Select Board Member Proposes ‘Expanded’ Residential Tax Exemption

CHATHAM – One of the criticisms opponents levied against the residential tax exemption approved by the select board last week was that landlords, facing a real estate tax hike, will pass the increase on to renters. Select Board member Randi Potash has a solution to that: an “expanded” residential exemption.

The proposal calls for allowing the owners of residential rental properties to qualify for the residential tax exemption (RTE) if they rent to year-round residents. The so-called expanded RTE has been adopted by Provincetown and Truro and would require approval of a home rule petition by the state legislature.

The expanded RTE would work with the Lease to Locals program approved at last May’s annual town meeting to expand and retain the number of rentals available to year-round residents, Potash said.

“I feel like it’s a step in the right direction,” she said. “We should at least try it.”

Under the Lease to Locals program, owners of short-term rentals can receive a one-time subsidy to convert a property to a year-round rental and lease to a full-time Chatham resident. Voters approved $312,500 in attainable housing funds for the program’s first year.

Last week the select board approved a 20 percent RTE, which shifts a portion of the property tax burden from year-round to nonresident owners. Properties owned by residents assessed at the average residential value of $1.7 million will save approximately $1,000 in property taxes over a similar property owned by a nonresident.

Critics of the RTE said it unfairly saddles nonresidents, who have no vote, with higher property tax bills. That includes owners of rental housing; rental homes owned by residents do not qualify for the RTE, which applies only to owner-occupied homes. The finance committee and summer resident advisory committee, both of which opposed the RTE, expressed concern that landlords would increase rents to make up for the higher property tax.

A 2024 housing production report estimated there were about 350 year-round home rentals in town, compared to approximately 1,400 short-term rentals. The expanded RTE could be a way to incentivize short-term rental owners to rent to year-round residents, Potash said.

“If they get this incentive along with Lease to Locals, I think it could be meaningful,” she said. The expanded RTE would apply to any year-round rental converted from a short-term rental, with no restriction on the amount of the rent.

Potash has requested that the topic be included on a future select board agenda and will push for inclusion of an article on the May annual town meeting warrant authorizing the board to submit home-rule legislation to the state authorizing the expanded RTE.

 Based on the requirements in Truro and Provincetown, the process for qualifying for the expanded RTE is complicated, requiring the filing of lease agreements signed by both landlord and tenant, tax returns and proof that a tenant is a year-round resident. Provincetown’s expanded RTE was approved in 2018, while Truro’s went into effect in 2022. Provincetown further modified the expanded RTE to include up to four units within a multi-family residential parcel, provided they are occupied by either the property owner as a principal resident or by year-round tenants.

 Just like the RTE, the expanded RTE would have to be adopted annually by the select board at a tax classification hearing, Potash noted. At that time officials could assess the program to determine if it is having the desired effect. Once qualified, a year-round rental property would continue to receive the RTE.

 The expanded RTE is “low-hanging fruit” that, among other programs the town can adopt or expand, can help provide support for year-round residents, she said. One indication that the expanded RTE could be successful is that a Housing Assistance Corporation program, Rent 365, which provides a one-time financial incentive to homeowners to convert to year-round renting to residents, reached its capacity this year.