Vermont Legislature SmartTranscripts:

[Unidentified Committee Member]: Welcome

[Rep. Marc Mihaly (Chair)]: back everyone to the House Committee on General and Housing. It's still Wednesday, May 13, and we've been diving into the housing targets and the relationship between how the housing targets were derived, how they were disaggregated, and the relationship between supply and price, as well as looking at second homes. And so, our next witness is Samantha Sheehan from The Leagues. Come on up, Samantha.

[Unidentified Committee Member]: Thank you.

[Rep. Marc Mihaly (Chair)]: Josh, are you observing? No, I'm just here for sure. You're watching, making sure. Samantha, I know you're going to be now more boring, less interesting than you usually are, because you're being Oh, rarely. Right?

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: For the record, my name is Samantha Sheehan. I'm the municipal policy and advocacy specialist for the Vermont League of Cities and Towns.

[Unidentified Committee Member]: And

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: I'm going to share my screen. Not that one. This one. Okay.

[Unidentified Committee Member]: So I have

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: prepared some information, hopefully, that will be interesting to you about concepts and impacts and priorities for municipal government related to short term rental regulation enforcement and revenue authority. So you may remember that throughout this biennium, the LCT has advocated that municipalities should have tax authority related to short term rentals, and that the primary reason for that is to support the municipal level regulation and enforcement of Vermont's roughly 11,000 short term rentals currently that are available for visitors and Vermonters to enjoy. And that if municipalities had better revenue authority that brought local resources into their town budgets, they could also use those revenues to mitigate negative impacts of short term rentals in their community, which really varies depending on the rental and lodging market in that community, the existing housing inventory and housing needs in that community, or a variety of other factors, maybe stresses to public safety and emergency service resources, solid waste management, etcetera. We'll get into it. But the idea is if a municipality can bring in local revenue, then they can maximize the benefits of short term rentals and have better capacity at the local level to mitigate some of the negative impacts that may happen from a quickly growing local short term rental marketplace. So just a reminder, so VLCT, of course, represents all Vermont municipalities. All the municipalities that you live in and represent in your districts are members of VLCT. And the majority of Vermont municipalities are rural in nature, have small populations. 73 are under 2,500 people that reside there. And in those small and rural communities, the professional capacity is really limited or, in some cases, nonexistent. Most municipal governments, everything state government authorized municipalities to do and obligates municipalities to do under state law is by and large executed by volunteers who are elected or appointed officials who volunteer their time to run local government. Hopefully, this is somewhat

[Unidentified Committee Member]: of a

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: refresher. I know we've talked about this a couple times, but all municipalities can regulate short term rentals through municipal ordinance. Municipality does not have to have zoning and subdivision by law in order to use those authorities to regulate short term rentals. They can regulate for other types of community impacts through ordinance. By the same authority granted to municipal government by the state, they may set fees, so a permit fee or a registration fee. And fees may be punitive. So you can use fees created and set under ordinance as a penalty for lack of compliance. Fees may not be revenue generating.

[Rep. Marc Mihaly (Chair)]: I have a question about that.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Yeah. I may not be able to answer, but

[Unidentified Committee Member]: I'll pass it on a question.

[Rep. Marc Mihaly (Chair)]: Go ahead, why don't you go ahead first? Can you give an

[Unidentified Committee Member]: example of a fee that is punitive but not revenue generating? What happens to the fee?

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Well, the fee saving authority that municipalities have through ordinance, and think of this like parking fee. That's a really common fee that we all pay. That's revenue generating, though. Well, it offsets the cost of maintaining parking infrastructure and the cost of enforcement in compliance with parking ordinance. I mean, you have a town I

[Unidentified Committee Member]: mean, truly, you may have a town meeting where people push back against the parking fee, but because they don't wanna pay it, and the town's response is, this is a revenue generator. It

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: creates revenue that is collected by the municipality that supports the provision of the service. And honestly, to explain the limitations of that authority more, I would have to get an explanation from one of

[Unidentified Committee Member]: our attorneys. I think what you're talking about is the

[Rep. Marc Mihaly (Chair)]: parking parking fee, meter fee, for example. The punitive part would be when you don't pay it. The revenue part is it's enough to pay for the parking meters, the meter reader, and other related administrative costs. It cannot generate revenue outside of the parking. What I was going to say is that in towns, let's say, for example, in California, where a building permit costs $35,000 the revenue that it generates pays for all of the services that are estimated to be the share of that house. There would be nothing to stop with their attempt other than, of course, competence, money, etcetera, which is real, from their doing a nexus study in which they, Stowe could do a nexus study in which they estimated the total cost of administrative and municipal services associated with short term rentals, and then levy a fee. They just don't do it.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Well, right. And there's impact fees in Vermont, some of the existing impact fees. It's a pretty rare governmental finance authorities that municipalities have, and it's a universal authority. You don't need a charter permission to have it. But some of the existing impact fees are created that way. They find out per unit, per toilet, under the local regulation, what does it cost to create capacity for potable water connection and sewer connection? And then that figure calculates the impact fee of a new residential construction. But that's not the type of fee. Typically, short term rental ordinances use a fee structure that we call a fee schedule. And it is published, and it's a way the municipality can use its existing authority to generate some revenue that supports compliance enforcement, registration, regulation as needed and not have to update the ordinance every time something changes. So if you have a municipal COLA and the amount of money that municipal employees make goes up, you're not having to reopen at the select board, meaning the ordinance for short term rentals. So they'll publish a fee schedule that says, per unit, the first time registration is $150 And in FY 'twenty eight, it'll be $155 In FY 'twenty seven, it'll be $175 And for example, STOW has penalty fees for noncompliance. And I think the first time offense is $100 or $200

[Unidentified Committee Member]: That's legal. So it's

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: a punitive fee. There's no way that $100 fee is covering the public cost of enforcement on non compliance.

[Rep. Marc Mihaly (Chair)]: Right, but it is generally for the committee's information. Fees are subject because of Supreme Court decisions, fees are subject to a nexus requirement. You cannot impose a fee without a study or some evidence that the fee addressing the fee is a need to which the entity subject to the fee is contributing in proportion to its contribution. On the other hand, a tax, you can tax for any reason you want. I I pay income taxes and I can't claim, well, I don't need an F-thirty five, so why should I pay the tax? You can't do that. So, a tax is much, in a state full of tiny towns, which are not capable financially of putting together nexus studies for fees, the easiest way out is to tax.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: That's a great explanation. I pay property tax, which funds the state public education system. I do not have a dependent in a public school. Exactly. That's a tax authority. But when I park on State Street and pay $2 an hour for parking, I am utilizing the facility that the city of Montpelier and the residents of Montpelier pay through their municipal property tax and I'm enjoying it for the two hours I'm parked there.

[Rep. Marc Mihaly (Chair)]: What did you guys Didn't you guys advocate a specific tax proposal?

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Yeah, well, we would like a unique local option tax that can be used short term rentals only. 1% to 3% is what it one to 3%. Burlington has 9%, but we'll get to that. So over the last decade, this data is paraphrase a from vermouthousingdata.org. But roughly ten years ago, there was roughly 7,000 known or estimated short term rental units online in Vermont statewide. And the most recent estimate is that that is closer to 11,000 in 2025. So there are real positives. Sorry, ten Yeah. Years

[Unidentified Committee Member]: think it's Last one in the last three years has leveled. It's leveled off at about that.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: So there are a lot of local benefits that communities I actually want to start here. I worked in Burlington during the time that the short term rental ordinance was being finalized after a several year process. And then when enforcement began, At that time, it was, I think, arguably still the pandemic era. The local community impacts of the pandemic were really palpable, including the Burlington's causing affordability and availability. And I had a pretty binary perspective from that experience on the impact of short term rentals, that mostly the impact of short term rentals was on the housing availability and affordability of rental units, in particular, long term rentals. Since working at VLCT and talking with more municipal officials statewide in different types of communities that have very different characteristics in terms of amenity, local economic opportunity, local employment opportunity, the benefits of tourists and tourism at different seasons, and have different characteristics in their local housing inventory, I realize it's really a much more complicated question if you ask yourself. If you ask any town official in any town what happens when short term rentals come online in your community, you will hear different answers and you'll hear positive things and negative things. And so there are many positive things. It creates employment opportunities for property management, for house cleaners. It can be revenue generating, especially for folks that may have big houses or more than one unit at the residence that they live in and maybe live on a fixed income or have limited income earning potential, and they're able to support their family and bring in resources to their community group listening to short term rental, they sometimes are particularly well liked and advocated for in communities that are near major tourism destinations but may never benefit from a traditional lodging establishment. So I live in Hancock. A hotel is not coming. We are not going to have 110 room Hilton built in Hancock, which is too bad because hotels also bring a lot of benefits in state revenues and local revenues and employment and richness of having visitors and lodging for visitors.

[Unidentified Committee Member]: But Hancock can have short term rentals. Yes. Can I ask you It might be a more opinion based question? Maybe I actually really like hotels. I think they provide a large array of benefits. Yeah. Why don't you think

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: the hotel's gonna need to cut?

[Unidentified Committee Member]: If there's, I think, because we're saying we agree that there is a need, kind of depending on where you are. Do you know what I'm saying? Great

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: question for a hotelier. But when we talk about these questions about what type of development do municipalities want, need, and can they make legal and realize, the challenges to a hotel are not unlike the challenges to building an apartment building. So we don't have sewer and water capacity. We don't have zoning and permitting. So any hotel is only going through state permitting processes in a community like mine. We have a low population that travels in every direction for work and may not be an adequate workforce. Mean, one of the great benefits of traditional lodging in large hotels is how many people they employ on all three shifts. And there are probably not enough residents in Hancock to staff 110 room hotel seven days a week. But there are less traditional lodging types that can still bring a lot of those benefits to a community like mine that is located between three major ski resorts, and one of those opportunities is short term rentals. I think regardless of what types of opportunities a short term rental brings, there are some pretty universal challenges and impacts. And those are the type of things that municipalities want and need and can regulate in their short term rental ordinance. So we've heard a lot from zoning administrators and municipal inspectors that they have big So in communities without sewer, a top line concern is wastewater capacity. So they may know or think they know, like they being the zoning administrator, that that house on one main street has a three bedroom permitted septic. So ANR reviewed the septic design and said, This is appropriate for a three bedroom house. And then they see an Airbnb listing for 1 Main Street that says sleep 16. And then maybe they see cars there a couple of weekends, and it's not really concerning. And then they start seeing a lot of cars every weekend, and you don't know how many people are in there running the dishwasher, running the laundry, flushing toilets, taking showers, how many showers are they taking? And if that septic fails, what type of impact is it going to have on the public infrastructure and on the neighboring properties? So that's just an example of whether a residential unit is being used for a long term rental, a short term rental, or a midterm rental, or it's sitting unused as a second home, the municipality has an interest in knowing that it has a safe, permanent wastewater system that is not being used over capacity.

[Unidentified Committee Member]: Yes, question on the paper. I don't

[Unidentified Committee Member]: think I've ever heard the term midterm results.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Oh, yeah, like three to six months.

[Unidentified Committee Member]: Wait, so it's not. Don't know.

[Unidentified Committee Member]: Just since we're on the topic, how would that work as far as because they don't permit septics for people.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: So I sat through a really fascinating presentation with the wastewater division and AMR where they explain how they determine that. And it's literally like because it's not how many toilets do you have. It's like how much water does a human being use that comes out of your house and is managed by the wastewater system. They would be the best people to explain it. It's fascinating how they come up with this.

[Rep. Marc Mihaly (Chair)]: It's good by bed. They

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: call it by bed, but there's a way of getting backwards from that that can assume the maximum capacity that the wastewater system has to have per bed. But when we're talking about a municipal if I were in the Killington zoning and permitting office, what I want to know is that this unit has a permit, what the capacity on the permit is, and how many beds they've listed on their short term rental. And that is the information I want to know as a municipal official. So I want to know that the short term rental capacity is compliant with what the state has permitted for the bed capacity for that wastewater system. Could be 12 beds, could be 25, could be two. But what matters is, are you sleeping that number of people that the state said that subject system can support?

[Unidentified Committee Member]: Yeah. I get it. It's a different conversation, but I'd just be curious. If it's my primary residence, there's nothing stopping me from having a three bedroom and I have two of them have bunk beds in

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: them. Correct.

[Unidentified Committee Member]: Nothing stopping me from it. Right. It's perfectly legal. Right. So, you know, switch it to, like, a different use. Yeah.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: There's even more. Yeah, we could talk more about it. Different thing. Yeah, because some of our permitted systems are quite old and did not assume year round use in Vermont. And that's a concern in some communities, too. And there are other concerns and other potential impacts, like with public safety, other ordinances that may or may not be complied with, with a short term rental occupant, such as noise ordinance, parking ordinance, solid waste removal, if you're in a municipality that provides public pickup of recycling. And so what a lot of municipalities do in their short term rental ordinance is they require a local property manager or a caretaker for the property that isn't going to be available and can respond. So if the trash cans get flipped over and there's trash all over everybody's lawn, who's coming to pick it up if it's short term rental? So sometimes there's small concerns that just can be difficult to manage if you're not dealing with a resident or a landlord who's local. And sometimes it's a potentially really big, severe problem like an exploding septic tank. And the way that a municipality can talk through those and have an enforcement tool is through their short term rental ordinance. I want to quickly talk about occupancy and affordability requirements, which is not super common currently in Vermont, but is one of the things that a municipality could include. So in Burlington, they allow short term rentals, and they're defined. And they are taxed. Burlington has a unique tax authority, excise tax authority. But what Burlington says in their ordinance is you can list a short term rental if you occupy the residence. So if I have a house with an ADU, I can live in the house and short term rent the ADU. I can also stay in the ADU and short term rent the house. Both of those things are allowed, and you can switch it up. If I want to rent a property I don't live on as a short term rental, and especially if I want to do that more than once, if I buy a five unit apartment building and I want them all to be short term rentals, what the Burlington ordinance says is you can do that, but you need a one to one long term rental. So if I buy a duplex, I can rent one side out long term rental, one side out short term rental. If I buy a 10 unit apartment building, I can rent five apartments out long term, five apartments out short term. So that is within the municipalities authority. It's a way that some short term rentals are regulated elsewhere, and it is the way Burlington has chosen to do it. That introduces a whole other complexity and capacity issue from the municipal enforcement perspective. Just a quick question. I assume that when that those short term rentals to which you refer are whole residences.

[Unidentified Committee Member]: And I wonder where or how rooms come into play.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Yeah. So some short term rental ordinances allow for you to rent a room or a shared space without triggering the short term rental ordinance.

[Unidentified Committee Staff/Analyst (possibly “Josh”)]: That's very good.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Some would have a different level of a different standard. Is there a requirement of owner occupancy? Do you know? So in Burlington, they require owner occupancy or the one to one. That's what

[Rep. Marc Mihaly (Chair)]: I was expecting. It's

[Unidentified Committee Member]: just Burlington, towns I think.

[Rep. Marc Mihaly (Chair)]: Are people going to use I mean, okay, so you've got all these problems. You have a town of 2,500 or 3,000 people. Are you talking about using the money to hire somebody who is an enforcement agent who spends all their time thinking about this stuff?

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Yeah, so there is third party compliance tools that are really useful, and Burlington uses that and pays for it.

[Rep. Marc Mihaly (Chair)]: Does that mean third party compliance tools? Are you talking about

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: it's a Rent an officer, right?

[Rep. Marc Mihaly (Chair)]: What? Rent an officer.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: No, no. It's like rent a computer program that monitors and aggregates listing data and compares them with your registration database and finds properties that are available to short term rent that are not registered. And then a human being takes that flag and looks into it. And it might be the case that the compliance software says one main street is listed on Airbnb, but I don't see it on your thing. And that might just be a duplicative Airbnb listing, and really the short term rental is correct, is compliant. Or it might be that that person was trying to get away with an unregistered, non compliant unit. So there are tools that are available that municipalities can use. And it's not just in Vermont, like in Nashville or whatever. That is a service that you can pay for, and there are different options that a municipality could pay for and use. When I've talked with enforcement officials in small rural communities in Vermont, especially in places that have a lot of ski, mountainside condo developments, They have tried to use those and found them virtually useless because of tree cover, long private driveways, having a town that has 110 doors that are identical because they're all the same '70s mustard color, and they don't have a number on the door. So it's like you can't use the pictures and the tools that the software uses to actually say this is a different unit listed by a different person. So in those communities, it's much more important to have the local human resource if you're going to pursue enforcement of the registration under the ordinance. Any other questions about that? My next plan is

[Rep. Marc Mihaly (Chair)]: to

[Unidentified Committee Member]: I

[Rep. Marc Mihaly (Chair)]: sort

[Unidentified Committee Member]: of keep be fair

[Unidentified Committee Member]: about

[Rep. Marc Mihaly (Chair)]: thinking about the last, the prior testimony we got, in which the great, a substantial part of all of the short term rentals in the state are in the resort community.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Yes. And so, let's go there. So I'm going to compare Burlington's experience with Stowe's experience. So this data I'm showing from Burlington is all from the 2024 housing report. So it's not totally right, but I think it's really good. And it's beautiful and, I think, easy to look at. Burlington is Vermont's largest city. It has two large colleges, also is nearby St. Mike's. There are 10,000 students in Burlington, about 45,000 people. And the vast majority of residents of Burlington are renters. So when we're talking about housing costs and housing affordability and housing construction and the permitting of new housing units in Burlington, we're mostly talking about multifamily, what we would call commercial residential, so an apartment building that's owned by one person and rented to others. So in Burlington, there's roughly 21,000 people that rent, occupy a rental unit, roughly 15,000, closer to 16,000 that owner occupies. So that could be a condo, a single family home, a duplex where the owner lives in half, rents the other half out. And then some number 7,000 and change who live in group quarters. So that would be SROs, dorms, frat houses, things like that. Burlington has also experienced an extraordinarily low vacancy rate for a long time. And it has been the work of many Burlington leaders and residents to change that, to increase housing inventory in order to improve affordability. But there were long periods of time in the pandemic era where the Burlington vacancy rate was below 0.5, sometimes well below 0.5%. 2% is considered the beginning of the functional range. So a person could argue that any short term rental in Burlington is impacting Burlington's housing market, because most people who live in Burlington need access to rental units that are long term. And Burlington has demonstrated year after year, quarter after quarter, an extraordinarily low vacancy rate within those available rental units. So you could say every short term rental takes a long term rental offline if we're talking about the city of Burlington. And so as I said, Burlington did choose, at the end of a very long community process, to create this one to one. So you can have an owner occupied short term rental, where you rent a room or you rent a garage apartment. Or you can have a short term rental rental that is also available year round. And what we see in the data with the number of units over time listed in Burlington is that there was not a dramatic downward change when the ordinance took effect. So one of the goals of the city at the time of developing this ordinance was not to kill the short term rental market in Burlington. They serve a role in the local economy and accessibility of lodging and visiting the city. So they didn't want the total number to plummet, but they also didn't want the total number to explode. So that was a broad policy goal. And so it's hard to say because this period of time goes, obviously, this drop. Can you see my mouse when I move it? So this is stay home, stay safe. Obviously, there's a plummet. There's some going back and forth. And I've asked our permitting officials, and they did see a lot of people putting their STRs up and then taking them down, putting them up and taking them down, the same unit in the post pandemic comeback. And then the ordinance took effect. They were asking short term rental owners to register and to become compliant, but they were holding back on enforcement. And then the enforcement period began later in 2023. And then we see this skyrocket because this is the eclipse. So a lot of full time residents, even renters, got special permission to make their apartment or their condo or whatever available for short term rental. So we don't really know over a long period of time how is the ordinance working to control the overall changes in the short term rental inventory. But we can see a little bit that in this 2022 to 2024 period, it was mostly flat. So there's also summer seasonal short term rentals in Burlington because of the student housing. I also just want to point out, on the day in history when it was the best time to list a short term rental in Burlington, it was still just over 400 total in a city with more than 60,000 parcels. What did we say? 18,000 rental units. So 18,000 units of housing citywide. Going into the eclipse, there was about 400 short term rentals. It's a pretty small fraction. Stowe has more than twice that number of short term rentals. So when you look at Stowe's housing inventory and how short term rentals fit into that, it's very different in Stowe compared to Rural and Dunne. So Stowe has close to 900 short term rentals. I took all of this from a new story that is maybe six months old. Stowe has just under 900 short term rentals, and 78% of those are owned by someone that lives out of state. So can conclude. So like I said, a person, a reasonable person could conclude that in Burlington, any short term rental is taking a long term rental offline because the demand for long term rentals is very clear and easy to see in Burlington. And so a reasonable person could say, when a short term rental comes online, it is an improvement over having an empty second home. Because if 78% of the units are second homes, that is activating that property as a residential use more days of the year than if it is a second home that is not being used by the owner who lives out of state. So of their, call it, 900 units, 22% list their owner mailing address located in Stowe. So it's someone who lives in Stowe and has a short term rental listed in Stowe. 86 people total, or a very small fraction, live elsewhere in Vermont, not in Stowe, but in Vermont. And then a very low number of them have multiple short term rentals in Stowe. So remember, one of the things the Burlington ordinance is trying to balance is they don't want someone buying a whole apartment building and only having short term rentals. So that's why they have the one to one. In the Stowe data, you see that not really happening. And that may be an organic effect of the cost of owning a residential property in Stowe, that maybe not a lot of people are going to own five or six of them just to have them rented as short term rentals. But anyway, that's what the current data available from their short term rental registration shows.

[Unidentified Committee Member]: I'm about to be really obnoxious, and I might have to wait for tomorrow for the testimony to appear. I just happened to, I promise I was listening, I was on Facebook, and someone posted Stowe's new short term rental

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: ideas. Have you guys

[Unidentified Committee Member]: been involved in those conversations at all?

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: We've had some larger, member conversations about how municipalities are navigating the post governmental ordinances. It's also a regular conversation that our attorneys have. They provide guidance on the limitations of authorities for municipalities who are drafting short term rental ordinances. So I'd say it's a pretty significant conversation that's happening with a lot of municipalities and my colleagues across VLCT in one way or another. But we're not helping Stowe come up with ideas. That's a local Yeah, that's the result of a pretty ongoing

[Unidentified Committee Member]: local process. It seems very intensive. Like, a lot of intensive work has been done. So I didn't know if you had any.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Yeah. No, they've been leading it, and it's been going on for a while, their production and public conversation about this data. In Burlington, I think it was five years of local process before the ordinance committee even took it up.

[Unidentified Committee Member]: Okay. Yeah. Okay. Thank you. Can I ask if Yeah? So this might this feels a

[Unidentified Committee Member]: little chicken and egg because so your the argument that they're these are already second homes. So having the second home become a short term rental, at least you're bringing life and vibrancy and economic engine because people are now occupying these otherwise empty second homes. But do we know whether these homes were purchased, were made, were had been primary homes that became second homes?

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: So like, we don't know whether I mean I don't know do you know Stowe's current second home rate is about 50%? I know like Warren's is sixty one percent

[Unidentified Committee Staff/Analyst (possibly “Josh”)]: second home. It's more likely to be a second home than a primary home in Stowe and it's been that way for a long time.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: All homes? Yeah, the

[Unidentified Committee Member]: whole All single family homes tend to be second homes.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Like I know the majority,

[Unidentified Committee Member]: yes, More half.

[Unidentified Committee Member]: Well before we started that game, the $8.90 short term Well

[Unidentified Committee Staff/Analyst (possibly “Josh”)]: before short term rentals existed.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Yeah. Like, I know Warren was 50%, like, in the Irene recovery period. Yeah. That was, like, when we knew it was measured to have gone over 50%. And it went above 60% in the post pandemic period.

[Unidentified Committee Staff/Analyst (possibly “Josh”)]: And to put it in another way, if a resort town like Stowe or Killington that has more than half second homes were all full time homes, they'd be some of our larger municipalities and we would The demographics of Vermont would look like that.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: So we've talked about some of the positives, some of the very real impacts of short term rentals that municipalities are grappling with. No matter what, it requires local capacity to come from somewhere to make sure that if the goals of a community is to have a lot of short term rentals that are full all the time, we want to make sure they're fire inspected, they're safe to occupy, there's adequate parking, solid waste management, wastewater management. And if a municipality wants to make sure that short term rentals are not distorting their available long term rental market in negative ways, then there may be additional enforcement or compliance measures that that community is taking. In either scenario, what the municipality needs is tools, staff and money to make those enforcement changes. And there may be other uses of revenue that are part of the conversation as well. So there are some municipalities that may use revenue they receive from the existing 1% local option tax for lodging to promote a tourism economy more, to generate even more local revenue and local spending and local tourism attraction, for example. And there are communities that have I'm sorry, it's so late in the session. Do you know how many municipal housing trusts we have? Is it 11?

[Unidentified Committee Staff/Analyst (possibly “Josh”)]: Local housing trusts? Yeah. I think it's less than. I think it's maybe about eight.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: Okay. So there are between eight and eleven municipalities that have a municipal housing trust, and they put locally raised revenues into those. One of those that you may have heard before is Burlington. So this is showing revenues into Burlington's affordable housing trust from 2009 to 2024. And I'll just walk you through it because it gets pretty explosive when they begin to apply their unique Burlington only short term rental tax authority. So this housing trust was created by Senator Sanders' then mayor in approximately 1985 and has been a really cornerstone feature of the city's work to build and then maintain over decades a pretty significant inventory of permanently affordable housing in Burlington. So when Mayor Sanders created the housing trust, the voters of Burlington also authorized a dedicated tax on the municipal tax rate that only goes into the housing trust fund. So that is a different, totally unique thing that Burlington has anyway, where they can tax all property owners to raise money into this housing trust fund. And for a long time, that was the only revenue into the fund. Then Burlington changed its inclusionary zoning ordinance. And they said that you can build 20% affordable units when you build an apartment building, or you can buy your way out of building those by paying an impact fee into the trust fund. So that's another way that Burlington has added money into the housing trust fund. And on this chart, that's that green square. So that means in 2011, someone built an apartment building and instead of building perpetually affordable units, they paid some money into the trust fund. But you can see there was not a lot happening in terms of revenue growth. In this period, the mayor decided in the mayor's budget to the city's so called rainy day fund, they're called the unassigned fund balance technically in the law. The city's unassigned fund balance was performing really well and well above their goal. And I think their goal was to have around $20,000,000 I think it had around $26,000,000 And so the mayor and the mayor's budget chose to spread out like a bump. So they took extra cash on hand they had in the rainy day fund, and they put that in. That's this blue line. And then when that was over, the revenues fell right back down and right back just to what comes in from the dedicated tax. And then this in 2023, they start to collect the short term rental 9% consumption tax. And that's this orange bar. At the same time, obviously, you can see the number of units being built in the city goes up. So they have a significant bump from this inclusionary zoning impact fee and then an even bigger bump from the short term rental income. Can I ask a question about that 9% tax is collected

[Unidentified Committee Member]: at point of sale from the

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: rent From the person who's renting? It's collected my understanding, and we can follow-up. Burlington has a number of consumption tax authorities that it collects itself. And then the only one the state collects is they have a local option sales tax, a 1% local option sales tax. So on short term rentals, the city of Burlington assesses it as a municipal lodging tax on the short term rental. And then that is collected through Airbnb in the transaction and sent to the city. And Burlington also has, I think, a 4% on hotels. So maybe 9% on short term rental, 4% on hotels. And same thing, if you go stay at Hotel Vermont, you pay the state lodging tax, and then you pay 4% to the Burlington tax, and then that gets paid, much like a meals and rooms lodging tax would be paid by a bed and breakfast in Elmore. But it gets paid directly to the city in that case.

[Unidentified Committee Member]: It's not the owner that charged the rental that it's not charged on their income.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: I mean, guess in theory, like oh, not on their income. No. No. No. No. No. Okay. It's part of this sales transaction of the person occupying the rental for the night. Okay. Yes. So that would be the same as sales tax on any commodity. So if you do your sales tax, let's say, quarterly, and there's that box that says local option, and is it hotel or so it's the owner that's paying that, and they incorporate it in the rental. It's not like they're paying it regularly as they rent.

[Unidentified Committee Member]: It's the

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: owner. Yeah. I think that's It's owner that's paying it when they do their sales tax. And remember, it's a 9% sales tax. So they pay a fee to register. And then if they list their bedroom in their house for $100 it's 9% on $100 If they list their lakefront six bedroom house for $2,000 a night, it's 9% on $2,000

[Unidentified Committee Member]: a

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: night. And if the nightly cost of that rental is a lot less in February and a lot more in July, then that consumption tax is attaching to the nightly cost of the rental. And it's showing right there, kind of like if you were purchasing. I don't think so. I've not been an Airbnb guest in Burlington, so I don't know what the sort of receipt looks like, but I was just trying to understand whether it has

[Unidentified Committee Member]: to come out of the person getting the income from the rental or whether it's being charged

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: and so

[Unidentified Committee Member]: it sounds like it's being charged to the person who's renting and how the owner of the property manages that.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: They could price up to that. Could accept less in order to price it competitively. Similarly, Stowe, Stowe has a 1% local option tax on lodging. That is collected by the state and remitted to Stowe quarterly by the State Department of Taxes. So if you stay in any of the Vermont municipalities that have a 1% if you stay in a short term rental, yeah, this is a big part of what we talked about. Having a short term rental market place that exists in Vermont, and in particular exists in rural communities in Vermont, along with changes to applying sales tax to online purchases, has created a really new opportunity for municipalities to raise real revenue in their local budget through the existing 1% local option tax. We think that because of the differences and the complexities and the impacts and the importance of regulating these types of lodging

[Unidentified Committee Member]: at the local level,

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: that it makes sense that a municipality have more revenue authority to support those activities compared to liquor, for example, where there's a 1% local option tax for liquor. That's the case we're trying to make. But you're saying But

[Unidentified Committee Member]: if what you're trying to address is so you're saying, because you have to address more than simply the cost of regulating, why not just allow them to just keep upping the fees? If you're saying that the fees are meant to address the impacts, right? You're saying they're not addressing the impact, they're only addressing the

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: cost of regulating or cost of administering. They don't address the cost of regulate of the impacts on Great, public safety system, local parking, waste management, wastewater, other things we talked about. And potentially, depending on the community, a part of the local housing market.

[Unidentified Committee Member]: That can be addressed via tax, because it's more broadly collected and doesn't have to be straight funneled right back into the cost of the administration of Right.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: It's not capped by the cost of the administration or the use of those public services, as we talked about with my property tax pays for public education compared to my parking fee pays for the parking. There are other reasons to consider. I don't speak for short term rental owners. But if you had So let's say I had an ADU at my house and my sister was living there, and then she gets married or something and moves away. And I'm like, hey, I'll try out this short term rental thing. Would I do it if there was a $10,000 fee? When I'm going to list the ADU for $150 on some of the weekends a year. I haven't made the money. I haven't created the income rep generation from adding an agent.

[Unidentified Committee Member]: That's going be more proportional because it's a percentage of whatever you've bought.

[Unidentified Committee Member]: So see So I mean, there's different

[Rep. Marc Mihaly (Chair)]: It's very difficult.

[Unidentified Committee Member]: It's so localized. Yeah, no, that's what

[Unidentified Committee Member]: we just talked about, the difference between using Yeah.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: We think that there are good policy reasons to authorize a tax at the local level. And we think Burlington look at what Burlington's at. They've more than tripled, the resources that the municipality has to spend on affordable housing. This money is used to fix HVAC systems and Cathedral Square apartment buildings. It's used to go to duplexes being built by Habitat for Humanity. This is a resource that goes directly into creating access to affordable rentals and homeownership opportunities in the city. And you're getting these other ancillary benefits of still having a healthy short term rental market, where people can rent a unit for three weeks for a job interview process or just come visit their kids at college for a weekend. And so it's good. It's win win. In other municipalities, they're having more trouble getting to the win win, where they're getting to enjoy the ancillary benefits of having short term rental markets in terms of creating economic opportunity, bringing visitors, maybe recruiting future residents because you get to experience that community with the negatives, are impacts on roads. Sometimes there are short term rental properties that are very popular and used frequently that might be on roads that didn't have lots of big cars driving up and down them several times a day, multiple times a week in the past. Sometimes impacts on steep gravel roads that need to be repaired or overbuilt. Sometimes, it impacts on school services, like fire response or police response. And sometimes it's ones that's harder to make a direct line to, but has to do with the affordability and the availability of long term rentals. And so with a tax authority that provides the flexibility for the municipality to prioritize and address those needs. When the communities are having conversations about the tax,

[Unidentified Committee Member]: how

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: did Burlington arrive at the 9% figure when they're knowing desirability of the benefits of short term rentals versus what's the impact? I don't totally know. That was concluded just before I joined the team. If I remember, they sought to find the figure that changes behavior. And if I remember correctly, the result of that research and common I think a figure that's commonly promoted, I want to say, is either 11 or 13 per I think it's 13 per shoe. So if you go to buy a pair of white sneakers, and these white sneakers cost this much, and these white sneakers cost 13% more, that is at the tipping point where someone changes their consumption behavior. And so again, part of Burlington's policy goal was to deal with the impacts, including on the availability of long term rentals, create the capacity and resources to have safe lodging through short term rentals, but to not totally plummet or distort the market, and frankly, hand it all over to when you see in South Burlington and Wells. And so they try to maximize their utilization of their tax authority but stay under that behavior changing tipping point. And because it's the authority that they have, they can change it. So if that, in a future economy, that tipping point is higher up, they can go higher up with their tax rate. If it becomes clear, they're obviously tracking and reporting and trying to understand this in their community. If they see that precipitous drop in the availability or the use of short term rentals or the revenue that those short term rentals are bringing in to both the city and to the homeowner, property owner, then they can bring that tax down. Because the state didn't say, You're maxed out at this. The state granted the city the authority to create that tax. How does, to your knowledge, any community simply prohibited short term loan? Not that I am aware of in Vermont, and

[Unidentified Committee Member]: That's what

[Rep. Marc Mihaly (Chair)]: I meant, in Vermont.

[Unidentified Committee Member]: Yeah.

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: I'm not aware of that even being really

[Rep. Marc Mihaly (Chair)]: In communities where they're having negative experiences, have they done anything to limit them?

[Samantha Sheehan, Municipal Policy & Advocacy Specialist, Vermont League of Cities & Towns (VLCT)]: No. I'm aware of HOAs doing that, especially ski condos. And I'm aware of some situations where a municipality said, you can't have these things, like fireplace, if you're gonna have a short term rental, because they had a number of situations involving someone that didn't know how to use a fireplace in a short term rental, things like that. So they're saying, you can have a short term rental, but not on the beach, not with the fireplace, not with a septic tank or whatever, but not a total ban. I haven't heard of that.

[Rep. Marc Mihaly (Chair)]: Any other questions? We're past the noon hour. Any other questions by the committee? Samantha, as you can see, we enjoyed your testimony as always. Thank you. Coming.

[Unidentified Committee Member]: It's time for the barbecue. Ladies

[Rep. Marc Mihaly (Chair)]: and gentlemen, I think we are adjourned until tomorrow

[Unidentified Committee Member]: at