GREAT BARRINGTON — The town is making money from its tax on short-term rentals, and officials have thrown this into the debate as they move closer to hammering out regulations that would limit this revenue stream.
For those who support the tightest regulations, the loss is OK. They say it might even be surpassed by people who live full time in homes that might otherwise have been used as short-term rentals — if those are bought by year-round residents.
Others say the town needs every dime from sources other than real estate taxes, since residents also are clamoring for a way to lower those.
From September 2020 through December 2021, more than $404,000 in revenue from a 6 percent tax on short-term rentals landed in town coffers, according to the Massachusetts Department of Revenue. The agency recently began breaking out short-term rental data from all lodging revenue in a community.
Finance Committee Chairman Philip Orenstein presented this at last week’s meeting, saying he did so in response to requests for more data as the community continues a fiery discourse that now involves a petition and an alternative, less restrictive, bylaw.
It might be helpful to see some numbers, Orenstein said.
“I don’t particularly think this moves the discussion one way or the other in a meaningful way,” he said, noting that the good news is that tax revenue for the current fiscal year will be higher than for the last fiscal year.
Taken together with traditional lodging tax revenue for the same time period, the grand total comes to more than $1.1 million.
On Monday, the Select Board will continue to parse the proposed bylaw, word for word, to come up with something vote-worthy. Residents still will have to approve it at annual town meeting in May.
The bylaw, as it now stands, would limit renting a home to 90 days a year in an effort to deter investors from snapping up housing stock and, in theory, driving up real estate assessments and prices. The 90 days applies only if the homeowner is not present.
The board is under pressure. It appears that regulation is its only option for an attempt at market control that might ease the housing crunch.
In Great Barrington, where the median single-family home price is $348,400, the problem is driven by a slew of factors. Most recently, the coronavirus pandemic had city dwellers buying fast and moving here full time. Many second-home owners came to live here year-round.
Inventory is low, demand is high, and this has sent prices for homes and long-term rents soaring — all amid national inflation speeding forth at a rate not seen in 40 years.
Opponents of the 90-day limit say it’s hard enough to make a living in the Berkshires. Some residents have said publicly that they use their rental income to pay their child’s college tuition. They say the town should not interfere in people's investments, their livelihoods, and that regulations also will keep the working class from earning by renting.
They also say what's needed is more new affordable housing, and that the regulation won't lower home prices.
Yet, there is some evidence that it could help, even if a little.
Proponents of 90-day limits point to research showing the “Airbnb effect” — where short-term rentals proliferate and housing and long-term rental prices rise. Various studies of different areas in the U.S. show increases from 0.76 percent to as much as 11 percent, in New York City, in areas with an increase in short-term rental activity. Granted, the evidence comes from afar.
Back to the revenue question: San Francisco found that a single short-term rental taken out of the housing stock costs the city up to $300,000, which is more than from total visitor spending. The city’s ordinance requires a homeowner to be a permanent resident of the home they want to rent — in this case, spending at least 275 nights a year there.
In the other direction, a restrictive Airbnb regulation might also cost a town revenue and long-term economic growth, according to a study published in November by the Harvard Business Review. The study found that restriction "directly leads to less residential development, less growth in home prices, and thus less tax revenue for cities (to the tune of $40 million per year in the U.S.)."
Still, there is a feeling among some that a restrictive bylaw is worth putting on the books, even if its success is hard to measure.
“It’s an intuitive, rational connection, but one that is impossible to quantify,” Lenox Town Manager Christopher Ketchen said about the town’s “compromise” bylaw enacted in 2019. “There’s so much noise because of all the different factors. It’s like asking, ‘How much does this cup of coffee contribute to my mental acumen?’”
Since a tax on the rentals began the same year the town approved the bylaw with a 75-day limit — and option to apply for 35 more — there isn’t historical revenue data to show any losses, Ketchen said.
In Great Barrington, officials and those who rent houses say the short-term revenue will most certainly outpace that in the Department of Revenue report, since, during the first year of the pandemic, renters fleeing cities stayed for long periods, reducing the number of times the rental was taxed.
“If we pass this [bylaw], we’re willing to lose the revenue,” said Ed Abrahams, a Select Board member who opposes the 90-day limit and doesn’t think it will ease the crisis. “Some of the money will shift to hotels.”
Leigh Davis, the Select Board vice chair who is the driving force behind the regulation, and who sparred with Abrahams at a recent meeting, agrees, and says the loss will contribute to more revenue in the long run.
“One short-term rental could [instead] be a long-term home for a resident that will be shopping and frequenting restaurants and buying clothes,” she said. “A lot of the Airbnb people … are cooking in the kitchens and not going out to restaurants to save money.”
As to the effect on neighborhoods, Davis points to a case in point: The little white house around the corner from her that could have been a “starter home." Instead, it was bought by someone intending to “Airbnb it.” She also wants to remind residents that they still can rent out rooms or separate dwellings on their property all year long with no restrictions.
Revenue from the rentals still will come in, she noted — she is not proposing an outright ban. But, what she also will propose is that a 3 percent additional local “impact” tax be tacked on to rental stays, something the state allows, and which Egremont is now doing.
Short-term renters then would pay a total of 14.7 percent, which includes the local tax and the state’s 5.7 percent.