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 who rent homes by the night 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.
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, the largest player in the business, calls the Massachusetts law flawed and has not ruled out challenging it in court. Still, the San Francisco-based company says it’s optimistic the industry will keep growing here, and on Monday it is set to release a study highlighting its contribution to the economy. The report estimates that Airbnb’s 5,700 hosts in Massachusetts generated a state record of $256 million last year.
“People vote with their feet and they vote with their wallet,” said Andrew Kalloch, Airbnb’s head of policy for Massachusetts. “Home-sharing is here to stay because it offers fantastic economic value to guests and a fabulous economic opportunity to hosts.”
It’s also creating headaches for people such as Joan Talmadge, who with her husband runs We Need a Vacation, a marketing and advertising service for about 4,000 vacation rentals on Cape Cod and the Islands.
“It’s just chaos,” Talmadge said. “Homeowners are confused. Towns are confused. Everyone, including us, is confused about the details of this.”
The state law signed Dec. 28 by Governor Charlie Baker sets a state tax of 5.7 percent on most short-term rentals — equivalent to the hotel room tax — and allows cities and towns to add their own levy of up to 6 percent. On the Cape, there’s another 2.75 percent fee for wastewater treatment.
The taxes apply to any agreement signed after Jan. 1 but, Talmadge said, some communities haven’t yet decided on their local tax rate. As a result, she said, hosts are not sure whether they should collect local taxes on stays being booked for this summer.
“They want to do the right thing, but it’s very confusing,” she said. “The timing couldn’t have been worse.”
Over the longer term, Talmadge said, the taxes could hinder vacation rentals on the Cape. The average host there has raised rents just 2 percent a year in recent years, Talmadge said, not enough to cover rising costs. She predicts the added taxes could scare off budget-conscious vacationers, perhaps causing some homeowners to quit the vacation rental business altogether.
In Boston, Mayor Martin J. Walsh last year signed citywide rules intended to reduce the number of apartments being rented short term. They prohibit non-owner-occupants — both investors and tenants — from leasing entire units short term and limit what owner-occupants of three-deckers and other small multifamily buildings can do. In a city where roughly two-thirds of housing units are rentals, that’s expected to put a sizable dent in Airbnb’s business.
But enforcement remains unclear, in part because Airbnb is challenging a key plank of Boston’s law, which holds online platforms subject to steep fines for violations by the hosts who advertise on them. The company has filed a lawsuit in federal court to contest the law, and city officials have agreed to delay enforcement while a judge considers an injunction. On Thursday, a judge in New York blocked a similar law that requires platforms to turn over host data to New York City officials, saying it asked for a “breathtaking” amount of personal information.
Airbnb declined to comment on the New York ruling. Walsh administration officials said Friday they’re reviewing the judge’s decision.
“We’re trying to analyze what that means for us,” said Joyce Linehan, Walsh’s chief of policy. “That’s the thing with new technology, a lot of the laws are still being tested.”
Regardless, Boston launched its registration process last week, with 36 properties signed up so far. Officials and housing advocates hope that the statewide registry included in the new law will prompt more hosts to sign up in the coming months and give the city a better handle on the industry’s scope and impact.
“The registry is the spinal cord of the whole thing that pulls it together,” said Ford Cavallari, chair of the Association of Downtown Civic Organizations in Boston, which has lobbied for stricter regulation. “Getting this information and being able to provide it to the city and state, that’s really important.”
Well-defined regulations, Cavallari predicted, will help pull short-term rentals out of the shadows and over time allow the major platforms to expand without the constant threat of crackdowns in the cities where they do business.
That’s especially important for Airbnb, which is widely believed to be preparing to go public in a stock offering that could be worth tens of billions of dollars.
Airbnb’s Kalloch said there may be some bumps along the way as the rules take effect, but he, too, was confident that short-term rentals will continue to grow in Massachusetts.
“We truly believe that if you’ve got a great product — as our hosts do — then people will find it,” he said. “We’re very optimistic about the future.”