City Adopts Short-Term Rental Community Impact Fee

City Adopts Short-Term Rental Community Impact Fee

–Will Dedicate 100% of Revenue to Affordable Housing Projects

Gloucester Mayor Sefatia Romeo Theken today announced that the City of Gloucester has voted to adopt a 3% community impact fee on short-term rentals.

The City will dedicate the entirety of the fee collected for affordable housing initiatives and projects.  Gloucester’s commitment to use that revenue solely for affordable housing projects is significantly higher than the 35% minimum requirement set by the State.

On December 28, 2018, Governor Charlie Baker signed An Act Regulating and Insuring Short-Term Rentals which sets forth a comprehensive framework for the regulation of short-term rentals.  The new law imposes State and local excise taxes on short-term rentals that are rented for more than 14 days, but not for more than 31 consecutive days, in a calendar year starting on July 1, 2019.  This taxation applies to any rental contract entered into, on or after, January 1, 2019.  Under the new law short-term rental operators are also required to register with the State.

Mayor Romeo Theken’s Administration had been following developments on this new law since earlier this year.  The proposal to adopt the community impact fee was introduced in late July by At-Large City Councilor Melissa Cox through a City Council Order (CC#2019-027).  On Tuesday, August 27, the City Council voted unanimously to impose that fee.

Mayor Romeo Theken said, “Affordable housing is an important asset to any community and is a constant priority for my administration.  It’s crucial that working families have a safe and affordable place to live.  Although Gloucester continues to progress in planning to support affordable housing in the City we face hurdles.  We hope this revenue will serve as the catalyst for major developments that will enhance housing options.”

The community impact fee goes beyond the 6% local lodging excise tax Gloucester already collects on these rooms, as well as hotels and inns.  The revenue from that local room occupancy excise is general fund revenue and may be appropriated for any municipal purpose.

Both the local excise tax and community impact fee will be paid by the operator (proprietor) directly to the Department of Revenue (DOR) and DOR will then distribute the local shares to Gloucester.

The City has reported its acceptance of the community impact fee to the Division of Local Services and expects the fee to become effective on October 1, 2019.  The fees collected will then be distributed by the DOR to Gloucester on the current quarterly schedule.

Jim Destino, the City’s Chief Administrative Officer said, “At this time it is unknown how much money the City may collect.  We expect there will be a seasonality to the collections and distributions.  Changes to the original law will make it easier for both the operators to remit the excise and the City to receive it.  We value this new revenue and feel that it levels the playing field with the already established lodging establishments in the City.”

Additional information and FAQ’s on the law that expanded room occupancy excise to include short-term rentals and changes that apply to traditional lodging establishments can be found here:  https://www.mass.gov/info-details/room-occupancy-frequently-asked-questions#definition-faqs–