Massachusetts may be the first state to trying to curb and regulate short-term home rentals with a law set to go into effect this summer that is the toughest one in the country so far.
The law, set to take effect in July, requires short-term rentals to register with the state, carry a minimum of $1 million in insurance, and pay a 5 percent tax to the state.
The law also allows local municipalities to assess an additional 6 percent tax and creates a state-run affordable housing fund, which will funnel money from another 3 percent tax on property owners with two or more short-term rentals in the same municipality, according to Governing.com.
The legislation also creates a first-of-its-kind statewide registry for short-term rentals.
Massachusetts scrambling to figure out new law
The state’s decision last month to enact a law with some of the nation’s toughest rules on short-term rentals has thousands of people scrambling to figure out how to comply.
From Cape Cod to Boston to the Berkshires, individual hosts and corporate owners are sorting through the state regulations, which establish taxes and registration requirements for units that aren’t covered by traditional one-year leases. In Boston, separate rules that sharply restrict who can rent homes for the short term add another layer of complexity, according to the Boston Globe.
Together, the regulations could transform — and, some say, inhibit — an industry that has grown rapidly in recent years, thanks to online platforms such as Airbnb and HomeAway.
Airbnb had a record year in Massachusetts
Airbnb says the Massachusetts law is flawed, and has not ruled out challenging it in court. At the same time, the company said there were 1.2 million people who stayed in Airbnb rentals in Massachusetts in 2018, and hosts in the state earned more than $256 million, according to a WBUR.org report citing Airbnb.
There are now more than 15,700 Airbnb hosts in the state who typically earn at least $7,800 annually, according to the company. Andrew Kalloch, the head of public policy for Airbnb in Massachusetts, said the “record numbers” show that Airbnb is an “economic engine” in Massachusetts.
“We see millions of guests across the country and around the world who want to come to Massachusetts and spend time in different parts of the state coming to Airbnb as a first option and seeing the value that home-sharing can provide to them,” Kalloch said in a phone interview with WBUR.org.
The law defines short-term rentals as “occupied property” where at least one “room or unit is rented out by an operator through the use of advance reservations.” That includes apartments, houses, cottages, and condominiums.
The definition does not include hotels, motels, and other lodging establishments providing accommodations to guests; nor does it include time-shares or month-to-month leases.
“A short-term rental is a rental that is not for more than 31 consecutive calendar days,” says the Department of Revenue.
The law applies whether property owners rent out the property themselves or use an intermediary, like a broker or hosting platform (i.e. Airbnb, Homeaway, or any other online apps or websites).
However, the new tax does not apply to people who rent out their homes infrequently. After negotiations between the Baker administration and state legislators, a compromise bill was reached to exempt people who rent out their homes for 14 days or less in a calendar year.
New Orleans also tightening regulations
In mid-January, the New Orleans City Council unanimously approved a package that permanently extends the nine-month ban on short-term rentals in the French Quarter and Garden District, according to governing.com. In an effort to preserve retail space, the new rules also prevent Airbnb operators in commercial zones from renting first-floor units. And in residentially zoned neighborhoods, people can only rent out rooms in homes that they occupy.
Airbnb, which did not respond to an emailed request for comment, has said that it plans to sue New Orleans, according to governing.com.