TRURO — In an effort to stem the loss of residential property from the year-round housing stock, three Outer Cape towns are considering the adoption of an additional fee on certain short-term rental units.
The rules for the fee were set in the same state law that created the short-term rental tax in 2018. Towns that have adopted the 6-percent local-option tax on hotel rooms and short-term rentals — typically referred to together as the “rooms tax” — may consider adding a “community impact fee” of up to 3 percent. All four Outer Cape towns now have the 6-percent local-option rooms tax in place.
State law offers two options for the fee, which is targeted at owners of multiple residential properties that are booked as short-term rentals. The first option would apply when an owner has two or more residential units in the same town listed as short-term rentals if those units are not also at their primary address and if that primary address is a one-, two-, or three-family home. The second option would apply the fee even if the units are at the owner’s primary address.
The terms can become complicated, but the upshot is simple: people who have multiple properties in a given town that are rented short-term would see the tax that their customers pay go up. The rooms tax in all four Outer Cape towns is now 14.75 percent — 6 percent of the room price goes to the state, 6 percent to the town, and 2.75 percent to the Cape and Islands Water Protection Fund. The community impact fee would add up to another 3 percent to the room price for affected units, all of which would go to the town.
The law specifies that at least 35 percent of the revenue from the fee must go to housing efforts.
Both Provincetown and Wellfleet will have the fee on their town meeting warrants, with 100 percent of the revenue directed to housing efforts. Provincetown’s warrant will include only the first option: a 3-percent fee that exempts units at the owner’s primary residence. Wellfleet’s warrant, meanwhile, will include both options, but with only a 1-percent fee.
Eastham’s select board discussed the fee on March 8 but decided to have a community forum on the subject before adding it to the town meeting warrant. The date of that forum has not been set, according to Town Administrator Jacqueline Beebe.
Truro’s select board has not discussed the community impact fee. Town Administrator Darrin Tangeman said the fee is “not something the town is looking at right now.”
If approved at town meeting, the fees would be implemented on Jan. 1, 2023, according to Eastham Finance Director Rich Bienvenue.
Provincetown: 3 Percent
According to Provincetown’s town meeting warrant, “the intent is to discourage the ‘warehousing’ of apartments for short-term rentals, where developers purchase several units for the distinct purpose of renting them short-term, thereby removing them from the inventory of seasonal or year-round occupancy.”
The impact fee appears as Article 15 on the warrant, the first of 10 articles developed in a series of housing workshops involving the select board, community housing council, and Year-Round Market Rate Rental Housing Trust.
At those workshops, town staff were not sure how many properties the impact fee would apply to, and they told the boards the measure probably wouldn’t raise a huge amount of money. But the consensus of the three boards was that the fee could deter developers who might consider buying up properties here to create a short-term rental operation in the future.
“Rather than try and catch it after the fact, like we’ve done with every other housing issue, let’s have something on the books before it becomes a problem,” said select board chair David Abramson.
Wellfleet: One Percent
Wellfleet’s select board voted on Feb. 15 to put both the primary-residence-exclusive and primary-residence-inclusive impact fee options on the warrant, but they opted for a one-percent fee instead of 3 percent.
Select board chair Ryan Curley advocated for a 3-percent fee, but other board members pushed back and suggested the town take an incremental approach.
The 3-percent fee is a “a big jump” for tourists, board member Michael DeVasto said. He argued that the fee is paid by the customer, so it would not stop people from buying residential properties here for short-term rentals but would price out some long-time summer visitors who could no longer afford vacations on Cape Cod.
If the article passes, all fees collected would go to the Wellfleet Affordable Housing Trust, with 35 percent designated for federally defined affordable housing projects and 65 percent for the trust’s unencumbered funds, which can be used for a wider range of projects targeting varying income levels.
“It’s important to dedicate these funds when we actually enact it, as we know, because of what happened with the rooms tax,” Curley said.
Wellfleet has brought in new revenue from the expansion of the 6-percent rooms tax to include short-term rentals, but that money has been earmarked for the town’s fiscal 2023 budget deficit.
The community impact fee is one of the few options still on the table for a dedicated funding stream for housing, Curley said.
Eastham: Public Forum
The select board in Eastham discussed the community impact fee at its March 8 meeting and decided to have a public hearing on the subject before putting an article on the warrant. The date was still being determined as of Friday, March 11, according to Town Administrator Beebe.
“I want to understand what the feeling is in the community about it,” said select board chair Art Arturino.
Assistant Town Manager and Finance Director Rich Bienvenue offered detailed projections on how many properties the fee would apply to and how much revenue would be produced.
Eastham has 75 short-term rental owners the community impact fee would affect, according to Bienvenue’s data. Fifty-seven of those owners have two short-term rental units, eight have three units, nine have four units, and one has five units, for a total of 179 residential properties.
“Some people will rent for the summer and some will rent for less than the summer, with varying rates which range from $1,000 a week to $3,000,” Bienvenue said. “On average, those units or properties got $10,000 for the season. Three percent of that would generate about $54,000.”
Select board member Jared Collins supported implementing the fee.
“Why would we not want to do this?” he asked the board. “It makes sense to tax people more if they’re able to afford more properties to have vacant all year. I’m saying that as someone who is about to inherit a property with seven units on it, so I’m being the opposite of biased here.”
Truro: Not Right Now
A community impact fee “is not something the town is looking at right now,” Town Administrator Darrin Tangeman told the Independent. Having just raised the local-option rooms tax from 4 percent to 6 percent, “we’re waiting to see how that impacts the market before we add an additional fee.”
