The Finances Of Short-Term Rentals

To the editor: Accelerated growth on Nantucket is affecting all residents. Many folks are discussing how Nantucket's popularity with its sky-high house prices is causing a loss of community members because they cannot find affordable housing.

Furthermore, the Island's growth has greatly impacted our local government. The Town's budget is 40% larger than five years ago. The cost to run the landfill is up over 46%. Other increases include the accumulated debt that pays for significant capital expenses.

The growth comes from different areas. An increase in the year-round population. The need for more services. The surge of short-term rentals (STRs) in residential neighborhoods. We could discuss the many nuances of STR ownership – from definitions to locations.

However, two points are clear. Investor-owned, commercial STRs are businesses that do not belong in residential neighborhoods, and investor-owned, commercial STRs should be taxed at commercial rates like all other businesses on our island.

Although the Town shares in the State’s 5.7% room occupancy tax revenues, a few additional financial facts are noteworthy.

1. Commercial real estate (property) tax rates are 1.7x higher than properties assessed as residential. Therefore, the Town’s real estate tax revenues are lower by ~70% for each property taxed as residential that should be taxed as commercial. In effect, commercial businesses should bear a more considerable tax burden than local residents. In addition, for those local residents who elect a residential exemption, this tax difference could be even higher.

2. Local real estate taxes are “zero-sum”. If investor-owned, commercial STRS would be taxed at commercial, as opposed to, residential rates, the real estate tax burden for local residents would decrease. In essence, the way things stand now, from a real estate tax perspective, local residents are subsidizing investor-owned, commercial STRs without receiving the commensurate financial benefit. The point is clear. Since investor-owned, commercial STRs are not paying their fair share of the tax bill, Nantucket taxpayers are subsidizing commercial interests. If residents wish to rent their homes that is up to them. But investor-owned, commercial STRs (“mini-hotels”) should be located in commercial districts, and they should be taxed at commercial rates.

Although the members of the short-term rental work group (STRWG) might be well-meaning people, their output memorializes investor-owned, commercial STRs throughout our Island. As such, until the financial fairness issues are addressed, I urge folks to vote NO on Article 2 at the November 7th Town Meeting.

Thank you very much.

Sincerely,

Eric Silfen MD