Alert June 26, 2018

New Short-Term Rental Regulation in Boston

Summary

On June 13, 2018, the City of Boston adopted a new City Ordinance to regulate so-called short-term rental housing units which commonly use certain internet home-sharing platforms such as AirBnB or HomeAway.  Prior to the adoption of this Ordinance, short-term rental housing units were largely unregulated in Boston. The Ordinance will take effect January 1, 2019. 

The most significant consequence from the Short-Term Rental Ordinance is that the Ordinance bans the listing of “investor units” – housing units by owners who do not live in or directly adjacent to such units. According to the mayor’s office, of the 5,500 active listings for Short-Term Rentals in the City, 2,000 were “investor units.” Explaining his support for the Ordinance, Mayor Walsh stated, “[m]y goal in regulating short-term rentals has always been to responsibly incorporate the growth of the home-share industry into our work to create affordable housing for all by striking a fair balance between preserving housing while still allowing Bostonians to benefit from this new industry.” Those in favor of the Ordinance believe that it will deter and prevent remote operators and owners from monopolizing Boston’s housing market with short-term rentals, which, according to a 2016 UMass Boston study, have driven up rent prices 0.4% in the already pricey Boston rental market.  

The Ordinance narrowly defines allowable “Short-Term Rental” units as “Home-Share Units” (rental of an operator’s entire primary residence home with no more than five-bedrooms), a “Limited-Share Unit” (rental of up to three bedroom units within a primary residence with the owner present), or  “Owner-Adjacent Units” (rental of a complete dwelling unit within a two- or three-bedroom multi-family home, with the owner occupying at least one of the remaining dwelling units). Rental of any unit designated as “affordable housing” by the City of Boston are specifically forbidden. All permissible Short-Term Rental units must be registered with the City on an annual basis. Existing licensed lodging houses, bed & breakfasts, rentals to serve hospital stays, and units for institutional or business stays of at least 10 days (furnished units where an agreement exists between a building owner, a corporate housing operator, and an institution or business for the temporary housing of employees or other individuals affiliated with such institution or business) are exempted from the Ordinance, and units currently contracted for short-term rental as of June 1, 2018, are grandfathered either until the end of any such contract or September 1, 2019, whichever comes first.

The Ordinance will have the significant effect on the use of “home-sharing” or short-term rental platforms in multifamily developments in Boston and may impact corporate housing operators. Further, other communities in Massachusetts and across the United States may take Boston’s lead in regulating such platforms in this manner.

In addition, the Massachusetts State Legislature is moving toward the passage of new regulation that would extend the 5.7% state hotel tax to Short-Term Rentals and that would allow cities and towns to levy their own additional usage taxes. As of the writing of this alert, each of the State Senate and House have passed their own versions of a new Short-Term Rental tax bill and are presently engaged in negotiations to pass a compromise bill before their session ends on July 31, 2018.

Short-term rental regulation is on the rise nationwide. We urge any clients considering investing in or commencing a short-term rental platform to do their due diligence on the local politics of every urban center under consideration. 

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For more information or to discuss how this regulation may affect you, please contact Craig Todaro in Goodwin’s Real Estate Industry and Real Estate Finance practices (ctodaro@goodwinlaw.com or 617-570-1831) or Jennifer Schultz in Goodwin’s Real Estate Development & Permitting group (jschultz@goodwinlaw.com or 617-570-8215)