Councillors weigh tax treatment for grandfathered owner-occupied short-term rentals

Councilors and residents debated whether owner-occupied properties grandfathered under the town—s short-term rental (STR) rules should continue to qualify for the resident tax rate when those properties, under grandfathering, may rent more than two bedrooms.

Councilor Dennis Toronto raised the issue, asking that the two-tier resident/nonresident tax ordinance be modified so that full-time residents who were grandfathered in as STRs not lose resident tax treatment solely because they rent more than two rooms. Toronto said the current rule created an unintended consequence in which some residents who live in their homes year-round received notice they would be treated as nonresidents for tax purposes because their grandfathered STR allowed more than two rented rooms.

Town legal and administrative staff explained the background: a prior council resolution aimed to incentivize long-term rentals and to preserve housing stock. Under the current ordinance, a dwelling unit registered and used as an STR generally does not qualify for the owner-occupied rate, but an exception allows an owner to rent up to two bedrooms in their primary residence while living there and still qualify for owner-occupied tax treatment.

Councilors and staff clarified several points: grandfathering of a nonconforming use is a zoning concept and does not automatically carry tax treatment; primary-residence status still requires the resident to live at the property more than six months per year; and the STR permit process requires zoning approval for owner-occupied STRs that deviate from the two-bedroom limit.

Councilor Toronto and other councilors asked the administration and solicitor to draft possible ordinance revisions or clarifying language that would permit certain grandfathered owner-occupied properties to retain resident tax treatment, and to compile data on how many properties would be affected. Multiple public commenters, including Don Moore and Rebecca Homer, described personal situations in which full-time residents who rent portions of their homes faced large tax increases; Homer said she experienced a 34% tax increase after a notice indicating nonresident treatment.

Council members asked staff to examine the data, determine legal constraints, and return with recommended language and an estimate of affected properties. Council discussion did not produce an immediate ordinance change; the administration said it would draft options for consideration.