Cape Towns Still Analyzing Impact of Short-term Rental Tax

HYANNIS – Towns across Cape Cod are still assessing how much tax revenue has been generated by the new short-term rental tax and how the funds will be used.

The tax, which extended the state’s hotel and motel tax to most short-term rentals, went into effect in July.

The new law taxes units rented on a short-term basis, including vacation homes and units rented through Airbnb and similar apps, at 5.7 percent.

Towns can levy an additional tax from 2 to 6 percent. The law also included the creation of the Cape Cod and Islands Water Protection Fund, which includes a 2.75 percent tax added to the state and local taxes.

Tax revenues distributed to communities through the state’s Department of Revenue are combining money from the regular room occupancy tax with the short-term rental revenues and communities are still working to figure out how much was generated from the new tax.

Tourism, housing and environmental leaders on the Cape are looking for the towns to place a portion of the revenues into a special Infrastructure and Community Investment Stabilization Fund  focusing on regional issues.

The Association to Preserve Cape Cod, the Cape Cod Chamber of Commerce, Cape Cod & Islands Association of Realtors and Housing Assistance Corporation have formed the Future Cape Cod coalition.

“Why don’t you set aside a percentage of that or a certain dollar amount and put it into housing, use it for wastewater, maybe support local transit options in your community, perhaps build out broadband in your downtown area – something that’s going to be the underpinning for the Cape Cod economy,” said Wendy Northcross, CEO of the Cape Cod Chamber of Commerce.

Northcross said it is a new era for short-term rentals on Cape Cod, which there are more of than hotels, motels and bed & breakfasts.

“The towns will have to sort of play it out, look at the next year and look into the next summer and beyond to assess what is the true [impact] of this revenue stream,” Northcross said.

Northcross said towns will have to compare what revenues used to be generated compared to what funds are generated now from the taxes and gauge the best uses for the increase.

She said towns will also have to see if regulations created for the rental industry that might suppress the marketplace.

“Maybe they need to really be careful about how they regulate that industry going forward,” Northcross said.

One of the reasons the new law was passed and supported by state lawmakers was to provide immediate access to new revenues for communities.

“Maybe they need it for police, fire, education,” Northcross said.

“Maybe they need it for snow clearing. Maybe they need it for beach cleanups or lifeguards.”

Future Cape Cod is urging the towns to support the local and regional economy before the funds are used to support smaller issues or programs.

“Take a moment in time, which is now, to really try to assess what you can put aside and earmark for big economic development support projects,” Northcross said.

About Brian Merchant

Brian Merchant grew up in Central Massachusetts and now lives in South Dennis on the Cape. He has been part of the news team in the NewsCenter since the spring of 2014. He studied radio broadcasting at the University of Tennessee.
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