Renting out the castle



At what point does a private home become a luxury good or a commercial enterprise? What should be the government’s role in drawing that line — and regulating and taxing accordingly? How best to balance private property rights while addressing a shortage of affordable year-round housing in many coastal communities? 

Those are central questions when it comes to the proliferation of short-term vacation rentals in Maine, and judging by legislative and municipal efforts thus far, there are no easy answers.

Rep. Christopher Kessler (D-South Portland) has sponsored a bill that would impose new fees on more affluent property owners who own vacation homes or operate short-term rentals that are vacant more than half the year. Revenue generated by the fees would help expand affordable housing and support the state’s homestead exemption program. Rep. Billy Bob Faulkingham (R-Winter Harbor) wants to ensure homeowners can rent out their properties as they see fit. He is sponsoring LD 1365, An Act to Prohibit Municipalities from Prohibiting Short-term Rentals. The bill, submitted April 5 and subsequently referred to the Committee on State and Local Government, is short and to the point: “A municipality may not enact or enforce an ordinance, rule or order prohibiting a short-term accommodation rental rented through a transient rental platform.” 

As it happens, Faulkingham’s hometown of Winter Harbor has one of the highest concentrations of vacation homes in the state at 54 percent, according to property exchange firm IPX 1031. Castine ranks third at 48 percent. (Cape Neddick was No. 1 at 64 percent.) A vacation home is not necessarily a short-term rental property — Maine has a long history of seasonal residents and snowbirds who flock home for the warm season — but the data does reflect the demand on the local housing market.  

In Bar Harbor, short-term rentals have become a long-term conundrum. Nearly 1 in 5 residential dwelling units is a vacation rental. There are as many types of vacation rentals as there are vacation rental owners, it seems. There are the locals who rent out all or part of their primary residences or purchase a second property to bring in some extra money. There are property owners “from away” who may use their Bar Harbor addresses partly or exclusively as income properties. Then there are the property owners who don’t rent out at all but worry that any rules restricting their right to do so could affect property values or future income potential. 

Almost all property owners would agree that maintaining a year-round community is important. It is part of what makes a destination worth visiting. More pragmatically, the local community provides the workforce for the summer influx. Housing issues are already playing out in the shortage of seasonal workers that seems to worsen every year.

There are economic and social costs of leaving a substantial percentage of an area’s housing stock vacant from October to May. Any small town with high property values and low student censuses knows the negative impact that has on state education funding. On the flip side, the owners of seasonally occupied properties pay annual property taxes while requiring few services much of the year. Seasonal visitors flood money into the economy.

While securing additional funding for affordable housing is enticing, the residential vacancy impact fee proposed by Rep. Kessler would go into a statewide fund and not necessarily end up being used in the municipality where it was collected. Moreover, many families being priced out of competitive housing markets may not be eligible for housing programs due to their incomes. We have doubts that the measure would achieve its intended goal of preventing the continued transformation of year-round neighborhoods into seasonal enclaves. 

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