Town meeting voters this spring in Truro, Wellfleet, and Eastham will be asked to raise the short-term rental tax rate from 4 to 6 percent, to maximize what state law allows towns to collect on vacation home rentals.
Provincetown is currently the only Outer Cape town that charges the maximum 6 percent. In one year, Provincetown accrued $1.7 million in new revenue from short-term rentals. Even at 4 percent and even in a pandemic, the other three towns also did well. Truro will get close to an additional $600,000, Wellfleet almost $700,000, and Eastham almost $800,000, according to the state Dept. of Revenue.
Though housing advocates and legislators are urging officials to earmark much of that money towards housing, Truro is the only town so far that has proposed a specific housing-related use for it.
“If the select boards and finance committee cannot find a way to take a certain percentage of that money and devote it to affordable housing, it is a huge missed opportunity,” said state Rep. Sarah Peake of Provincetown. “This is millions and millions of dollars coming directly back to the communities as the result of people who vacation here.”
Jay Coburn, CEO of the Community Development Partnership, said 50 percent should go to housing.
“I don’t understand why every single town isn’t doing that,” Coburn said. “Why aren’t we using that money now?”
“This crisis is so severe, we need multiple revenue streams, and we need multi-million-dollar investments,” said state Sen. Julian Cyr of Truro.
Provincetown: 13% for Housing
The select board got into the nitty-gritty of how much of the town’s short-term rental revenue should go to housing on May 10. The latest proposal from town officials puts 13 percent into housing, or about $416,000. The rest of the anticipated $3.2 million would go to the tourism fund, capital stabilization, wastewater infrastructure, and the general fund.
Select board member Louise Venden asked why so much (26 percent, or $832,000) is for the general fund. Town Manager Alex Morse said nearly $600,000 from the general fund pays the mortgage on Harbor Hill, a market-rate rental housing project. No decisions were made that night.
The nonprofit Housing Assistance Corporation’s CEO Alisa Magnotta said taxpayers should be alarmed if select boards aren’t setting aside money to help year-rounders stay here.
“Once it starts going into the general funds, it will be really hard to pull it back,” she said.
Truro: 33% for Housing
Truro town officials had worried that the new short-term rental tax, which went into effect in July 2019, would deter vacationers. Instead, rental demand and real estate sales skyrocketed. Even with newly hired Truro Town Manager Darrin Tangeman’s $172,000 salary, he is unable to get financing for a house in town, he said.
So, along with the 6-percent tax rate article, Truro voters on June 26 will be asked to create a housing stabilization fund. The fund would get 33 percent of the revenue from the short-term rental tax. The money would be spent on housing projects approved by town meeting. The proposed stabilization fund differs from a housing trust, from which trustees can authorize spending without town meeting approval, Tangeman said.
Any more than 33 percent, Tangeman said, would cut into what the town used last year to offset budget shortfalls.
Eastham: No Decision
The Eastham Select Board remains uncommitted.
“It will be used for attainable housing, but we are waiting to decide on the most impactful use,” board chair Jamie Demetri said.
Rich Bienvenue, Eastham’s assistant town administrator, said that so far Eastham has used the short-term rental tax for capital projects and budget reserves. Currently, the town has only an AA+ bond rating and Bienvenue said increasing reserves will help the town achieve a AAA bond rating.
The extra 2 percent would give Eastham at least another $300,000, he said.
Wellfleet: Transfer Fee?
Town officials have been caught in a crisis trying to prepare for the June 26 town meeting. Both the town accountant and town administrator resigned, and officials are struggling to put together a budget. There has been no decision about what to do with the short-term tax revenue — either what has come in so far or future receipts, said Harry Terkanian, a member of the Wellfleet Housing Trust and a volunteer now helping to prepare the warrant in the absence of town leadership. Raising the tax by 2 percent would bring in an additional $375,000, according to the Wellfleet draft town meeting warrant.
At the same time, the select board is considering a real estate transfer fee, which could put many thousands of dollars toward year-round housing each year. The article, proposed by board member Ryan Curley, would impose a fee of ½, 1, or 2 percent, still undecided by the select board.
State Rep. Sarah Peake said she has asked the state legislature to approve a home rule petition for a ½-percent real estate transfer fee in Provincetown ever since she was first elected to the House in 2007. Provincetown voters have approved the idea repeatedly, but opposition on Beacon Hill is strong, particularly from the Mass. Association of Realtors. CEO Theresa Hatton told the Statehouse News Service that transfer taxes are “not good policy” because they ask one specific buyer or seller “to take care of the common good.”
Curley, however, said he thinks the tide may be turning. Boston, Nantucket, Truro, Provincetown, Somerville, and Brookline have submitted home rule petitions to link transfer fees to housing, according to the Statehouse News Service.
“Boston asking for it changes the playing field,” Curley said, adding when Airbnb infiltrated mainstream communities, suddenly Boston lawmakers saw the wisdom of a short-term rental tax.
In Wellfleet, where just 1.9 percent of the housing stock is officially affordable, Curley’s proposal could raise real money. Based on 2020 home sales, a ½-percent fee would generate $237,247 a year if applied to sales over $500,000. (That is, if a home sold for $600,000, the fee would be ½ percent of $100,000.)
Curley is waiting for more input from his fellow board members, which he hopes will happen in time to put the article before voters June 26. Chances of getting the required legislation through the State House, however, remain virtually nonexistent, according to Peake.