Towns eye revenues from shortterm rentals

The days are longer, daffodils are coming up, and Connecticut is heading toward another busy summer travel season with a mixed bag of short-term rental regulation.

Some communities, like Noank, have banned them, through zoning rules. Others are taking up their own new ideas and some, like Stonington, which failed on its first attempt, have yet to put a viable regulation plan on the table for consideration.

As the town-by-town regulation potpourri continues to unfold, amidst growing complaints about all the negative impacts of commercialized short-term rentals in residential neighborhoods, legislators have been promoting some ideas.

One proposed bill, from Sen. Cathy Osten, Democrat of Sprague, would make it clear that municipalities have the right to hire consultants to develop regulations. Some suggested at a public hearing that municipalities already have that ability, but Osten said it was specifically requested by Norwich officials, as they develop an STR strategy.

I think one of the more intriguing ideas for regulating the STRs comes from Rep. Aundré Bumgardner, Democrat of Groton, who is promoting a bill that would essentially give municipalities the right to tax them.

The state already collects a 15% tax on short-term rentals, and Bumgardner’s proposal would allow the Department of Revenue Service to remit some of that back to cities and towns where the rentals are located.

One draft of the measure would essentially allow municipalities to levy their own tax of 5%, which would be collected and remitted to them by DRS.

The state agency would also make available a registry of short-term rentals and relieve municipalities of that burdensome bureaucratic element of regulation.

“You can’t lie to the tax man,” said Bumgardner, noting that DRS, which already taxes the rentals, is in the best position to help cities and towns regulate them, as well as add a robust new revenue stream.

Bumgardner’s measure also proposes that 40% of the new impact fees from STR income be used to fund local affordable housing trust funds.

In eastern Connecticut, Bumgardner says, where job growth is putting pressure on housing opportunities, the STRs are also impacting the availability of affordable housing because so many apartments have been converted to facilities catering to travelers staying less than a week.

The impact money from short-term rentals could also be used by municipalities to cope with costs of catering to the commercialization of housing and residential neighborhoods.

I’m not a big fan of new taxes, but

it does seem like the growth of commercialized STRs, many in residential neighborhoods, is a windfall with impacts that their landlords should expect to pay for in their communities.

There is a model for Connecticut to follow, Bumgardner says, noting that Massachusetts has a similar program. The impact money for Connecticut municipalities for

STRs would also be similar, he said, to the arrangement that directs money from Connecticut marijuana stores to the communities where they are located.

Giving municipalities impact aid from STRs is not the only solution the problem requires. Surely many places, like Noank, are ultimately going to eliminate them.

But in communities where compromises develop, allowing them only in owner-occupied properties, for instance, the potential to collect impact money could help cities and towns work out solutions.

It’s a short legislative session in Hartford, and Bumgardner’s STR impact proposal has a lot of competition for attention.

I hope it gets some.