Municipal leaders ask state for local fee authority on short-term rentals to fund housing

Josh Hanford, director of intergovernmental relations at the Vermont League of Cities and Towns (VLCT), and Samantha Sheehan of VLCT told the General & Housing Committee on Jan. 7 that municipalities can regulate short‑term rentals but lack authority to raise revenue from them.

Sheehan said municipalities currently “have the authority to regulate short term rentals as they do long term rentals,” including permits, inspections and registries, “but what they don't have is the ability to… set revenue to pay for that or to address the other local impacts.” That limitation, VLCT argued, prevents towns from using visitor‑generated revenue to fund enforcement, inspections or local housing investments.

VLCT pointed to Burlington’s 2023 local excise as an example: Burlington’s ordinance creates a municipal excise on short‑term rentals that funds enforcement and funnels money into an affordable housing trust. VLCT said Burlington’s short‑term rental tax generated significant revenue—VLCT’s presentation estimated about $685,000 attributed to the excise in the year the ordinance took effect—and that other towns with robust short‑term rental markets lack similar local revenue tools.

Committee members asked whether short‑term rental regulation is exclusively local and how the 3% statewide surcharge interacts with local options. Sheehan noted the 3% statewide surcharge sends revenue to the state education fund and does not provide municipalities with dedicated funding. VLCT recommended giving municipalities a local option tax or an additional 1% option specifically for short‑term rentals so towns could choose whether and how to apply it.

The presentation included practical examples of municipal approaches—owner‑occupied permits at low cost versus higher fees for non‑owner units, fire and safety inspections, and wastewater checks in towns without municipal sewers. VLCT said fees today can cover administrative costs but cannot be structured to generate new housing revenue without statutory change.

The hearing record shows VLCT asking for statutory authority to allow municipalities to levy targeted short‑term‑rental taxes or local option surcharges, while keeping enforcement and permitting authority at the municipal level. The committee paused the session for a break and scheduled further witnesses later in the morning.