An Outside-the-Box Thought on Proposals to Tax Vacation Home Rentals

Monday, August 10, 2015

Thirty-two or thirty-three years ago, I can’t remember exactly, friends of ours bought a second home on Cape Cod, in the town of Dennis.  It was an older, kind-of-smallish home, nothing fancy, and just a short walk from the beach.  They paid $39,000 for it. 

If that house were sold today, it would probably go for eight or nine times that price.
Around the time our friends bought into Dennis, my wife and I had been renting a cottage in Chatham for three weeks every July with my sister-in-law and her husband.  We must have done that for four or five years straight.  The house was on Sea Shell Lane, a narrow dirt road leading down a steep hill to the beach.  We paid the owner, a couple from Wrentham we never met, $350 a week.

I don’t know what it would cost to rent a place in that neighborhood today but it would probably be in the vicinity of $2,000 a week, maybe more depending on the house.
A couple of weeks ago, I drove over from Harwich, where my sister-in-law now owns a house, to take a look at Sea Shell Lane, as I often do when I’m on the Cape.  I like to call up the memories of when my wife and I were young, our children were little, and we were totally happy, together, by the ocean during the ripest part of summer.  It was not unusual in those days for me to go hunting for pennies to roll up so I’d have enough to buy a six-pack of Schlitz.

I have to use my imagination now to see the cottage as it was in those days. Twenty years ago, it was sold to a family that immediately enlarged it and turned it into the kind of fancy beach house that could be featured in the Sunday newspaper magazines. 
They don’t build little cottages on Cape Cod any more.

What Cape Cod has, everybody wants.  Countless souls dream of a home on the ocean, near the ocean, or tucked in a grove of pines and oaks next to one of those fresh-water kettle ponds that formed on the Cape when a monstrous block of ice melted 10,000 years ago.  There is not enough of Cape Cod to go around for all who want to own or rent a piece of it.  So the cost of being there keeps going up.  The contractors who build and repair and remodel homes, and the realtors who sell them, are always busy.  A guy in a pick-up who’s good with his hands gets his price there.
To know Cape Cod is to understand not only how precious it is but also how fragile.  It is one long, curving, immense deposit of sand -- a peninsula built from glacial run-off as the ice sheets covering this part of North America disappeared in the slow, pre-historical warming of our planet.  In many places, the Cape is covered by a thin layer of topsoil, which supports a handsome-but-hardly-robust tree cover.  Its edges are mostly exposed dune.

Even when the sea is relatively calm, it chews on those beaches, nowhere more relentlessly than on the outer Cape, the far, eastern wall of it that runs from Chatham up to Provincetown.  One loves the Cape more because its splendor is ever under threat.
A narrow arm of sand containing one aquifer of fresh water is not the most hospitable place to build a bunch of towns and to pack those towns every summer with hundreds of thousands of super-consumers who drive big boats and big cars, who need to live in houses with two (or three!) full baths, who must have access to supermarkets, pharmacies, restaurants and liquor marts, and who panic when the trash haulers fail to make their second weekly pick-up.  Where super-consumers gather, super-trash results.  

Local officials have to worry about funding all of the infrastructure and services needed to sustain Cape Cod’s growing population and popularity.  They need more money every year to protect the resources essential both to human habitation, such as fresh water, and to the unique appeal of the Cape, such as open spaces and clean beaches.
It’s no surprise that many of those officials now want the authority to collect taxes from owners who rent their homes to vacationers.  Two bills are pending in the Massachusetts legislature that would give towns on Cape Cod and the Islands (Martha’s Vineyard and Nantucket) the option of levying a new tax on summer rentals.  Town managers and select persons from Sandwich to Edgartown and from Yarmouth to Wellfleet feel they really need a new, substantial source of money.

How substantial?  No one knows for sure because there’s no system in place to track summer rentals across the region.  A study commissioned last year by the Island Housing Trust on Martha’s Vineyard found that between 20% and 25% of homes on the island are rented at some point in the year, and that a 5% tax on those rentals would generate as much as $6.3 million per year if both summer and off-season rentals were taxed.
A long-time innkeeper on the island was quoted in a recent article in the Martha’s Vineyard Times as saying, “I don’t think someone renting a place for $5,000 a week is going to balk at $250 (in new rental taxes).”  No doubt that gentleman is correct.

My wife and I just spent a significant amount to rent a four-bedroom house in Harwich for two weeks so that our entire family, which includes six grandchildren, could collectively enjoy a vacation.  The price was worth it: we had an incredibly good time from start to finish. 
If, next year, we have the money to rent that house again and Harwich has the newfound ability to hit us with a tax equal to 5% of the rent, we’d probably do it again.  I wouldn’t be happy with the tax because it has the feel of a money grab: townies squeezing outsiders because outsiders have the dough, townies want it, and townies can take it.  But I’d pay because it’s just so good to be on Cape Cod in July.  There’s nothing I know that can compare to it. I do, however, have one suggestion for the leaders of a Cape Cod that is increasingly taking on the look and feel of a rich man’s preserve:
When you start collecting that 5% or 6%, or whatever it will be, on every rental, and when the money starts piling up in those new rental tax accounts, please give some thought to creating with that money colonies of little, old-fashioned summer cottages all over the Cape and the islands, and to renting those cottages cheaply to low- and moderate-income families from Massachusetts, folks from Boston, Everett, Brockton and the like.

I even have a suggestion on where one of those colonies might go: Morris Island, in Chatham.  The miles of beaches on Morris Island are public, while the interior of the island is privately owned and taken up with estates owned by millionaires.  There’s a de facto limit on access to Morris Island’s beautiful shoreline via the small number of public parking spaces near the trails leading to the beaches, a common tactic in ocean communities.

After a few years of collecting rental taxes, Chatham could buy one of those Morris Island properties, take down the Architectural Digest-worthy behemoth that stands there, and replace it with 10 or 12 little cottages.  It would not be hard to find families that have never experienced Cape Cod and are eager to spend a week in one those new bungalows by the sea.
It is in our nation’s interest, I would argue, to have every child swim in the ocean, play on a beach, and breathe the salt air, night and day, at some point in their early years.  The ocean is the last wild and changeless thing most of us will ever be able to touch.  Something indefinably good happens when a person immerses himself in earth’s eternal waters.

We are the Bay State.  We should be as willing to spend tax dollars to assure that every child in Massachusetts can experience living by the sea at least once as we are to spend it on the conventional aspects of their education.

UPDATE: In March of 2016, the legislature's Joint Committee on Revenue gave a favorable report to House Bill 2645, An Act Providing for Local Aid Enhancement, which proposed to give the state and its municipalities the authority to collect taxes of 5% and 6%, respectively, on vacation home rental proceeds.  The bill was subsequently referred to the House Committee on Ways & Means, where it died on July 31, 2016, upon the adjournment of the 2015-16 legislative session.












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