Boston City Council passes strict new short-term rental law

After nearly three years of studying how to regulate vacation rentals, the Boston City Council has approved new short-term rental rules that are among the strictest in the country.

The new law allows short-term rentals to be offered only by owners who live in the properties they rent out. Owners of small multifamily buildings who live on premises may also rent out one of the other units in the building along with the unit they live in.

Tenants and investors who don’t occupy their rental units are banned from renting them out for short terms. This major change is designed to free up housing stock for local long-term residents — rather than having it rented out by the night on sites such as Airbnb, HomeAway, and VRBO — amid a housing crunch and rising rents.

The latest rules also require short-term rental hosts to register with the city every year and pay annual fees of $25 to rent out a room and $200 to rent out an entire unit. While Boston Mayor Marty Walsh had originally proposed an annual cap on the number of nights that short-term rental units could be offered, that provision didn’t make it into the final bill.

Under the measure, short-term rental sites such as Airbnb will also be required to share data with the city and remove any hosts who break the rules. Certain kinds of short-term rentals, including bed-and-breakfasts and units used for hospital-related stays, are exempt from the new regulations.

The law takes effect January 1, but current short-term rental hosts will be able to follow the old rules until September 2019.

The council approved the measure by a vote of 11 to 2 and Walsh, who has been pushing for regulation, said he’ll sign the bill into law.

The mayor’s office estimates that there are 5,500 active short-term rental listings in Boston, and 2,000 of those are whole units listed full time. The average unit is rented 230 nights per year. According to a report by Community Labor United, 12 percent of Boston Airbnb operators earn 45 percent of Airbnb revenue in the city.

Housing affordability has been a major point of contention in the debate on short-term rentals. A 2016 study by UMass Boston found a correlation between short-term rental units and a slight increase — 0.4 percent — in rental prices.

Airbnb, however, says short-term rentals contribute to the local economy. The company released its own report showing that Airbnb guests spent more than $46 million in Dorchester, Jamaica Plain, Mattapan, and Roxbury in the last year. According to Airbnb, its hosts in these neighborhoods made nearly $11 million from short-term rentals.

The Commonwealth of Massachusetts may also be close to creating its own short-term rental regulations. Both the state House of Representatives and the Senate passed separate bills during this year’s legislative session that would regulate short-term rentals and tax them for the first time.

The bill that the House passed would establish a three-tiered tax rate based on how many units the host is offering for rent. Under this plan, the more units an owner rents out, the higher the tax. Meanwhile, the bill passed by the Senate would apply the state’s 5.7 percent hotel tax to short-term rentals as well.

Lawmakers must come up with a version that both legislative bodies will support before the 2018 formal legislative session ends at the end of July.

The Massachusetts Senate recently released a state budget proposal for next year that includes $20 million in revenue from short-term rentals. Massachusetts is the only state in New England that does not have an agreement to allow Airbnb to collect lodging taxes on behalf of its hosts.