The island community has been working on many initiatives to help solve the housing crisis. Big solutions are needed, but will take time. Meanwhile, we need all the help we can get to ensure year-round islanders find a stable, affordable home. That’s where the Community Impact Fee comes in.
In 2019, when the Baker Administration expanded the lodging tax to include short-term rentals, it directly acknowledged the impact of STRs on housing and infrastructure. And it offered municipalities a number of tools to find a better balance.
It’s common knowledge that the State collects a 5.7% lodging tax, while municipal governments have the option to impose up to an additional 6% (Nantucket’s current policy is 6%).
But the State also created other options, including the Community Impact Fee, targeting a subset of short-term rentals that put additional pressure on local housing, water, sewer, roads, etc. This local option fee can be up to 3%, and it ONLY applies to professionally-managed STRs. The State defines these as STRs in a multi-property portfolio of two or more investor-owned units.
Here’s how it can help in the near term. Local governments must set aside at least 35% of the tax collected to pay for affordable housing or infrastructure projects.
In the last year, eleven cities and towns have adopted the Community Impact Fee, including Amherst, Boston, Cambridge, Gloucester, Plymouth, and Swampscott.
According to the State’s registry, 328 STRs on Nantucket qualify as professionally-managed and would get assessed a Community Impact Fee, if we elected this option. How much could the tax generate? If these properties rented for eight weeks at Nantucket’s average daily rate of $921 sourced from AirDNA, they could make $17M in rental income. Apply the 3% Community Impact Fee, and the Town would receive roughly $500,000 per year. Voters could elect to have all of it pay for housing and infrastructure projects.
The Community Impact Fee could be part of a comprehensive plan to address the way STRs are shaping the island and its community. We’ll be talking more about the impact of investor-owned STRs on housing soon.