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New Short-Term Rental Laws in Massachusetts - 31 days or less

New Short-Term Rental Laws in Massachusetts Q&A


Today, Massachusetts adopted a new law taxing and regulating the short-term rental market. The following information should help Realtors® navigate the short-term rental market under these new laws and regulations.

What does this new law require? 
The new law expands the state's hotel and motel tax to include the short-term rental of homes (condominiums, single family, multifamily, etc.). Massachusetts is one of the last states to adopt this type of tax. The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, personal, or business use. At the insistence of MAR, the new law only applies to short-term rentals, meaning ordinary tenancies, such as an annual lease or a tenancy-at-will, are not covered by this bill. 

Tax Structure
The short-term rental rate varies by locality and is the total of the following rates: 
  • State: 5.7%
  • Local: up to 6% (Boston 6.5%)
  • Cape Cod & Islands: includes additional 2.75% to fund Cape Cod and Islands Water Protection Fund 
  • A community impact fee of up to 3% may be assessed locally on professionally managed properties (Owners of two or more units in one town).
The law requires regulations to minimize the administrative burden on tax filings for those who only rent their unit five (5) months or less each year. 

Are there any exemptions in the law?
The tax imposed by the new law does not apply to properties rented for fourteen (14) days or less per calendar year. It is important to note that these properties are still subject to the other requirements of the law, such as insurance and registration. 

When will this law take effect? 
Rental contracts that were signed on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax. We anticipate that the Department of Revenue will issue guidance on how to handle the tax on bookings made on or after January 1, 2019. The law exempts from tax any 2019 rental contract that was completed on or before December 31, 2018.  

Does this apply to the units I rent? 
As stated above, the new law applies to all rentals for a period of 31 days or less. Ordinary rentals, such as an annual lease or a tenancy-at-will are not covered. The new law applies regardless of whether the owner rents the property themselves, hires a Realtor® to rent the property, or uses an online platform to facilitate the rental. 

Do I need to collect the tax? 
Most likely, yes. The law requires intermediaries (which includes Realtors® who post the property for rent online) who enter into a written agreement with the owner or operator to collect rent or facilitate the collection or payment of rent on behalf of the operator to collect and remit the tax. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department. This also means that a Realtor® who does not collect or facilitate the collection of rent on behalf of the owner or operator does not need to collect and remit the tax. 

Do I need to carry insurance for the listed properties? 
No. Although part of earlier versions of the legislation, the final law does not include a requirement that Realtors® provide any liability insurance for listed properties. This requirement was removed due to the advocacy of MAR. Owners, however, are required to maintain $1 million dollars in liability insurance to cover each short-term rental. Realtors® should be sure to confirm that any property they list for rent is properly insured by the owner.  The coverage is required to defend and indemnify the owner or operator and any tenants in the building for bodily injury and property damage. Realtors® may elect to offer insurance coverage as part of their services but are not required to. 

Before offering a property for short-term rentals, a hosting platform (including Realtors®) must provide notice to the owner or operator that standard homeowners or renters insurance may not cover property damage or bodily injury to a third-party arising from the short-term rental. 

Do the properties need to be registered with the state or city/town? 
Each rental unit will need to be listed with the state short-term rental registry. Additionally, each city and town is permitted to create a registration requirement for short term rentals. Check with your municipal government office for details. 
 
Are there any inspections required? 
Cities and towns may implement a health and safety inspection requirement and set the frequency of inspections. Short-term rental operators are required to cover the cost of inspections and will likely face a fee to cover registration costs as well. 

What are some best practices I can apply as the new law gets implemented? 
  • Realtors® would be wise to disclose to prospective renters that any booking made on or after January 1, 2019 may be subject to a tax and that the tax rate may change before the rental period. Realtors® may want to postpone the collection of rent until the community tax rates are finalized. 
  • Develop a policy to verify the number of units owned by each client in a municipality and that those units are properly insured.
 

Important Documents - Link on MAR:


Community Impact Disclosure

Insurance Disclosure

14 Day Exemption Form

Short Term Rental Lease

https://www.marealtor.com/members/legal-resources/short-term-rentals

 

Top Renovations To Complete Before Selling Your Home

https://www.keepingcurrentmatters.com/?p=2064416

Surprisingly Good December Jobs Report

U.S. December Nonfarm Payrolls Grew by 312,000; Jobless Rate Rose to 3.9%

Employers added an average of 220,000 jobs a month in 2018, the best growth since 2015

Essex County Housing Report December 2018

Essex County Housing Reports: November 2017 vs November 2018; Septeber - Novmeber 2017 vs September - November 2018

Inventory fell for Single Families, Condos and Multi-Families and Sales fell for all properties except November Single Families.

Prices rose across the board for current month and current 3 months.  

Here is breakdown by property type:

Single Family: November: Inventory Down 1.8% and Sale Prices Up 3.6%:  3 Months Inventory Down 1.1% and Sale Prices Up 4.6%

Condo: November Inventory Down 7.4% and Sale Prices Up 11.8%:  3 Months Inventory Down 3.2% and Sale Prices Up 7% 

Muilti-Family: November Inventory Down 4.2% and Sale Prices Up 2.7%: 3 Months Inventory Down 2.7% and Sale Prices Up 5.3% 

To view data for every Essex County town, go to:  http://www.sullivanteam.com/Properties/Reports/Public/Charts.php 

To dowload the full Housing Report go to: http://sullivanteam.com/pages/EssexCountyHousingReports

 

 

Essex County Housing Reports: October 2017 vs October 2018

Essex County Housing Reports: October 2017 vs October 2018; August - October 2017 vs August - October 2018

Inventory Finally Turns Up For Single Families but continues to fall for Condos and Multi-Families.

Prices continue to rise for all property types - breakdown by property type:

Single Family: October: Inventory Up 4% and Sale Prices Up 3.2%:  3 Months Inventory Up 0.3% and Sale Prices Up 5%

Condo: October Inventory Down 1.6% and Sale Prices Up 10%:  3 Months Inventory Down 2.9% and Sale Prices Up 3.5% 

Muilti-Family: October Inventory Down 8.8% and Sale Prices Up 4.5%: 3 Months Inventory Down 1.1% and Sale Prices Up 7.1% 

To view data for every Essex County town, go to:  http://www.sullivanteam.com/Properties/Reports/Public/Charts.php 

To dowload the full Housing Report go to: http://sullivanteam.com/pages/EssexCountyHousingReports

 

 

Home Sales Forecast for 2019

Mortgage Bankers Association (MBA) – As the leading advocate for the real estate finance industry, the MBA enables members to successfully deliver fair, sustainable, and responsible real estate financing within ever-changing business environments.

The National Association of Realtors (NAR) – The largest association of real estate professionals in the world.

Freddie Mac – An organization which provides liquidity, stability, and affordability to the U.S. housing market in all economic conditions extending to all communities from coast to coast.

Fannie Mae – A leading source of financing for mortgage lenders, providing access to affordable mortgage financing in all markets.

Here are their projections:

 

https://www.keepingcurrentmatters.com/?p=2063062

Are You Paying Too Much For Rent?

Chances are if you are renting you are spending too much of your income on your monthly housing expense. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their rent or mortgage payment. This percentage allows the household to save money for the future while comfortably covering other expenses.

According to new data released from ApartmentList.com49.5 million renters in the United States were cost-burdened in 2017, meaning they spent more than 30% of their monthly incomes on rent. This accounts for nearly half of all renter households in the country and is up 3.1 million from 2007.

When a household is cost-burdened by their monthly housing expense, they are not as easily able to save money for the future. This is a big factor for many renters who dream of owning their own homes someday.

But there is hope for those who are able to save at least a 3% down payment! The percentage of income needed in the US to buy a home is significantly less than renting at 17.1%!

The chart below compares the historic percentage of income needed to rent and buy from 1985-2000 to the first quarter of 2018. As you can see, the cost of renting has climbed above historic numbers while the cost of buying dropped over the same period of time.

 

 

https://www.mykcm.com/2018/10/30/are-you-spending-too-much-on-rent/

Home Price Forecast

The Home Price Expectation Survey – A survey of over 100 market analysts, real estate experts, and economists conducted by Pulsenomics each quarter.

Zelman & Associates – The firm leverages unparalleled housing market expertise, extensive surveys of industry executives, and rigorous financial analysis to deliver proprietary research and advice to leading global institutional investors and senior-level company executives.

Mortgage Bankers Association (MBA) – As the leading advocate for the real estate finance industry, the MBA enables members to successfully deliver fair, sustainable, and responsible real estate financing within ever-changing business environments.

Freddie Mac – An organization whose mission is to provide liquidity, stability, and affordability to the U.S. housing market in all economic conditions extending to all communities from coast to coast.

The National Association of Realtors (NAR) – The largest association of real estate professionals in the world.

Fannie Mae – A leading source of financing for mortgage lenders, providing access to affordable mortgage financing in all markets always.

https://www.keepingcurrentmatters.com/?p=2063050

 

Essex County Housing Reports: September 2017 vs September 2018

Essex County Housing Reports: September 2017 vs September 2018; July - September 2017 vs July - September 2018

Inventory Down, Number of Sales Down and Sales Prices up Except Condos - breakdown by property type:

Single Family: September: Inventory Down 9% and Sale Prices Up 6.3%:  3 Months Inventory Down 4.6% and Sale Prices Up 4.9%

Condo: September Inventory Down 5.7% and Sale Prices Down 6.5%:  3 Months Inventory Down 3.9% and Sale Prices Up 3.4% 

Muilti-Family: September Inventory Down 12.4% and Sale Prices Up 13.5%: 3 Months Inventory Down 4.5% and Sale Prices Up 13.2% 

To view data for every Essex County town, go to:  http://www.sullivanteam.com/Properties/Reports/Public/Charts.php 

To dowload the full Housing Report go to: http://sullivanteam.com/pages/EssexCountyHousingReports

Buying Cheaper Than Renting in MA and 37 Other States