Portland lawmaker proposes funding affordable housing with short-term rental tax

Maine may be dubbed “Vacationland,” but for 1.3 million people, Maine isn’t just a getaway destination. It’s their permanent home. 

“Maine is a great place to visit — it really is — but it’s an even better place to live,” said Rep. Charles Skold (D-Portland) at a recent Taxation Committee meeting.

The state can be both a home for some and a holiday to others, but there are concerns over the stress short-term rentals, such as Airbnb, are placing on the already limited housing supply. 

Certain housing markets, such as heavy tourist areas, are more affected by the presence of short-term rentals than others, but nonetheless they have become a topic of discussion as the state tries to solve an affordable housing crisis.

Up to this point, the regulation of short-term rentals in Maine has largely fallen to municipalities. Portland, Rockland, and Bar Harbor have all passed some form of regulation, while communities like Old Orchard Beach and Kennebunkport continue to discuss proposals. 

Now, the Taxation Committee is considering a bill that hopes to empower communities to use short-term rentals to help alleviate the affordable housing crunch by tapping them for additional tax revenue. 

The bill, sponsored by Skold, proposes granting municipalities the option to increase the lodging tax on short-term rentals — defined as less than 30 days — by 1%. The revenue from that additional tax would be required by towns to be used on affordable housing programs. 

However, before towns and cities could enact the increase, LD1298 specifies that they would need to bring it to voters through a referendum question. 

The committee considered a similar bill earlier this session, but it proposed a fee rather than a tax and died in the Senate last week. And during the previous legislature, a bill that would have allowed towns to place a fee on second homes that are unoccupied by a permanent resident was killed on the House floor.

Between April 2022 and 2023, Maine had almost 24,000 rental properties with at least one reservation, according to an October statewide housing study. These properties are largely concentrated on the coast, where more than 16,900 of those rentals are located.

Some of those represent seasonal homes that the owner occupies for a portion of the year, but more than half (57%) of those properties are part of the supply of year-round homes. However, given various differentials, such as price, they study notes that only about a third of all short-term rental stock can be “reasonably comparable” to what they describe as “naturally occurring affordable housing on the market.”

In Hancock County, which includes Mt. Desert Island and Acadia National Park, one out of 10 homes were active short-term rentals, the study says, though about 3% would otherwise qualify as affordable stock.

At a public hearing for Skold’s bill, real estate and tourist industries came out in opposition, as did the Maine State Chamber of Commerce. The groups said they were concerned about how a tax increase could deter tourists because of higher costs or affect the bottom line for local businesses by having to absorb the extra tax. And there were concerns that it would disadvantage businesses in the communities that choose to enact the tax. 

The business community, as well as the state’s Department of Administrative and Financial Services, both voiced resistance to adding any local sales tax option.

“I think the committee knows where the Chamber stands on local option sales taxes,” said Linda Caprara, the group’s vice president of advocacy. “We’ve testified several times before this committee in the last year or so. Whether it’s a local option sales tax on lodging or purchases, we still oppose it.”

Caprara went on to say that “if affordable housing is something this Legislature wishes to address,” she thinks the money should come from the state’s surplus. Last November, Maine’s Revenue Forecasting Committee projected a $265 million budget surplus over fiscal years 2024 and 2025.

There were also concerns over the constitutionality of the bill. Skold said the bill is in line with the Maine Constitution, but committee members suggested the topic be researched more for the work session.

In submitted testimony in support of the bill, North Haven resident Becky Bartovics said she lives on an unbridged island that is “rapidly losing” its affordable housing to short-term rentals.

“These homes being removed from local affordability are seriously impacting our community’s ability to operate,” she wrote. “While this bill may not be the best solution for some, it would go a long way to support our communities.”