Nantucket's Short-Term Rental Tax Revenue Hits New Record In Summer 2023

Short-term rental occupancy tax revenue collected by the town of Nantucket over the summer hit a record high in 2023. 

Short-term rentals operated on the island in June, July, and August generated $4.8 million in taxes, according to figures obtained by the Current from the Nantucket Finance Department. That represented a 10 percent increase over the same period last year and was the highest amount collected during any quarter since the state implemented the short-term rental tax in 2019.

Room occupancy taxes collected by the town from traditional lodging establishments like inns and hotels decreased to $2.2 million for the summer, down 6.7 percent from the same period in 2022. 

Even as the debate over how to regulate or restrict short-term rentals on Nantucket has raged over the past year, the island's real estate firms have been stating that the number of such rentals are down significantly in 2023. If that is the case, how could short-term rental occupancy tax revenue be at an all-time high? The answer depends on who you ask.

"It's not because rentals are up, it's because they're so expensive," said Penny Dey, president of the Nantucket Association of Real Estate Brokers. "We don't have hard data for this year yet, but I can tell you anecdotally and statistically with my knowledge, rentals were down somewhere between 12 percent and 22 percent from last year."

Dey emphasized the rising rates of short-term rentals - not a proliferation in the number of rentals available - are what is driving the tax revenue higher.

"It's calculated on the finance, not the number of leases," Dey said. "This is what's been happening, because of the pandemic, accommodations got a lot more expensive than they were. Unfortunately, the cost of renting here has continued to escalate, which is the case with so many desirable places. This is not just Nantucket dealing with this. These places people wanted to be where they felt safe during the pandemic and the number of owners that have chosen not to rent after the pandemic, that means more financial pressure on what is for rent."

But Julia Lindner, the executive director of the political action group ACK Now, believes the rise in short-term rental tax revenue during the summer of 2023 reflects an increase in the number of bookings on Nantucket. Over the past three years, ACK Now has sponsored a series of bylaw proposals to regulate and restrict short-term rentals on the island and has funded lawsuits by Nantucket homeowners against their neighbors in an attempt to have a court rule that short-term rentals are prohibited in residential zoning districts.

Lindner pointed to data from AirDNA, a short-term rental research and analytics company, that showed "platform bookings" of short-term rentals on Nantucket - those made on online sites like Airbnb and VRBO - were up 21 percent for June, July, and August of 2023 compared to last year.

Those bookings can be separate and distinct from the short-term rentals available through Nantucket's real estate firms.

"Overall, it's not surprising given the numbers coming out of the platform bookings," Lindner said of the short-term rental room occupancy tax increase for the summer of 2023. "Although the realtors haven't been talking about it publicly, it seems from the numbers you're seeing and if their (rentals) are down, they're losing market share to the platforms. The platforms blew it out of the water compared to last year. If the realtors weren't up, I can only conclude they're losing market share."

Lindner and ACK Now have been pushing for more restrictive regulations on short-term rentals than those proposed by the town work group that is sending a series of bylaw proposals to the Special Town Meeting next month.

"We were told early on that we were going to be down huge, but the numbers are not showing that," Lindner said. "Part of the narrative is that the market is going to self-correct, but that's not at all what's happening."

The data underlying short-term rentals on Nantucket has been one of the most contentious points in the ongoing debate over whether and how to restrict them on the island. The Nantucket Short-Term Rental Work Group, appointed by voters at the 2022 Annual Town Meeting, along with its consultants spent many hours attempting to dissect and analyze data available from the state short-term rental registry, AirDNA, and the Nantucket Association of Real Estate Brokers, to establish common ground and a baseline for its recommendations.

Nantucket's local option room occupancy tax allows the town to collect 6 percent of the revenue generated by operators of both traditional lodging establishments and short-term rentals. The state collects another 5.7 percent

Since the state legislature and Gov. Baker approved the legislation that subjects short-term rentals to the room occupancy tax in July 2019, the revenue has become a significant portion of the town's budget. In FY2023, the town received room occupancy tax revenue from traditional lodging establishments and short-term rentals in excess of $13.2 million, more than 10 percent of the town's total revenue.