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community impact fee

    TOWN MEETING

    What’s the Impact of an Impact Fee?

    A dive into the short-term rental data suggests six figures of revenue in each town

    By

    PROVINCETOWN — Articles to establish a community impact fee on investor-owned short-term rental properties are on the town meeting warrants in Provincetown, Wellfleet, and Eastham this spring.

    According to Provincetown’s warrant, the intent of Article 15 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 rules for the community impact fee are included in the same 2018 state law that created the short-term rental tax. The fee would apply when owners have more than one residential unit in the same town that is listed for short-term rental. It takes the form of a 3-percent surcharge on the booking price of those units. Options in the law allow towns to include or exclude short-term rental units that are on the same property as the owner’s primary residence, provided that property has three residential units or fewer.

    At its April 4 town meeting, Provincetown will vote on an impact fee that would not apply to short-term rental units located at an owner’s primary residence.  Eastham is planning two separate articles: one that does not apply to units at a primary residence, and one that does.  Wellfleet is also planning to vote on both options, but the select board chose to apply a one-percent fee instead of 3-percent. Truro’s select board discussed the fee last week but decided to postpone the subject until after this year’s town meeting.

    The Effects of the Fee

    The impact fee has two effects: it raises prices at investor-owned short-term rentals relative to their competition, and it raises revenue that towns can use for housing efforts. The significance of those two effects has been harder to determine.

    In Wellfleet, select board member Mike DeVasto said that a 3-percent fee would not meaningfully deter real-estate investors but might burden summer tourists. DeVasto argued for a one-percent fee instead.

    The opposite opinion prevailed in Provincetown, with select board chair Dave Abramson saying that large investment companies were not a problem here yet, but an impact fee might keep them away. “It would be nice to be ahead of the problem for once,” said Abramson.

    The actual revenue that would be generated by the fee is not known. For one thing, in both Provincetown and Eastham, the available data suggest that about 80 percent of rental units belong to people who don’t own multiple units and therefore would not be subject to the new fee.

    In an October housing workshop, Provincetown’s assistant town manager, David Gardner, said the town doesn’t know how much money the fee would raise, but “we don’t think it’s a million dollars here.”

    Eastham Finance Director Rich Bienvenue analyzed that town’s short-term rental taxpayer list and told the select board there were 179 taxpaying rentals that might be covered by an impact fee. If they each had $10,000 in bookings, then an impact fee of 3 percent on those properties would raise around $54,000 per year, Bienvenue said.

    Bienvenue’s might be a low estimate. Based on calendar 2021 tax revenue, Eastham’s 947 short-term rentals (as listed in the state’s Public Registry of Lodging Operators) had a total sales figure of $17,161,000. That would put the average revenue per property at around $18,000 per year, not $10,000.

    To learn more about how much money a community impact fee might raise, the Independent took a dive into state data sources.

    Plymouth, Boston, Cambridge

    Only 17 towns and cities statewide have implemented the community impact fee, and many of them are very small. None are on the Cape or Islands.

    Three of them, however, have total short-term rental revenues that are broadly comparable to those in the Outer Cape towns. Plymouth brought in $707,000 in short-term rental tax revenue in 2021, according to information provided to the Independent by the state Dept of Revenue (DOR). Cambridge brought in $589,000, and Boston brought in $4,692,000.

    Of the Outer Cape towns, Truro brought in the least short-term rental tax revenue in 2021, $778,000. Wellfleet brought in $919,000, Eastham received $1,029,000, and Provincetown collected $2,310,000, according to DOR figures.

    (These short-term rental tax numbers are a subset of the towns’ more frequently reported “rooms tax” revenue. Rooms tax is also levied on stays in hotels, motels, and campgrounds. The short-term rental portion of the rooms tax is not posted online by the state, but it can be requested from the DOR.)

    In 2021, Plymouth received $81,000 in community impact fee payments. Cambridge received $154,000, and Boston took in $866,000.

    That means the impact fee brought in an extra 11 percent of the total short-term rental tax revenue for Plymouth. In Cambridge, the impact fee was worth another 25 percent of the short-term rental tax revenue, and in Boston it brought in an additional 18 percent of the short-term rental tax total.

    No town is a perfect analog because each one has a different mix of property owners. But these towns have comparably-sized short-term rental sectors, and they provide some data about what a community impact fee has actually raised in practice.

    If the Outer Cape towns were to fall in the middle of that range and raise a further 18 percent of their short-term rental tax revenues with an impact fee, that would mean $140,000 in Truro, $165,000 in Wellfleet, $185,000 in Eastham, and $415,000 in Provincetown.

    Still a Small Business

    Bienvenue told the Eastham Select Board there were 75 owners who might be covered by an impact fee: 57 who own two rental units, eight who own three, nine who own four, and one person who owns five. Together that amounts to 179 residential units, or 19 percent of Eastham’s 947 registered short-term rentals.

    The Independent analyzed Provincetown’s short-term rental taxpayers list, which was provided by town staff in response to a public records request. The results were remarkably similar: 64 owners with two short-term rentals on the list, 13 owners with three, five owners with four, two owners with five, and one with six. Together that amounts to 203 units, which is 20 percent of the 997 units on the state’s public registry of short-term rentals for Provincetown.

    The taxpayers list has some limitations: for instance, properties that have sold in the last two years often appear on the list under both sets of owners. Also, almost 200 units are listed under corporations, realty trusts, or property management companies, and tracking these back to individuals takes a lot of time.

    This analysis also suggests a counterintuitive conclusion: the ultimate goal of a community impact fee here might be to keep the resulting revenue flat, or even declining. If the idea is to “discourage the warehousing of apartments,” as Provincetown’s warrant says, then rising revenue would actually be a sign that the policy isn’t working as intended.

    HOUSING ANALYSIS

    Surprises in Short-Term Rental Data

    Community impact fee could apply to many properties here

    By

    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.

    One of 38 properties in Provincetown that are managed for short-term rentals by Del Mar Vacations Inc. (Photo Paul Benson)

    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.

    TOWN HALL

    Resident Tax Exemption Causes Friction on Eastham Select Board

    Seeking ways to increase revenue and keep town affordable

    By

    EASTHAM — The select board began its annual deliberations on whether to adopt a residential tax exemption for the next fiscal year at its Monday, Dec. 7 meeting, and division on the board was quickly apparent.

    Board member Arthur Autorino, tasked with reviewing prior board discussions of the tax exemption option, noted that “the word fairness never came up.”

    The residential tax exemption is considered revenue neutral: the valuations of properties owned by “domiciled” residents are reduced by a fixed amount, which results in a higher tax rate for all properties.

    “I don’t know if any one of you has ever paid taxes as a nonresident,” Autorino said.

    “No, because I don’t own a second home,” replied chair Jamie Demetri.

    “I couldn’t vote,” Autorino continued. “I couldn’t be on any town committee. If I wanted to go to a town meeting, I had to sit in a separate room or sit in the bleachers.”

    “It really is a choice, Art, whether you live in town or not — to be a resident and participate,” said vice chair Aimee Eckman. “So, the taxation without representation idea doesn’t really fly with me.”

    Nonresidents can and do serve on committees, noted Eckman. They just can’t serve on regulatory boards. Eckman said her nonresident friends are happy the town has good infrastructure and schools, so their homes are safe when they’re not here.

    Demetri shared a recollection of a trip she made to Nantucket, where she watched who was arriving on the first ferry on Monday morning. “It was construction workers,” she said. “It was painters, and it was plumbers. People with lunch boxes. They’re the people who keep a community going, and they had to be boated in on Monday morning because they can’t afford to live there. And I remember thinking to myself, as long as I’m on this board that won’t be Eastham.”

    “I agree,” said Autorino.

    The select board had previously set a policy of triggering a residential tax exemption when the ratio of resident home owners to nonresident home owners reached 40 to 60 percent. Finance Director Rich Bienvenue said that the ratio was 52 to 48 percent when the board set that policy, and it’s probably about 55 to 45 now. “It’s not really moving in the direction you think it would go,” said Bienvenue.

    The residential tax exemption would not generate additional revenue for the town. But Bienvenue brought up the community impact fee, which is allowed under short-term rental legislation. The fee could amount to “three percent of the total amount of rent upon each transfer of occupancy of a professionally managed unit that is located within that city or town.”

    “We have a situation,” said Bienvenue, “where we have 1,100 or so properties contributing to short-term rental taxes, and a good portion of those are owned by corporate interests.” The impact fee could be charged in addition to the four percent in local taxes the town currently receives on short-term rentals.

    Town Administrator Jacqui Beebe said on Tuesday that, during Monday’s discussion, they were considering applying the community impact fee to owners of three or more units in town. She noted that the law actually allows towns to levy the fee on owners of more than one property, but she wasn’t sure citizens would want to institute the policy on those owners.

    She stressed that Monday’s discussion was preliminary, and that the select board would place the residential tax exemption on the agenda for its first or second meeting in January.

     

     

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