PROVINCETOWN — The conversion of year-round rental property to short-term rentals has played a starring role in the housing crisis here. But it’s not the only player.
An Independent analysis of rental tax and other data shows that properties being rented short-term to maximize revenue for their owners account for less than 30 percent of the total real estate sales in the last five years.
They are a consistent share of the market for properties priced from $300,000 to $1.2 million, however. The potential revenue from short-term rentals could be helping to establish the market price — but the evidence shows there are plenty of other buyers at that market price who aren’t renting out their properties short-term.
The short-term rental tax took effect on July 1, 2019. The state gave a list of the taxpayers to the town in November 2020, after the tax had been in effect for 16 months. The Independent obtained that list and compared it with other sources, including the market-research website AirDNA, the 2020 U.S. Census, and the assessor’s sales reports.
Short-term rental taxes were paid on 1,064 properties in Provincetown between July 2019 and November 2020. That is about 7 percent fewer than the number of properties appearing on AirDNA, which aggregates information from Airbnb, Homeaway, and VRBO. AirDNA reported a peak of 1,148 “entire home” listings in August 2019.
Some short-term rentals would not appear in AirDNA’s data, such as those run by local real estate companies, or by smaller websites like WeNeedAVacation.com, which currently has 76 Provincetown listings.
AirDNA data show that about 200 properties have left the short-term rental market since the pandemic began, presumably because their owners have moved here full-time.
Who Are the Owners?
The taxpayer list shows few large investors with multiple properties.
Because of condominium conversions, different units often share one address — and sometimes one owner still owns several of those condos. Not many people have units scattered across more than two different addresses, however. The Independent could identify only eight owners on the whole list who had short-term rentals at three or more different locations.
That includes five individuals with three properties each, the Packard Family Limited Partnership, with four properties, and Lexvest Group LLC and Dol-Fin Management, with three properties each.
Two large property managers are on the list: Turnkey Vacation Rentals and Del Mar Vacations. But the assessor’s records show that they don’t own the properties they manage.
This means multi-property investors are rare here. The market is almost entirely in the hands of people with one or two properties.
Community Impact Fee
It also means that a community impact fee might apply to a lot of properties if it were enacted here. The law that created the short-term rental tax gives towns the option of imposing a 6-percent local tax on bookings — which all four Outer Cape towns have now done. It also allows for an additional 3-percent community impact fee on bookings in “professionally managed units.”
That term is defined as “one of two or more short-term rental units that are located in the same city or town, operated by the same operator and are not located within a single-family, two-family or three-family dwelling that includes the operator’s primary residence.”
In other words, any two short-term rentals that are not on the property of the owner’s primary residence could be affected by a community impact fee. There are very few owners with three short-term rental properties in Provincetown — but there are a great many with two. Depending on where those owners live, a large fraction of the total list might be affected.
Despite the presence of the term “professionally managed,” there appear to be no distinctions drawn between units managed by a real estate broker, an online platform, or a property management company. According to the law (mass.gov/info-details/room-occupancy-excise-tax), it’s the ownership of units that matters.
Provincetown brought in $3.5 million from the 6-percent local-option rooms tax in the most recent fiscal year. That number includes revenue from hotels and short-term rentals, and is the third highest in the state, behind only Boston and Nantucket.
Only 16 towns statewide have adopted the community impact fee. In nearly all, it added about 3 to 9 percent to the overall rooms tax number.
These data suggest that a community impact fee here would probably raise an additional $200,000 or so a year.
A Fraction of the Market
The Independent’s analysis also found that properties sold recently were only slightly more likely than others to be part of the short-term rental market.
Twenty-seven percent of the properties sold in the last five years appear on the short-term rental tax list. That number doesn’t change for individual years or specific sales prices. With relatively little variation, only about 24 to 32 percent of units in nearly every subcategory of year or sales price appeared on the short-term rental list.
By comparison, about 23 percent of the town’s total housing inventory is used for short-term rentals.
Most recent buyers, this means, apparently are not relying on short-term rental income to support their purchases. More than 70 percent of buyers at almost every price point are buying for year-round occupancy, seasonal use, or occasional vacation-style use, but without short-term rental income as a supplement.
Knowing that a future buyer of property could count on this income may still be relevant in setting prices here. But short-term rental income is evidently not essential to most buyers in Provincetown in the last five years.
This suggests that direct regulation of the short-term rental market might not move the needle in predictable ways when it comes to housing prices. The state’s 2018 short-term rental law also includes some little-used clauses, allowing towns to regulate the number of days per year properties can be rented and the number of short-term rental licenses in total, and even to regulate where short-term rentals will be allowed.
These provisions have not been tried anywhere on Cape Cod, however. And with so many recent buyers not relying on short-term rental revenue, it’s hard to say what their impact on the housing market would actually be.