rent their homes to vacationers also will have to get $1 million dollars in insurance, and register with the state.
Though other parts of the country have rolled out various short-term rental regulations in the past, Massachusetts is unique in creating a statewide registry.
Property owners who rent out their homes for only 14 days or less per year will be exempt from some of the regulations, which became law after a months-long back and forth between lawmakers and the governor.
Provincetown, in Cape Cod. Credit: Rolf_52 / Shutterstock.com
The new regulations don’t go into affect until July 1, but already Realtors in the state’s tourist meccas have raised concerns. Communities in the Cape Cod area, for example, are dominated by vacation homes that many owners rent out part time, in some cases to help them afford the mortgage payments. And while Airbnb has some of those rental listings, many others are managed locally by real estate agents, according to Ryan Castle, CEO of the Cape Cod & Islands Association of Realtors.
Ryan Castle
“Realtors on the Cape do the vast majority of vacation rentals,” Castle told Inman. “They’re managing properties, booking and collecting rent.”
Castle described nervousness among Realtors in response to the new regulations, saying that there are many unanswered questions about how exactly everyone is supposed to comply.
“The Department of Revenue hasn’t even created the registration forms yet,” he added.
Asked if the new taxes could soften demand for property in the Cape Cod area, Castle said it was too early to know, though he will be watching for answers as the tourism season plays out.
“This is going to be the summer to see how this goes,” he said.
The confusion extends to other facets of the regulations as well. David Callahan, owner of Jordan Real Estate in Nantucket, said that the rules allow cities to add additional taxes to short-term rentals, but so far it’s unclear what those taxes might be.
David Callahan
“We’re not quite sure what we’re supposed to be collecting and how we pay it out after we collect it,” said Callahan, whose company handles both sales and rentals.
Callahan went on to express frustration that the law was passed “at the eleventh hour” before all the necessary steps and infrastructure were in place to actually implement it.
“So there’s some confusion there,” he added.
Brett Holmes, an agent with Kinlin Grover Real Estate in Provincetown, experienced that confusion first hand. Holmes owns a rental property of his own, and told Inman he has so far been unable to get answers to questions about how the new regulations will impact him.
Brett Holmes
“I reached out to town hall and talked to four different departments and nobody had an answer,” he said.
Still, despite the current confusion, none of the real estate professionals who spoke to Inman expect Massachusetts’ vacation rental industry to evaporate thanks to the new regulations. Instead, they described a kind of gradual resettling as property owners recalculate the formulas they’ve used to turn a profit in the past.
“I think what it may do is force some people to correct their rates,” Holmes said of the regulations. “Some people who have been fairly aggressive with their pricing may have to step back a bit.”
Jane Booth
The new regulations could also trickle down through local economies. Jane Booth, a Realtor and rental specialist at Kinlin Grover, said that many families have been vacationing on the Massachusetts coast for years and will probably keep coming. But if they have to pay hundreds or thousands of dollars more in taxes, they may eat out less or cut things like whale watching from their itineraries. Or they may just choose less expensive rentals.
“There could very possibly be an impact to the rental market, and that’s going to ripple and have an impact on the local economy,” Booth told Inman. “Renters might have to look at costs and not go for house A that they wanted and go for house B.”
The new rules in Massachusetts come as officials nationwide look for ways to regulate, and make money from, short-term rental companies like Airbnb. Both New York City and Los Angeles rolled out laws in response to the company in 2018. And, of course, Airbnb has long prompted everything from anxiety to anger among people who say it gobbles up valuable housing in expensive cities.
In a statement to Inman Thursday, Airbnb said that more than 1.2 million people used its services while visiting Massachusetts in 2018. The company also criticized the state’s new regulations.
“While we are deeply disappointed in the flawed bill that emerged from Beacon Hill during the lame duck session, we will continue the fight to protect our community and the economic engine of short-term rentals for hosts, guests, and local small businesses,” Airbnb said in its statement.
How exactly that fight plays out remains to be seen, but in the meantime Realtors, property owners and short-term renters in Massachusetts will likely spend the year dealing with higher costs.
“Our fingers are crossed,” Booth said, “that this will be a smooth transition.”
