The House on March 22 approved and sent to the Senate a much-anticipated bill to govern the rapidly changing business of short-term rentals through services like Airbnb, HomeAway and Vacation Rental by Owner.
The bill would create safety and regulatory measures and tax rentals in a similar manner to how hotels and other traditional accommodations are taxed under the state’s room occupancy statute.
The bill (H. 4314, as amended) would provide the state – and cities and towns, at local option – with a new source of revenue, expected to begin in fiscal 2020.
The new short-term rental rules would not apply to units already covered by the current room occupancy statute (Ch. 64G), such as bed and breakfasts. The rules would not cover units rented for 28 consecutive days or more, or units where the rent is less than $25 per day.
The bill would create three levels of hosts. A “residential host” would be defined as anyone who is renting one or two units. An “investor host” would be anyone who rents three, four or five units, and a “professionally managed host” would be someone renting six units or more.
The tax rate on short-term rentals under the new Chapter 64O of the General Laws would be based on the type of host: 4 percent for residential host units, 5.7 percent for investor host units, and 8 percent for professionally managed host units. The maximum local-option amounts would be 5 percent, 6 percent, and 10 percent, respectively. This compares to a combined state-local room occupancy maximum for hotel stays of 11.7 percent under Chapter 64G, with higher amounts allowed in six cities and towns for convention center financing purposes.
The local excise would be adopted through a vote of the local legislative body and would take effect in the calendar quarter beginning 30 days after the local vote.
With the excise sections slated to take effect one year after the effective date of the proposed law, it appears that collection of new state and local revenues from short-term rentals would not commence until fiscal 2020. Cities and towns would be required to dedicate 50 percent of the revenue collected from professionally managed host units to local infrastructure or housing programs, with at least half of the housing amount dedicated to low- and moderate-income housing.
The House bill would require anyone offering a unit for rent to register each unit on a registry maintained by the Department of Revenue.
Cities and towns that adopt the local tax would be required to adopt local ordinances or bylaws requiring units to be inspected and to conduct inspections within 60 days after a unit is registered. Cities and towns could require that hosts demonstrate that units for rent are not the subject of any local code enforcement actions. The cost of inspections would be charged to the unit host.
The bill would allow local restrictions on rentals, including the number of days a host may rent a unit and a requirement that a unit be the host’s primary place of residence. Cities and towns could also require that a host obtain a local business license.

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