Governor Baker Sends Short-Term Rental Bill Back to Legislature
On Monday, July 30, the State Legislature passed a compromise bill that would establish a first in the nation statewide registry for short-term rentals like AirBnB, and would also tax such accommodations like motels and hotels. The bill also authorizes municipalities to impose a special fee on short-term rentals that must be used, in part, for affordable housing or local infrastructure projects. It would also require short-term rentals to carry $1 million in liability insurance.
The conference committee members who negotiated the final bill included Representative Aaron Michlewitz, Chair of the Joint Committee on Financial Services, Representative Sarah Peake, Representative Jay Barrows, Senate President Karen Spilka, Senate Majority Whip Michael Rodrigues, and Senate Minority Whip Ryan Fattman.
The bill traces the tax framework passed by the Senate as recommended by the Joint Committee on Revenue, a committee formerly chaired by one of the bill’s chief negotiators, Senator Michael Rodrigues. Specifically, the bill would fold short-term rentals, like AirBnB, into the room occupancy excise tax framework, which applies to motels and hotels. These taxes are the 5.7% room occupancy excise and any applicable local option excise on room occupancy (up to 6%, and up to 6.5% in Boston). Short-term rentals would also be subject to the 2.75% convention center financing fee to accommodations in Boston, Cambridge, Springfield, Worcester, West Springfield, and Chicopee.
The compromise legislation also includes a number of provisions originating from the House version of the bill, which includes a fee that could help fund affordable housing.
The bill would authorize municipalities to adopt by a vote of their legislative body a “community impact fee” of not more than 3% on so-called “professionally managed” units. “Professionally managed” units are defined as accommodations where an operator runs more than one short term rental in the same city or town and at least one of those units is not located within a single-family, two family, or three family dwelling that includes the operator’s primary residence. Municipalities are also authorized, by a separate vote, to apply the “community impact fee” to include owner-occupied short-term rental accommodations located within a two-family or three-family dwelling.
If a municipality adopts a community impact fee, at least 35% of revenue must be allocated to affordable housing or local infrastructure projects. The conference bill did not include provisions included in the House version that would have required 50% of local revenue to be dedicated to “programs addressing either local infrastructure needs or low-and moderate-income housing programs.” The final conference bill also did not include an amendment filed by Joint Committee on Housing Chair Representative Kevin Honan which would have safeguarded funding for affordable housing by requiring at least 25% of that revenue be dedicated to “low-and moderate-income housing programs.”
The final bill also includes a special excise of 2.75% that would apply to all room occupancy types located in municipalities that are part of the Cape Cod and Islands Water Protection Fund. Lastly, the bill clarifies that anti-discrimination protections apply to occupants of accommodations subject to the room occupancy excise.
On August 1, the Governor sent the bill back to the Legislature with proposed changes. Baker proposed exempting homeowners who rent their properties 14 nights per year or less from the new taxes and insurance requirements. The Governor acted a day after the Legislature ended its formal session. This means legislators would either have to vote unanimously on the bill with the Governor's proposed changes or call a special session to rewrite the bill. For more information on the bill and the Governor's actions, click here.