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Time for a Tax on Short-Term Rentals

Wed, 12/07/2022 - 11:30


Sometimes it is useful for people here to look to other, similar vacation spots to get a sense of how shared issues are addressed there. On Martha’s Vineyard, the way the towns deal with short-term rental properties could provide a valuable example.

As on the South Fork, a vast proportion of Vineyard houses, backyard cottages, converted garages, and apartments have been refashioned to short-term rentals. There, as here, the boom has been facilitated by both online services and local real estate professionals — and property owners for whom short-stay guests are more lucrative than regular tenants. Because of this, they, like us, are losing year-round and seasonal-worker housing. Planners there are considering additional rules, including limiting corporate ownership of island properties.

Unlike here, state and local rental taxes are collected from property owners, which the excellent Vineyard Gazette newspaper described recently as a “windfall” since the tax was introduced in 2019. In the first full year, the short-term rental tax brought in $3.48 million; the figure grew to $5.54 million in 2021, and has already shot past $8.6 million this year. The Commonwealth of Massachusetts collects the payments as part of its larger tax on hotel rooms, then gives the towns their portions quarterly. The extra cash on Martha’s Vineyard has gone to everything from new Highway Department tractors to climate resilience. Now, Vineyard officials are considering ways the money could be used for more affordable housing. On Long Island, most short-term rentals are not taxed, which is a missed opportunity.

Here, officials have struggled to keep up with the short-term scene. A rental registry in East Hampton Town may have provided some enforcement power, but many property owners ignore it or offer rentals far in excess of the town’s numerical limits. Instituting a similar tax here could help. The money it would bring in could help augment a new half-percent real estate sales tax to be used for affordable housing. It would also give the town more muscle in prosecuting scofflaws. It is one thing for landlords to skip getting a rental permit, it is quite another if they fear being prosecuted as tax cheats.

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