An article directing Wellfleet to dedicate 80 percent of its rooms tax revenue to affordable housing was narrowly defeated — the vote was 90 to 101 — at this year’s annual town meeting. It’s time to reconsider that proposal and the reasons why it makes sense in our current housing crisis.
Guided by a “move fast and break things” model, tech billionaires make fortunes by harnessing the internet to extend digital technology’s reach. Think of social media apps like Facebook and ride-sharing businesses like Uber and Lyft. Their amoral philosophy and the novelty of their business models achieve profitability by circumventing the restrictions that apply to existing enterprises.
The political economist Joseph Schumpeter described the effect of such businesses as a “gale of creative destruction.” The winners prefer to describe the gale as “disruption” — more akin to a gentle zephyr than a Category 5 hurricane.
Among the by-products of the move-fast-and-break-things approach is inattention to local consequences that erode the quality of community life. On the Outer Cape, vacation rental platforms like Airbnb and VRBO are the ones moving fast and breaking things. While these platforms generate financial gain for homeowners, for communities they have hastened the conversion of year-round homes to seasonal rentals.
The expansion of the short-term rental market has produced rapid changes: The supply of year-round rentals has virtually disappeared. Median home prices in Wellfleet and Truro are over $1 million; in Provincetown, it’s about $1.4 million; in Eastham, it’s more than $800,000. In defiance of zoning regulations, residential neighborhoods are, in effect, becoming mixed-use areas with small commercial “hotels” interspersed among year-round and summer homes. Jobs are harder to fill because prospective employees cannot find housing. Jobseekers who accept positions on the Outer Cape face increasingly long commutes. Homeowners are enticed to treat their homes like tradeable investment properties.
To respond to the housing crisis, Outer Cape communities have taken advantage of state laws to form their own affordable housing trusts. These public bodies have the power to accept funds and land for the purpose of expanding the supply of affordable year-round housing.
But there is an important caveat: these trusts have no source of funds. Each trust is on its own to secure the funds required to fulfill its mission.
The Commonwealth also gives towns the power to impose an excise tax on short-term rentals (STR) like the tax imposed on hotels. Truro and Provincetown commit some portion of their STR tax receipts to affordable housing initiatives.
Four years ago, Wellfleet’s select board appeared to be on the verge of dedicating 80 percent of STR tax revenues to the town’s affordable housing trust. “It’s rare, said select board member Michael DeVasto, to have a revenue stream created by a problem that can be used to help solve that problem,” the Independent reported.
But the town’s will to capitalize the affordable housing trust evaporated in the uncertainty caused by the town government’s accounting mess. Despite its commitment to expanding the supply of affordable housing and having stabilized its finances, the town has become habituated to comingling these two streams of income — property taxes and STR tax revenues — to cover the town’s routine operating expenses.
The STR tax revenue has become a crutch, forestalling the prospect of tax increases by effectively subsidizing taxpayers. Perversely, that means that STR taxes end up subsidizing the taxes of those who lease their homes like hotel rooms.
To paraphrase DeVasto, the revenue stream that was intended to help solve the problems created by short-term rentals is now subsidizing the source of those problems.
The irony is that at the same town meeting at which the STR tax proposal was narrowly rejected, voters overwhelmingly supported continued spending to plan for the Maurice’s Campground redevelopment.
In recent years, voters have repeatedly demonstrated the town’s commitment to address its housing crisis, including the 46 units at Lawrence Hill now under construction and the farsighted decision three years ago to purchase Maurice’s Campground for housing.
Resistance to even small property tax increases is the most likely explanation for this contradiction. That is the “genius” of moving fast and breaking things. Companies like Airbnb reap the profits, and homeowners realize a windfall either by renting short-term or selling their homes at inflated values. The community as a whole is left to pay the price of restoring the year-round housing supply and the fabric of community damaged by the gale of “creative destruction.”
Carl Sussman is vice chair of the Maurice’s Campground Planning Committee and is a member of the Wellfleet Affordable Housing Trust. He lives in Wellfleet and Newton.
