The Regulation of Short-Term Rentals: A Background & Update
Regulation of Short-Term Rentals (STRs) has proven to be one of Nantucket’s most involved civic discussions over the last couple of years. And despite the 2022 creation of a Short-Term Rental Workgroup, any further definition or regulation of STRs continues to progress slowly as we move through 2023. My blog presents both a background of the STR debate as well as an update on where efforts are now.
The Commonwealth of Massachusetts defines Short-Term Rentals (STRs) as an occupied property that is not a hotel, motel, lodging house or bed and breakfast establishment, where at least one room or unit is rented out by an operator through the use of advance reservations. This includes houses, apartments and condominiums. STRs, in some fashion, have been a part of Nantucket’s history since tourism became the island’s primary economy after the fall of the whaling industry in the 1800s.
On July 1, 2019, Massachusetts required all owners renting out their dwellings or portions thereof to register with the state as an “operator” and obtain a certificate with the Mass DOR for each property they rent. The operator or their “intermediary” (such as a real estate broker or online booking engine such as Airbnb) is then responsible for collecting the short-term rental tax from the renters and remitting it to the State on a predetermined schedule in accordance with the commencement of the rental period. Short-term renters in Nantucket County are currently assessed 11.7%, of which 5.7% is the state’s room occupancy excise tax, and 6% is allocated locally. There are a few exemptions: first, if an operator rents a dwelling for 14 or fewer days per calendar year, they are exempt from collecting the tax from renters. Additionally, any rental period over 31 days doesn’t qualify as a short-term rental, so no tax applies. As a result, there has been a shift for many visitors seeking out rentals lasting over 31 days. For those whose jobs allow them to work remotely, this has been a tremendous benefit.
The increasing popularity of short term rentals spiked during the COVID pandemic, as 2020 and 2021 brought massive travel restrictions, creating unprecedented demand for domestic getaways. Not surprisingly, the high demand brought some issues to the forefront. Ultimately a concerned group of property owners and their liaisons banded with a previously-established civic organization, ACK Now, in an effort to address local housing dilemmas. The major focus points the group addresses are quality of life for residential neighbors of STRs, public health/safety/infrastructure concerns, and the perceived effects of STRs on the year round housing stock. On the other side of the coin, proponents of STRs highlight the following: income opportunities for operators and their intermediaries, increased tax revenue, creation of jobs, increased property values, support of local businesses through tourism, and in its simplest form, a homeowner’s right to rent. The proponents of STRs are supported by a grassroots group called Nantucket Together.
While a sweeping ban on STRs was initially voted down, voters acknowledged the need for local oversight, and at the 2022 Annual Town Meeting, two articles were approved. First, article 39 would create a local STR registration system (view the most recent version of that article here). Second, establish a workgroup to suss out the issues plaguing both sides using data-driven strategies. Thus the Short-Term Rental Workgroup (STRWG) was born. This 10-member workgroup consists of three at-large seats, one Planning Board member, one Finance Committee member, one Advisory Committee of Non-Voting Taxpayers member, one ACK Now member, one Nantucket Together Member, one Affordable Housing Advocate, and one Board of Health designee (non-voting), plus alternates. Care was taken to represent a cross-section of voices and to mitigate conflicts of interest. The STRWG includes property owners (seasonal, year-round, and commercial), those concerned with impacts of STRs in their neighborhoods, and business owners. Periodic meetings are held over Zoom and encourage community participation via public comment and participation in small group discussions during the meeting period. The goal is to provide 100% transparency in all discussions, deliberations, and decisions regarding STRs on Nantucket, to have 100% agreement to the contributing data points, how they are defined, and the necessary analyses for decision-making by the STRWG, and lastly, to develop sensible guidelines for STRs that consider (but not be limited to): Nantucket’s unique situation, the history of seasonal rentals, how STRs are developing in similar communities and the impact on Nantucket, and the economic impact of the suggested guidelines. Toward the end of 2022, it became clear that this massive issue was not going to be resolved expeditiously, and the Select Board voted to delay any voting on regulation to the fall of 2023 via a Special Town Meeting.
A crucial part of the data collection of the STRWG and Granicus, a private firm hired by the Town, comes with the implementation of local STR registration. Tasked with identifying all properties operating as STRs, this was slated to roll out on January 1, 2023. However, due to staffing issues at the Nantucket Health Department, the process was delayed. The local STR registration system represents significant data which has the potential to further push out regulatory bylaw proposals. As the community presses on, it has become evident that there are more layers to the issue than what first meets the eye.
Visit Fisher’s website to read more on STR news and developments as they evolve throughout 2023.