Like many larger cities in the United States, Boston residents often offer up their homes or apartments to tourists looking for inexpensive short-term rentals. These short-term rental arrangements are currently unregulated in Massachusetts. However, recent negative press for services like Airbnb has prompted Massachusetts legislators to pursue regulating and taxing short-term housing rentals.
Early this year, Massachusetts State Representative Aaron Michlewitz proposed a bill that would regulate short-term housing rentals, like those offered through Airbnb, Flipkey and Homeaway. As drafted, House Bill 2618 would amend Chapter 64 of the Massachusetts General Laws to create a new Chapter 64M.
Similar to the tax imposed on hotels, the proposed law would impose a 5% excise tax on short-term rentals and would allow local cities and towns to impose their own excise tax, up to 6% (Boston is permitted to impose a 6.5% tax). Like a receipt from a hotel, the owner of the short-term rental would be required to give a detailed statement setting forth the amount collected in taxes.
If passed, the new law would require the Department of Housing and Community Development to establish a “Short-Term Residential Registry.” Each city and town in Massachusetts would have to develop a system for evaluating applicants by December 31, 2015. Before renting a short-term rental, owners would be required to pay a $50 fee and apply for a two-year license with their city or town.
In addition to owners offering their homes as rentals, the law would impose obligations upon listing websites like www.airbnb.com. Those sites would be required to notify potential customers of the existence of the new law, the requirements of receiving and maintaining a short-term residential license, and the registration number of the residential unit. A website that fails to provide such disclosures can be subject to a $1,000 per day fine.
An owner who offers a short-term rental in violation of the proposed law would be guilty of a misdemeanor and subject to a $1,000 fine. Moreover, if a city, town or the State Attorney General institutes a civil action against a person or entity in violation of the proposed law, the violator could be subject to a $1,000 per-day civil penalty. The new law would also allow an “interested party” (e.g. a homeowner’s association) to join the suit. Meaning, if a city, town or Attorney General commences an action, an affected homeowner’s association could seek its own relief against the violator. In that scenario, the violator may be forced to pay the interested party’s attorneys’ fees and costs.
If you currently rent your home on a short-term basis, or are considering doing so, make sure you continue to monitor House Bill 2618. If it becomes law and you fail to comply, you could be subject to substantial penalties.