Vermont Legislature SmartTranscripts:

[Kesha Ram Hinsdale]: We are live.

[Ann Cummings (Chair)]: We are live. We are back. And at this point, I think we are going to hear senator Ron Hinsdale's amendment proposal.

[Kesha Ram Hinsdale]: Thank you, madam chair. So while Kirby's pulling that up, if I could say two things about how the housing policy conversation has shaped up around short term rentals just for when the conversation turns to short term rentals. I wanna say this on the record. The housing policy committee has never determined that short term rentals are a bad instead of a good or that we don't want them to exist in some form or fashion. We look at the data every year when we can, and we had gotten a contract through the Vermont Housing Finance Agency with AirDNA to understand how many short term rentals there are in each of our communities. Similar to the conversation about second homes, there are certain municipalities that have a high concentration of short term rentals that is impacting them. And I, when I was chair of the housing policy committee, would say to them, you may wanna consider passing a thirty day or more municipal ordinance around that. But that said, I think as the economic development committee, we've also seen that there is a lot of good that comes from short term rentals in places that don't have a high concentration of short term rentals. In places that don't have a high concentration of short term rentals and have high home ownership vacancy, they actually function as a hotel where there are not many places with hotels in the state, and they function to provide income to somebody in that dwelling. So our committee tends to look a lot at short term rental policy, but we would never say that we want to prohibit them in any way. The whole goal of tax policy, I should believe I believe is we should be saying we wanna tax something. We don't necessarily wanna prohibit it. And the combination of of conflicting tax policies ends up becoming both a prohibition and a tax. Okay. We know we can

[Ann Cummings (Chair)]: tack something to discourage it. Mhmm. Let's move through the amendment, and we'll see what the proposal we okay. This isn't posted. Right?

[Kirby (Legislative Counsel)]: This is not posted, if I'm not.

[Ann Cummings (Chair)]: Can you send it to Charlotte so she can post it? What page of the bill would it be in?

[Kirby (Legislative Counsel)]: It's it's the definition of law of government.

[Ann Cummings (Chair)]: 100. Okay. Page 100. Yeah. Got it. Page 100. Same one with the new one.

[Ruth Hardy (Member)]: It's a crease if I open it in my belt. Goes right there.

[Ann Cummings (Chair)]: That's a lot of writing. You want me to walk I through do.

[Kesha Ram Hinsdale]: Yes.

[Ann Cummings (Chair)]: Okay, let's see what this is going to do.

[Kirby (Legislative Counsel)]: Okay, so as you recall, the language that's in the bill currently is, there's three parts. What's in the current bill is thirty day requirement, thirty day increments, and then for cumulatively for six months, and then the third part is the most advised claims and check relationship. This has three parts, and the first part is that the dwelling unit for which the owner will be required to provide a landlord certificate pursuant to Section 6,069 of this title. That means that you are required to file a landlord certificate, which means that you have a rental period, at least one rental period of thirty days. That's what that means. Second part is a dwelling unit that is rented from a natural person, that is meaning a person not an entity, like a human being, or from an entity created for a business purpose which has a legal meaning that means it's not just for tax avoidance, and then two, a natural person. Numbers two and three here are getting at the bona fide network tenant relationship in a different way. That is what they're doing. So the first part is to say it's from a natural person or from an entity that was created for a business purpose, such as a landlord who owned several buildings who created an LLC for the purpose of their landlord business, and then to a national person. And then the last one is the amount of rent paid is equal to or more than 75% of fair market rent for the municipality in which the loan is located. That gets out another component of the bona fide landlord tenant relationship, which would look at

[Ann Cummings (Chair)]: I can't Are you paying my kid for $0

[Kirby (Legislative Counsel)]: Oh, I'm paying close to fair market rent. Yeah. So that's what it does, is it's taking out two big components of the bona fide landlord tenant idea and putting those directly into the statute, and then having the thirty day period, but by doing it through reference to the landlord certificate, and then it does not have the six months for clientele. You refresh my memory, our memory, on what it takes to pursue a landlord certificate, what does that entail?

[Ann Cummings (Chair)]: Is Fill up.

[Kirby (Legislative Counsel)]: You're required to file if you rent to a person for thirty days or more, and it's mostly used under our current system for purposes of helping track their renter rebate or renter credit, rather. To look at a landlord certificate and then look at the claim for a renter credit and you compare the two, do we have a landlord that said, yes, they rented for me? Have a person who claimed a credit, they match. Okay, this person qualifies for rent or credit. That's the point of the landlord certificate. My understanding from what I've heard from tax in the past is that they think they have about 80% compliance at the moment with landlord certificate filing.

[Ann Cummings (Chair)]: Way up.

[Kirby (Legislative Counsel)]: Yeah. So 20% of landlords aren't doing that, which means when tax receives a renter credit claim and there's no company landlord certificate, they have to go

[Ann Cummings (Chair)]: So if you don't file one and you're booked at as a short term rental under the Yes, yes. That's a powerful motivator.

[Kesha Ram Hinsdale]: It is, and may I add, Madam Chair, I think you and Senator Brock were on the committee when we added a lot of data collection to the landlord certificate that the HFA uses to figure Yeah, out go again, I've got a number of reds are. Yes, the landlord certificate is extremely, has become more important since we passed that in order to confidentially transmit landlord information on market rents, etcetera, so we can figure

[Ann Cummings (Chair)]: I out thought we took rent off because No. We left rent on. Okay. Because I know they were concerned that it's all confidential. Yeah. Didn't get any report. Mhmm. So,

[Ruth Hardy (Member)]: Kirby, this wouldn't address the situation of the I think the chair has outlined a few times of somebody having a home that they rent for thirty days and then the other three hundred and six thirty five days, they just have it as their second home.

[Kirby (Legislative Counsel)]: Oh, it's their second home?

[Ruth Hardy (Member)]: Because if they can do this, if they file all these

[Ann Cummings (Chair)]: things This

[Kirby (Legislative Counsel)]: would have the potential of turning what you might think of as a second home into non homestead, nonresidential. Yeah. As long as it's as long as it's the third day.

[Ruth Hardy (Member)]: It would be super easy. Everybody would do it.

[Kesha Ram Hinsdale]: So I I guess what I'd say is the reason I have landlord certificate in here is because you should still move all long term rental policy in a congruent way. If you think somehow it's harder to rent for someone for three months and make it up, or six months, go ahead and and write other language. But there is there's nothing in the language that makes it harder to do it for six

[Ann Cummings (Chair)]: months or three months or So one let's is this Yes, all the I

[Kesha Ram Hinsdale]: have some like mild concerns with other sections, but I have not tried to touch them.

[Ann Cummings (Chair)]: Okay, so what would be I don't think

[Ruth Hardy (Member)]: I understand, I mean, because this would not, it would allow somebody to rent for thirty days and and just and then have it as their second home for the rest of the year. Yes. I guess. So can we change it to so that they have to have add language that says that they have to have rented it at least six months out of the twelve months.

[Ann Cummings (Chair)]: 12 beds underneath. He is that what the years The

[Kesha Ram Hinsdale]: is actually articulating that a lot of people rent seasonally, and they this is about farm warehousing essentially from ways and means cleanup, and it kind of demonstrates that we don't have a we have a market that functions on largely, like, people thinking about two to three to four months stays somewhere.

[Ann Cummings (Chair)]: Largely, Keisha. What's the percentage? What's the percentage of what? Of those, of rentals that you're saying it's largely.

[Kesha Ram Hinsdale]: We ask for that information on the landlord certificate because we don't have it. So we know that actually a majority of rental agreements are informal. They, that's, we've been talking about landlord tenant law all session, and most landlord tenant agreements are not written in such a way that it says they're being rented for six months or more.

[Ann Cummings (Chair)]: I understand, I just wouldn't categorize it as I'm speaking from the housing policy expertise that we do you've said And you're saying that largely in the state of Vermont, people rent less say say again, say what you're saying? Large that a majority of rental agreements are not formalized for a certain period of time. Right.

[Kesha Ram Hinsdale]: So we can't say that somebody rents just one month. They might rent month, two month. They might rent for a year at a time, but most agreements do not spell out a number of Okay.

[Ann Cummings (Chair)]: But the intent is people do things with leases and week to week leases in part in response to the ability to remove or keep a good tenant. You may start out you start out with a probationary the first thirty days, but the intent is I'm renting this for the long term. I'm looking for long term income. Short term rental, the intent is I am only renting it for two, three, four, five, two weeks at a time in ski season. I do not want nor do I intend to rent it for six months.

[Kesha Ram Hinsdale]: Manager, by May, there are a lot of short term rentals, and this we started to see in the data, where they rent for two months for part of the year, three days, and another, they rent for graduation on one end, But and that is a short term rental. It's not if you rent for three months for part of the year. That would be

[Ann Cummings (Chair)]: a long term rental. Okay. Less if you have data, send it to us. Okay. I'll ask more. And then please I wanna go so that's the chain. Yep. Let me see if I can get it up because I'm having trouble reading it up here.

[Kirby (Legislative Counsel)]: You wanna zoom in?

[Ann Cummings (Chair)]: Let's see what I've got.

[Kirby (Legislative Counsel)]: I will flag for you that subdivision b here is the same language that's in the bill, and that language is to clarify that in situations where there's employer provided housing, including farm worker housing, that, that even if it doesn't meet all of the requirements up top, that that would still not receive the second home rate. Like, that's what that language is.

[Ruth Hardy (Member)]: Right. That's already in the bill. Right. It's already in the situation of somebody using their second home for a very short term rental and calling it out.

[Kirby (Legislative Counsel)]: I I would actually flag that if you want if you wanna proceed with this, that you might wanna change the language. Well, the language below is intentionally meant to match up with the six months, So that's why there's a six month requirement below. But if you want if you wanna switch to thirty days, maybe you should switch the bottom part to thirty days.

[Ruth Hardy (Member)]: I don't wanna switch to thirty days. I think thirty days is short.

[Ann Cummings (Chair)]: Yeah.

[Ruth Hardy (Member)]: And this language doesn't address that. This language leaves it open to every single second home in the state will rent their their house for thirty days in order to avoid the tax.

[Kesha Ram Hinsdale]: If I may, madam chair, we did just reconfirm our definition of a property transfer tax, second home, using the landlord certificate for the homestead declaration, then trying to build on it with an idea of what a bona fide landlord tenant agreement is. We we are seeing compliance, and tax can get at the exceptions to compliance without

[Ann Cummings (Chair)]: affecting everybody Once I buy that house Mhmm. I might live in it for a year. No. I'm don't think I'm getting any bills. So maybe we'll get $7.27 out. Means they should pay it a bit. Okay. I'll see where the stress in here gets to be too much. Okay. But property transfer tax is a one time thing. Yeah. Mhmm. Personally, if we go to this, I think I'd like to get rid of that. Property transfer tax? No, the add on. Oh. Alright? No, I'm not getting rid of the property transfer tax. And I know the realtors are sitting.

[Randy Brock (Member)]: Madam Chair? Yes. Question, you may have discussed this before I came back into the room. We discussed item three, the 75% of fair market rent?

[Ann Cummings (Chair)]: No. We haven't discussed it.

[Randy Brock (Member)]: Where do we get that from?

[Kesha Ram Hinsdale]: So I think we miss I I think we should look again at the definition of second home tax for the property transfer tax, because I was trying to help with this notion that the committee wanted to close a loophole for family members who rent to other family members. Mhmm. But in reality, that is an allowable landlord tenant agreement. We would have to get very deep into which family members are okay to rent or not, and what housing law does so that you can't gift your children a house is requires that they pay just below, 1% below Federal Reserve interest rate levels. So you you can't hand your children a house. You can't even hand them You can a sweetheart. So the ultra wealthy will always be able to figure out some tax loopholes. This is saying not

[Ann Cummings (Chair)]: a tax loophole. It's perfectly legal. You can do a sweep card or a deed to your kids. They are now owners of your house.

[Kesha Ram Hinsdale]: They have to pay capital gains.

[Ann Cummings (Chair)]: Not if it's a family member. They don't have to do property transfer. Not until they take possession, they would have to pay capital gains. But when you transfer, what is it, the lady bird, your kids can be on your deed as If it's your primary residence. If it's your primary residence.

[Kesha Ram Hinsdale]: Oh, sorry. Okay. So right. So that's only for your primary residence. Yes. If your kids buy you another home that's not your primary residence, they cannot simply hand it to you, and they cannot give you a zero interest loan for it. They have to give you a relatively fair market loan for that. So this is my attempt to mirror that for the middle class who are more likely to not have paid off a house entirely with a large chunk of money. They're more likely to be

[Ann Cummings (Chair)]: What how did we get to inheriting housing?

[Kesha Ram Hinsdale]: Because the idea being that if you we don't have something called a bonafide landlord tenant agreement. So if you wanna get at someone renting to their child for a dollar, this is saying 1,200 instead of 1,400.

[Randy Brock (Member)]: So 75% of

[Ruth Hardy (Member)]: not your been in here for all of our discussions, then you are blowing up a bill that is not in your jurisdiction. And this is is you have

[Randy Brock (Member)]: not been able up court

[Ann Cummings (Chair)]: answer first before they move

[Randy Brock (Member)]: to something

[Ann Cummings (Chair)]: would be good. I I thought it it has been answered.

[Randy Brock (Member)]: No. It hasn't been answered. Okay. The question was where does the 75% of fair market rent come from the municipality? I'll probably answer it

[Kirby (Legislative Counsel)]: for you. So the way this is written in the Department of Taxes would have if they decide, like, it would be if a person makes that claim, right, and when they file their dwelling use attestation, and the Department of Taxes questions that, it would be on them to have to come up with that number.

[Randy Brock (Member)]: So would they an appraiser for the market rent for that particular property in that municipality?

[Kirby (Legislative Counsel)]: I'm imagining more like it's like PVR, we'll do some kind of analysis. Would not be easy.

[Randy Brock (Member)]: That would not be easy. It simply would be an overly complex solution.

[Kesha Ram Hinsdale]: So I'm happy to take it out and just say it's rented from a person to a person. This was to get at the concern that someone might rent it to another person If or

[Randy Brock (Member)]: a person rents it to another person and rents it for below what is market value, you're not gonna get an appraised at every single time.

[Kesha Ram Hinsdale]: Well, do have put that

[Ann Cummings (Chair)]: on the municipality. Okay. We're trying So my

[Randy Brock (Member)]: question is how would that be done, and where would the number be I don't

[Kirby (Legislative Counsel)]: think it would be based on appraisal value. Would be based off of what current rental rates are for the municipality, and especially And for property

[Randy Brock (Member)]: of that type and of that condition, and who would determine that?

[Kirby (Legislative Counsel)]: It be on the department with us.

[Randy Brock (Member)]: The department. Does the department have the resources to do that, given the number of rentals that we have?

[Kesha Ram Hinsdale]: I think the question is, is this an easier metric to meet than trying to figure out if somebody has a bona fide landlord tenant agreement or not, which is not defined.

[Kirby (Legislative Counsel)]: It's relationship, I agree.

[Randy Brock (Member)]: Yeah. My sense is from looking at this that this is, again, a burden that's being placed on the department with no resources allocated to do it. We have no idea the size of that burden, the frequency with which it would be used, and to put this at law at this point with a total absence of information, So don't think makes

[Kesha Ram Hinsdale]: Senator Mattos did say kind of

[Ann Cummings (Chair)]: quietly, HUD

[Kesha Ram Hinsdale]: already has this figure. So we have fair market rent and AMI, area median income, for most areas because HUD, Section eight, and other housing programs use that so much.

[Randy Brock (Member)]: Do they use that 75% figure? Or they use fair market, what they think is fair market value?

[Ann Cummings (Chair)]: They can tell you what the average rent we use that for the renter rebate.

[Randy Brock (Member)]: Do you know if that's a valid

[Ann Cummings (Chair)]: I think we're

[Kesha Ram Hinsdale]: not

[Randy Brock (Member)]: If going that reflects reality.

[Ann Cummings (Chair)]: I don't think what they're looking for is dollar for dollar. It's looking for, I'm going to rent it to you for $10 a month. I don't care if you ever live in it, but for $10 a month, maybe you can come for a weekend and I get my for $60, I've rented it for three months. I think that's what you're trying to avoid. Yeah, if you're

[Kesha Ram Hinsdale]: trying to close a loophole, we need to know

[Ann Cummings (Chair)]: what loophole we're looking for. Okay.

[Randy Brock (Member)]: But we also need, if we put the number in a statute like that, that it has to be equal to more than such and such,

[Kirby (Legislative Counsel)]: we have to

[Randy Brock (Member)]: know where we got that number from and be able to reproduce it or be able to have somebody use it. I'm not sure that that number is reasonably or readily available for the people that

[Ann Cummings (Chair)]: have to calculate it. It uses for the renter rebate.

[Kesha Ram Hinsdale]: Julia's nodding. I don't want to put her on

[Ann Cummings (Chair)]: the spot, but this is

[Kesha Ram Hinsdale]: a number that is common in housing policy is commonly

[Randy Brock (Member)]: available to the public?

[Kesha Ram Hinsdale]: Yes, and in fact, I'm often looking up, what's the area median income in this county or what's the fair market rent in this county? So they're sometimes buying area, so like Franklin, we talked about this Franklin, I think get lost Yeah,

[Randy Brock (Member)]: remember that. The fair market rent you're talking about though is it grows for applicable to the particular property, because some properties are obviously worth three or four, five times more in rent than other properties.

[Kesha Ram Hinsdale]: I think it's by number of bedrooms.

[Kirby (Legislative Counsel)]: It's the

[Ann Cummings (Chair)]: Well, Randy has the floor. Right. Okay. It's Randy. And then I am about we we have I'm not particularly happy to answer it.

[Kesha Ram Hinsdale]: Know your JFO could answer this one. We've got Okay.

[Ann Cummings (Chair)]: Yeah. I think we've got the intention

[Kesha Ram Hinsdale]: to make the amendment.

[Ann Cummings (Chair)]: From now on, I think we're going to send questions about the legal cause and, you know, questions about their ability to do it should go to the tax department, questions about legal issues should go to the legal department, and I'm going to thank Sandra Ron Hinsdale for bringing this to us, and we can finish up our discussion. Okay? So I think so the proposal as I have it is we're on page 100 and we are still on one and still on the definition of long term rental and we've got that it is at least thirty days. Now we could say for the intention of this tax, for taxing, it has to be at least sixty days or ninety days, right? I mean, we could define in this chapter long term rental is anything between one and six months. Pick a number. What we're doing is we're trying to avoid the loopholes we've been talking about, which is I rent it to my cousin for $10. He comes off, he goes skiing for one weekend, and I now have a long term rental. The sixty days, so this bill says it has to be rented for at least sixty days, right? Six months, days and months. Six months by. Mhmm. Okay. And but I pretty much need to have it rented the rest of the year. I doubt there may be a few, maybe the Blue House kind of thing, but most are somewhat shorter than six months if I'm going to live in it. So this is picking up. This is my primary residence. I go to Florida for five months, and I rent it out to a college student or a legislator or whatever, a traveling nurse. And that qualifies as a second home anyway? No. That is not a second home. I think

[Kirby (Legislative Counsel)]: It would have

[Ann Cummings (Chair)]: We haven't even gotten into second homes. This is the definition between short term and long term rental for the purposes of taxing. If you are long term rental, you are taxed as a non homestead, non residential property, you're an apartment building. Even if you're single and curvy. Give me a thumbs down if I'm off on this. K. What we're getting involved in is how do we determine short term rentals. That's where most of the kids I haven't had a second homeowner really get upset with me except people who have a second home but they rent it out short term, they don't live in it, they own a second house. It's not, they don't live in it, ever. They rent it out short term or they rent out, you know, a wing of the house. They rent it, but it's it seems to mostly be people that rent out houses. We know, I think it's seven towns that have a lot of short term rentals. There's Burlington and things around ski areas. In those areas it's had an impact on the ability of full time residents to afford homes because the values are up and people from out of state will buy up a home for more than the residents can and will use it to go skiing or maybe in the summer, maybe in the summer they'll rent it out, for how long do we have summer, two months? Two months, three months to somebody that wants to go hiking or vice versa. It's that short term rental that we are trying to define. We could just punt and say rentals are all non homestead, non residential, and we could have this fight in conference. Or we can let this ride. I'm gonna I I actually would like a break so I can talk

[Ruth Hardy (Member)]: to Kirby because I need to I need to make sure I'm understanding Let us

[Kesha Ram Hinsdale]: do.