State Legislators, Governor Find Last-Minute Compromise on Short-Term Rental Bill:Ordinance Goes into Effect in Certain Areas This Week

Both houses of the state legislature and Gov. Charlie Baker found a sudden compromise at the end of last week’s two-year session to push through the stalled short-term rental bill – which Gov. Baker signed into law on Friday, Dec. 28.

The bill has been a long time in the making and has been shepherded through the legislature for years by South End Rep. Aaron Michlewitz, who was happy to see the compromise reached. Michlewitz had told many in the neighborhood this month that the bill was very close to passage, and was in the process of being ironed out with Gov. Baker.

That indeed was the case in the end, and the final version left intact several key provisions that were championed in the neighborhoods – particularly the ability of the City to levy taxes and also the ability of the City to keep a detailed registration of all short-term rentals in Boston.

“Our issue has always been the state law needs to be structured so it makes a framework for taxation and regulation at the local level,” said Steve Fox, moderator of the South End Forum and a member of ADCO (Association of Downtown Civic Organizations). “That’s what this law does. We’re really, really pleased with that framework they came up with and we’ll now be able to tax. In Boston, 6 percent is nothing to sneeze at.”

The Massachusetts Lodging Association was also happy with the new state law, noting that it leveled the playing field for traditional lodging establishments.
“We are pleased and gratified that the governor and legislative leaders came together in a bipartisan way to advance this critical measure into law,” read a statement from them on Dec. 28. “This is a tremendous victory for municipal leaders and the people of Massachusetts who have been waiting for years while Airbnb rentals have exploded, resulting in skyrocketing housing costs and disruptions in local neighborhoods. By adopting a more level playing field between short-term rentals and traditional lodgers, lawmakers made great strides toward a more fair and sensible system.”

Short-term rental companies were not happy with the new law, just as they weren’t happy with the Boston ordinance last year that was voted into law. AirBNB has sued the City of Boston to prevent some aspects of the ordinance from going forward.

However, on Tuesday, Jan. 1, the City of Boston registry was up and running on its website – calling for short-term and long-term rental owners to register their units and determine if they are eligible to do so.

The new state law does not affect Boston’s ordinance, but does give it some teeth, particularly when it comes to local taxation. Fox said ADCO has been advocating for the state law so that the issue of taxation could be solved.

“We believe there will be far less ability to not scam the system or avoid registration if there’s a potential tax rap with it,” he said. “It’s one thing to fail to register a unit, but it’s a different category of non-compliance if there’s a tax rap attached to it…It provides a bigger stick.”

Last summer, Gov. Baker had sent the state law back to the legislature, mostly out of concerns for the registry requirement that would put specific addresses of all units. That was something that the Boston ordinance had championed, and something that went into effect this week. However, the final version of the state law does allow for a statewide registry of all units with specific addresses.

The new law also levies a 5.7 percent state tax on all short-term rental units, and allows cities and towns to levy their own local taxes as well. In Boston, it is proposed to put an additional 6 percent on each short-term rental unit.

The trade-off with the registry for the governor seems to be a provision that allows for anyone renting out a unit for 14 days or less to avoid the taxation portion of the law. It was uncertain, but it initially did appear that those units would have to participate in the statewide registry.

The Boston ordinance – some of which is held up by the lawsuit – did go into effect on Jan. 1. It requires that all units be owner-occupied, and no one can book a stay 28 consecutive days or more and still be considered a short-term rental. The fee structure of the new Boston ordinance comes in three categories. A shared space with a homeowner is a $25 annual fee, while an owner’s unit or an owner-adjacent unit is $200.

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