Study: Short-Term Rentals Contribute Little Benefit To Island Economy

A new study funded by the political action non-profit group ACK Now concluded that short-term rentals provide little benefit to the Nantucket economy and that year-round households spend three times more on the island than seasonal residents and visitors.

ACK Now, which has spent the last three years unsuccessfully attempting to pass new regulations and restrictions on short-term rentals on Nantucket, commissioned and unveiled the study less than two weeks before island voters will convene at a Special Town Meeting to once again weigh in on bylaw proposals related to short-term rentals.

The study was immediately lampooned by pro-short-term rental interests such as the organization Nantucket Together and the Nantucket Association of Real Estate Brokers as “misinformation” and “disingenuous” coming out so close to the date of the Special Town Meeting on Nov. 7th.

ACK Now, founded by seasonal resident Peter McCausland, has continually emphasized its assertion that short-term rentals - particularly “full-time” and corporate-owned short-term rental properties - are having a detrimental effect on Nantucket’s year-round housing market and the overall quality of life in residential neighborhoods.

“This study shows that the year-round community is the economic engine of the island,” said Julia Lindner, executive director of ACK Now. “ It also dispels the myth that STRs significantly benefit the local economy. Also, the amount of money taxpayers have given to the town to help address the housing crisis far outweighs whatever lodging tax revenue is generated from STRs.”

ACK Now hired the consulting firm FXM Associates, which specializes in economic planning and research, to conduct the study. The firm based its analysis of the economic impact of short-term rentals on data from the U.S. Bureau of Economic Analysis, the U.S. Bureau of Labor Statistics, the 2020 U.S. Census, and a retail opportunity/gap analysis from Claritas Site Reports, a subscription data source. That data, according to the study, showed that in 2022 year-round island households spent $635 million on Nantucket compared to seasonal residents and visitors at $210 million. It found that short-term rentals contributed 5 percent of all seasonal resident and visitor spending and 1 percent of all spending attributable to year-round and seasonal units.

Another conclusion of the study was that while there is value to year-round residents who derive income from short-term rentals, most of the money leaves the island since approximately 80 percent of short-term rentals are owned by individuals and entities based outside of Nantucket.

Read the executive summary of the report by clicking here

“The results are intuitive because seasonal residents and visitors don’t spend nearly as much money as year-round residents on automotive-related, health and personal care, education, and financial services, in addition to the food and consumer goods bought by both year-round and seasonal residents and visitors,” said Frank Mahady, the principal of FXM Associates. “Consequently, local businesses overall benefit more from year-round residents, who also provide most of the workforce to supply their business operations. If housing is inadequate to support the year-round resident and business community, the overall economy of the island will suffer regardless of the number of visitors.”

Nantucket Together co-founder and president Kathy Baird said the timing of the study was disingenuous given that all the public forums organized to brief voters ahead of the Special Town Meeting had already passed. Baird pointed out that the study claimed to have been peer-reviewed, but did not specify by whom, and that some of the cited sources could not be verified because they are from paid sources.

“Basing conclusions on false assumptions with major financial information explicitly excluded can only yield questionable results,” according to a statement from Nantucket Together sent to the Current. “How can you justify leaving out the impact of the short-term rental taxes on the economy of the island when it represents 10 percent of the town's revenue and is paid for by the visitors? How can you assume that 100 percent of the gross income to short-term rental owners who are not year-round residents, goes off-island? Even if you discount the short-term rental income that goes to island caretakers, landscapers, cleaners, trash haulers, propane delivery, home renovations, and repairs, how can you point out, and then ignore the 531 real estate agents who derive income from short-term rentals to support their families as insignificant?”

The Current posed a series of questions to Lindner about the study, including how the authors took into account individuals on Nantucket who derive most or all of their livelihoods from short-term rentals, such as cleaners, property managers, landscapers, and others engaged in the industry.

“We recognize the value that short-term rentals provide local families and their contributions to the local economy,” Lindner said. “However, this study only compares total resident and visitor spending and found that the year-round population spends three times more than visitors, which includes seasonal residents and other visitors (of which STR visitors are a subset). The income earned by year-round residents in all occupations in considered at the macro-level and reflected in their local spending.”

How does the study track and account for investments in upgrading or renovating properties - for example, a person who owns a short-term rental using the proceeds from renting to pay a local builder/tradespeople to complete a project?

“This is a question worth exploring but not specifically addressed in our study,” Lindner said. “The income earned by Nantucket residents engaged in new construction or rehabilitation projects are obviously considered in how much they spend on the local goods and services addressed in this study.”

Just as the Current and others questioned the UMass Donahue Institute study on Article 60 in the run-up to Nantucket’s Annual Town Meeting in the spring because it was paid for by The Copley Group (which operates short-term rentals on the island), shouldn't we also question the conclusions drawn here given that ACK Now paid for this study?

“FXM Associates is engaged by some of the most reputable organizations including the Commonwealth of Massachusetts,” Lindner said. “More importantly, the value of this study is data sources that are documented in the analysis. The analysis is evidence-based, transparent, and reproducible by others.”

But Baird and Nantucket Together claimed there is no explanation or attached documentation that explains how the $635 million of year-round resident spending noted in the study is determined.

“Simply making a reference and requiring the reader to figure out where in the vast data set provided by the sources, that these facts are located, is unprofessional in a study and makes the citations questionable,” Nantucket Together stated. “Does that year-rounder spend include the businesses and individuals on-island who support the short-term rentals and purchase supplies on their behalf and bill them later? How is the spend of a 30-day renter separated from that of a 32-day or seasonal renter?”