Cape Cod rentals are having an unexpectedly slow summer
Happen to have this week off and no plans? You might still find a vacancy on Cape Cod.
A Truro cottage set atop a coastal bluff with stairs to a private beach was still available on Friday — at a $1,100 discount. It was the first time in three decades that a summer week at the cottage went unclaimed, the owner said, and it’s not the only week still available.
Likewise, Noreen Cahalane still had two prime weeks in August wide open at her Harwich house, just a short walk from the beach. She booked this current week only a few days earlier — to a vacationer displaced by tornado damage.
“Usually I’m fully rented,” she said. “I think people are staying away.”
The last-minute deals and vacancies may be a late-summer boon for procrastinators. But some Cape Cod property owners are attributing an unexpectedly slow summer to a troublesome pair of unwelcome arrivals: sharks and taxes.
Shark sightings have been closing beaches and alarming swimmers since last summer saw the first fatal shark attack in Massachusetts since 1936. The taxes, enacted last winter, took their first bite on July 1, imposing hotel taxes on summer house rentals for the first time in Massachusetts, adding 12.45 to 14.45 percent to already steep rates.
The Cape Cod Chamber of Commerce acknowledges the down market, though it has yet to see data for June to know how bad it is. But hotel room rentals — for which taxes are unchanged — are also down about 5 percent so far this year, said the chamber’s chief executive, Wendy K. Northcross, who noted how unusual that is. “For the last decade, they’ve seen year-over-year increases,” she said.
Northcross suspects other factors are in play beyond the sticker shock of new taxes: a wet, uninspiring spring and a glut in rentals on the market.
“Weather has not been our friend,” she said, an understatement for a part of the state that saw two rare tornadoes blow through last week.
And, of course, sharks are not good for marketing beach vacations. Swimming was briefly barred at several Cape beaches last week alone, for safety’s sake, and off Truro, witnesses described seeing a grisly “eruption of blood” as a seal was devoured by a shark.
But the sharks haven’t come to Harwich — that was the tornadoes — so Cahalane isn’t sure why her house is being overlooked for the first time in two decades. She stays at her parents’ house for the summer, while vacationers use her home.
Some property owners are blaming the new taxes for deterring vacationers — and questioning whether policy makers considered all the potential impacts on locals.
“I think that the worst sharks in Wellfleet are the politicians who imposed the 12.45 percent tax on short-term rentals for properties owned by individuals who are just trying to rent out their summer home for a few weeks over the summer,” said Wellfleet property owner John Salsberg.
The Massachusetts Short-Term Rentals Law was signed in December 2018 by Governor Charlie Baker. The law was aimed at Airbnb profiteers and leveled the taxation field with hotels, where tourists were already paying occupancy taxes. The law applies to every house that’s rented for more than two weeks a year. It makes no distinction between a real estate company renting dozens of properties and a year-round resident who leaves her cottage for the summer to make rental income.
The tax was supported by the Chamber of Commerce, and it includes multiple layers: Lawmakers from Cape Cod tacked on a levy to fund water-quality improvements, and some Cape towns raised their local occupancy tax rate at the same time.
Each rental is subject to the 5.7 percent lodging tax imposed by the state, a 2.75 percent water fund tax, and a local tax of either 4 or 6 percent.
All told, that increased the cost of a rental by 12.45 percent in Chatham, Dennis, Eastham, Falmouth, Harwich, Truro, and Wellfleet, and by 14.45 percent in Barnstable, Bourne, Brewster, Mashpee, Orleans, Provincetown, and Yarmouth.
So a weekly rental for a house in Yarmouth that once cost $4,000 a week now goes for $4,578.
Some property owners tried to soften the blow to renters by dropping their rental fees. Salsberg, who co-owns a house on Lieutenant Island in Wellfleet with his wife and friends, cut his rate 12.45 percent before the season started.
But his beachfront house, with a huge deck and sweeping views, is still sitting open next week — and in the final week of August, even after he discounted the price another 23 percent.
He estimates they’ve lost $10,000 for the summer. “I would have been paying state income tax on that,” he said. “All it is doing is hurting individuals like me and renters, who look for an opportunity just to be in a house, by bumping up their costs.”
The taxes kicked in on July 1. That narrowly spared Fourth of July revellers, whose weeklong rentals technically started in June. Reservations that were booked before the start of 2019 were also exempted this year.
Stephen Giatrelis still has gaping holes on the calendar for his Hyannis waterfront luxury house. Even after he reduced the rate to $4,000 a week, from $5,000 (before taxes), he wasn’t able to lock in his current renter until Wednesday of last week. And he still has vacancies in August.
“I don’t know if everyone’s afraid of the sharks or the taxes or what,” Giatrelis said.
Typically, the house is booked for seven weeks; so far this year, it’s booked only for four.
“I’ve been hearing from everyone, other friends that own property, that they’re off, too, this year,” said Giatrelis, a builder and developer who lives in Mashpee.
State Senator Julian Cyr — a Democrat who represents the Cape, grew up in the hospitality industry, and has family ties to the rental industry — said it’s too soon to pinpoint the reason for the softness in the market.
“I think it’s too early to tell if there’s one definitive factor,” Cyr said. “I think as it relates to short-term rentals, we’ve never had an occupancy tax on this. We went from having no tax to having a tax on it; I’m sure there’s some sticker shock.”
He also noted that with the increasing ease and popularity of online sites, from Vrbo to the Cape’s own WeNeedAVacation.com, more homeowners have been trying their luck at renting out their properties. And some homeowners may be losing out with all the new competition.
“The tax is definitely going to force owners to do work on their properties, get them remodeled or at least updated if they’re going to rent,” said Cape real estate agent Joe Baker. “People are buying them because they have all these shows on TV. There’s a lot of people doing it now, thinking it’s a get-rich-quick.”
Northcross, the chamber CEO, noted the Cape has had rapid growth in short-term rental units.
“It doubled in three years,” she said. “So we could be looking at supply versus demand.”
And despite the hype, she thinks the housing and economic trends are probably more to blame than the sharks. In May, she said, her organization conducted independent focus groups to gauge whether Cape visitors would be kept away by fear of sharks. No one said yes, she said; instead, they said they’d limit themselves to waist-deep ocean water.
What’s more, she noted, hotel bookings are also down in other places in Massachusetts — from Plymouth to the Islands to the Berkshires, she said.
“Obviously, some consumer behavior is being changed,” she said, “because the Berkshires are down and they don’t have sharks.”