Cape Cod, Massachusetts Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Cape Cod, Massachusetts?

Short-term rentals (STRs) like Airbnb and VRBO have become increasingly popular on Cape Cod, Massachusetts in recent years. However, the rise of STRs has also led to new regulations at both the state and local levels. Here's an overview of the key rules and requirements for operating a short-term rental in Cape Cod.

Starting a Short-Term Rental Business in Cape Cod

To legally operate a short-term rental in Cape Cod, owners must:

1. Register with the Massachusetts Department of Revenue and obtain a certificate number for each rental property address. Registration is free and can be completed online through MassTaxConnect.

2. Collect and remit state and local occupancy taxes from guests. As of 2024, this includes:

• 5.7% state excise tax
• Up to 6.5% local excise tax (varies by town)
• 2.75% Cape Cod and Islands Water Protection Fund excise tax
• 3% community impact fee on professionally-managed units in some towns

3. Maintain a minimum of $1 million in liability insurance coverage, unless renting through a platform like Airbnb that provides equal or greater coverage.

4. Notify their insurance provider that the property will be used as a short-term rental.

5. Comply with any additional local regulations set by their town or city. For example:

1. In Provincetown, STRs are limited to one rental per seven-day period, or two for owner-occupied "Primary Residence Hosted" rentals.
2. Falmouth created a Short-Term Rental Working Group in 2024 to review regulations.

By carefully navigating the regulatory landscape and prioritizing guest experience, short-term rental operators can tap into the strong demand for vacation accommodations in Cape Cod. However, it’s important to stay informed about evolving regulations as island communities seek to balance the economic benefits of short-term rentals with housing challenges.

Short-Term Rental Licensing Requirements in Barnstable

To legally operate a short-term rental in the Town of Barnstable, owners must register their property annually with the town's Health Division. The registration process can be completed online through the Town of Barnstable Online Permitting System.

Requirements include:

1. Completing the online Rental Registration Application, providing information about the rental property, owner, and local contact person.
2. Paying the annual registration fee, which is $90 for the first unit and $25 for each additional unit on the same parcel. Fees can be paid online by credit card or by mailing a check payable to "Town of Barnstable."
3. Undergoing a health and safety inspection, if required. Inspections are typically done when first registering a property and every few years thereafter.
4. Registering with the Massachusetts Department of Revenue (DOR) for tax collection purposes. This is a separate process from the town registration.

The town registration is valid for one year and must be renewed annually. Most applications are processed within a few business days, unless an inspection is needed.

Failure to register a short-term rental with the town can result in a non-criminal citation and fine of $100. The Health Division conducts periodic compliance checks and responds to complaints received through the town's short-term rental complaint hotline.

In addition to the town requirements, short-term rental operators in Barnstable must also collect and remit the applicable state and local excise taxes (totaling 14.45%) to the DOR. This includes the 6% local excise tax set by the town.

Required Documents for Barnstable Short-Term Rentals

To register a short-term rental property with the Town of Barnstable, owners must submit the following documents:

1. Rental Registration Application: This online form collects basic information about the rental property, owner, and local contact person. It is submitted through the Town of Barnstable Online Permitting System.
2. Proof of Ownership: Applicants must provide a copy of the current deed or other legal document demonstrating ownership of the rental property. This helps verify that the person registering the rental is the legal owner.
3. Floor Plan: A detailed floor plan showing the dimensions of each room, location of smoke and carbon monoxide detectors, and emergency evacuation routes is required. This is used to determine the maximum occupancy of the rental unit.
4. Local Contact Person Designation Form: Owners must designate a local contact person who is available 24/7 and can respond to any issues at the rental property within one hour. The contact person's name, address, and phone number must be provided to the town and posted conspicuously in the rental unit.
5. Proof of Insurance: Owners must submit a Certificate of Insurance showing liability coverage of at least $1,000,000. This requirement may be satisfied if the hosting platform (like Airbnb) provides equal or greater coverage.
6. State-Level Registration: Before applying for a Barnstable rental permit, owners must also register with the Massachusetts Department of Revenue (DOR) for tax collection purposes. A copy of the DOR certificate should be included with the town application.

These documents help ensure that short-term rentals in Barnstable meet health, safety, and regulatory standards. The town's Health Division reviews applications and may require a property inspection before issuing a rental permit.

Failure to provide the required documentation can result in delays or denial of a rental registration. Operating an unregistered short-term rental may lead to fines and other penalties.

Cape Cod Short-Term Rental Taxes

Short-term rentals on Cape Cod are subject to several state and local taxes that operators must collect from guests and remit to the appropriate authorities. Here's a breakdown of the taxes that apply:

1. Massachusetts State Excise Tax: The state imposes a 5.7% excise tax on all short-term rentals.
2. Local Option Excise Tax: Towns in Massachusetts can choose to levy an additional local excise tax of up to 6% on short-term rentals. Most Cape Cod towns, including Barnstable, Provincetown, Truro, and Wellfleet, have adopted the maximum 6% rate as of 2024.
3. Cape Cod and Islands Water Protection Fund Tax: An additional 2.75% excise tax applies to short-term rentals in all Cape Cod towns to fund the region's wastewater management efforts. This brings the total excise tax rate to 14.45% in most Cape towns (5.7% state + 6% local + 2.75% water protection).
4. Community Impact Fee: Towns can choose to levy an additional fee of up to 3% on operators who own two or more short-term rental properties in the same town. As of 2024, Provincetown is the only Cape Cod town charging this fee on "professionally-managed" units, bringing the total tax rate there to 17.45%.

It's important to note that these taxes apply to the total amount of rent, including any cleaning fees, pet fees, or other non-refundable charges. However, the tax is paid by the guest, not the operator.

Tax Deductions and Write-Offs

Short-term rental operators in Cape Cod may be able to deduct certain expenses related to their rental business on their income tax returns. These deductions can help offset the tax liability and reduce the overall cost of operating a short-term rental.

Potential deductions include:

1. Mortgage interest and property taxes (if the rental is not a primary residence)
2. Rental insurance premiums
3. Cleaning and maintenance costs
4. Utility expenses (electricity, water, internet, etc.)
5. Depreciation of furniture and equipment used in the rental
6. Advertising and booking platform fees
7. Accounting and legal fees related to the rental business

It's important to keep accurate records of all rental income and expenses throughout the year. Consult with a tax professional to determine which deductions apply to your specific situation and how to properly claim them on your tax return.

Massachusetts Wide Short-Term Rental Rules

In addition to local regulations in Cape Cod towns, short-term rental operators must also comply with state-level rules in Massachusetts. Key requirements include:

1. Registration: Hosts must register with the Massachusetts Department of Revenue (DOR) and obtain a certificate number for each rental property address. Registration is free and can be completed online through MassTaxConnect.
2. Taxes: As of July 1, 2019, short-term rentals are subject to state and local room occupancy excise taxes totaling up to 14.45% in most Cape Cod towns (5.7% state tax, up to 6% local tax, and 2.75% Cape Cod and Islands Water Protection Fund tax). Some towns like Provincetown also charge an additional 3% community impact fee on professionally-managed units. Taxes are collected and remitted by hosting platforms like Airbnb on behalf of the host.
3. Insurance: Hosts must maintain a minimum of $1 million in liability insurance coverage, unless renting through a platform that provides equal or greater coverage.
4. Health and Safety: Rentals must meet all applicable building, fire, health, and safety codes. Hosts may be subject to inspections to verify compliance.
5. Occupancy Limits: State law caps occupancy at 2 persons per bedroom, up to a maximum of 6 people total, excluding children under 12. Local limits may be more restrictive.
6. Rental Period: The state considers rentals of 31 days or less to be "short-term" and subject to the room occupancy excise tax. Longer rentals are exempt.
7. Exemptions: Properties rented for 14 days or less per calendar year are exempt from the state tax, but may still be subject to local rules around registration and safety.

While the state provides a baseline framework, Massachusetts allows cities and towns to further regulate short-term rentals through zoning, licensing, and operational requirements. Hosts should carefully review both state and local rules to ensure full compliance.

Does Cape Cod Strictly Enforce STR Rules?

Based on discussions in online forums like Reddit and Bigger Pockets, it appears that enforcement of short-term rental regulations varies across the different towns on Cape Cod, but is generally not very strict compared to some other cities. Many hosts seem to operate STRs in Cape Cod despite not being fully compliant with local rules.

On the Cape Cod subreddit, locals express frustration that most towns don't even know how many STRs are operating, let alone inspect them for compliance. One commenter stated "I don't think most towns even know what's being rented nor do I think anyone's inspecting them." This suggests a lack of proactive enforcement by local authorities.

However, some towns like Barnstable do respond to complaints about problem rentals. Neighbors can report issues to a short-term rental hotline, which may prompt the town's Health Division to investigate. But it's unclear how frequently this reactive enforcement happens in practice.

Overall, the Cape seems to have a fairly hands-off, Airbnb-friendly approach compared to cities like Boston that impose strict registration requirements, inspections, and occupancy taxes on STRs. The absence of a clear definition for "short-term rental" in most Cape Cod town zoning bylaws creates ambiguity around what's allowed.

As a result, many Cape Cod hosts appear to operate STRs without obtaining proper permits or paying required taxes. On Bigger Pockets, one host admitted to renting their Cape property on Airbnb while living out of state, which violates a state law requiring STRs to be operated by Massachusetts residents.

In conclusion, while Cape Cod towns do have STR regulations on the books, spotty enforcement enables many hosts to fly under the radar, making the Cape a relatively Airbnb-friendly destination overall. Stricter crackdowns on non-compliant rentals seem unlikely unless local residents ramp up political pressure on town officials to address quality of life and housing affordability concerns.

How to Start a Short-Term Rental Business in Cape Cod

Starting a short-term rental business on Cape Cod can be a lucrative venture, but it requires careful planning and execution. Here are the key steps to get started, along with tips for success:

1. Research local regulations: Before investing in a property, thoroughly research the short-term rental regulations in the specific Cape Cod town where you plan to operate. Rules vary by municipality, with some towns requiring permits, setting occupancy limits, or restricting the number of rental days per year. Failing to comply can result in fines and legal issues.
2. Choose the right location: Look for a property in a desirable area with strong vacation rental demand. Proximity to beaches, attractions, and amenities is crucial. Consider working with a local real estate agent specializing in vacation rentals to find the best opportunities.
3. Develop a business plan: Craft a detailed business plan that outlines your target market, pricing strategy, marketing approach, and financial projections. Be sure to factor in all costs, including mortgage payments, insurance, utilities, cleaning, and maintenance. Set competitive rates based on comparable rentals in the area.
4. Obtain necessary permits and licenses: Register your short-term rental with the Massachusetts Department of Revenue and obtain a business certificate from your town. You may also need to pass health and safety inspections. Start this process early, as approvals can take time.
5. Invest in quality furnishings and amenities: Outfit your rental with comfortable, durable furniture and high-quality linens. Provide popular amenities like fast Wi-Fi, beach gear, and entertainment options to attract guests. Don't skimp on these items, as they directly impact guest satisfaction and reviews.
6. Create a strong online listing: Craft an enticing listing on popular vacation rental platforms like Airbnb and VRBO. Include a detailed description, high-resolution photos, and an accurate list of amenities. Highlight your rental's unique selling points and the local Cape Cod experience.
7. Develop a turnover process: Have a reliable cleaning and maintenance system in place to efficiently prepare your rental between guests. Hire a reputable cleaning service or consider using a property management company to handle turnovers. Conduct regular inspections to catch any issues early.
8. Prioritize guest communication: Respond promptly to inquiries and maintain open lines of communication with guests before, during, and after their stay. Provide detailed check-in instructions and a local guidebook with recommendations. Address any concerns quickly and professionally to earn positive reviews.
9. Market your rental effectively: In addition to listing on major platforms, promote your rental through social media, a dedicated website, and local tourism partners. Encourage satisfied guests to leave reviews and refer friends. Consider offering special promotions or packages during slower periods.
10. Comply with tax requirements: Short-term rentals in Massachusetts are subject to state and local lodging taxes, which can total up to 14.45% in some Cape Cod towns. Set up processes to accurately collect and remit these taxes to avoid penalties. Consider using a tax compliance service to automate this task.

By following these steps and continuously adapting to market conditions and guest preferences, you can build a successful short-term rental business on Cape Cod. Remember to stay informed about regulatory changes and industry trends to stay competitive in this dynamic market.

Who to Contact in Cape Cod about Short-Term Rental Regulations and Zoning?

If you have questions about short-term rental regulations and zoning in your specific Cape Cod town, here are some key contacts and resources:

Barnstable: Contact the Building Division at 508-862-4038 or building@town.barnstable.ma.us. You can also visit their STR information page at https://townofbarnstable.us/Departments/planninganddevelopment/Barnstable-Short-Term-Rental-Information.asp

Provincetown: Call the Community Development Office at 508-487-7000 ext. 554 or email shorttermrentals@provincetown-ma.gov. More details are available at https://www.provincetown-ma.gov/1170/Short-Term-Rental-Occupancy-Tax

Chatham: Reach out to the Health Division at 508-945-5165 or health@chatham-ma.gov. The town's STR registration page is https://www.chatham-ma.gov/health-division/pages/short-term-rental-registration

Truro: Contact the Health Department at 508-349-7004 ext. 110 or healthinspector@truro-ma.gov.

Wellfleet: Call the Health Department at 508-349-0308 or email health@wellfleet-ma.gov.

For general questions that apply Cape-wide, you can contact:

• Cape Cod & Islands Association of Realtors (CCIAOR) at 508-957-4300 or info@cciaor.com. They have a helpful STR resource page at https://cciaor.com/shorttermrentals
• Cape Cod Chamber of Commerce at 508-362-3225 or info@capecodchamber.org. Their website is https://www.capecodchamber.org/

Some online forums and communities where Cape Cod STR hosts connect and share information include:

1. Cape Cod Short Term Rental Facebook group: https://www.facebook.com/groups/1409026482462394/
2. Bigger Pockets Cape Cod Short Term Rental thread: https://www.biggerpockets.com/forums/530/topics/980506-cape-cod-short-term-rental
3. TripAdvisor Cape Cod Vacation Rentals forum: https://www.tripadvisor.com/ShowForum-g185492-i369-Cape_Cod_Massachusetts.html

Reaching out to your town officials and connecting with other local hosts are great ways to stay informed about the evolving short-term rental landscape on Cape Cod. Rules and enforcement can vary significantly from town to town, so it's important to understand the specific requirements that apply to your property.

What Do Airbnb Hosts in Cape Cod on Reddit and Bigger Pockets Think about Local Regulations?

Discussions on online forums like Reddit and Bigger Pockets provide insight into how short-term rental hosts in Cape Cod feel about the evolving regulatory landscape. Here are some key takeaways from recent threads:

Lack of Enforcement: On the Cape Cod subreddit, several commenters expressed frustration that many towns don't even know how many STRs are operating, let alone inspect them for compliance. One local stated, "I don't think most towns even know what's being rented nor do I think anyone's inspecting them." This suggests spotty enforcement of existing rules.

Calls for Stricter Limits: Some Cape Cod residents on Reddit advocate for tighter restrictions on STRs, similar to those recently passed in Atlanta. Proposed measures include allowing owners to operate a maximum of two STR units (one being their primary residence), requiring a permit and occupancy tax, and increasing penalties for noise/party violations. Proponents argue this could help stabilize housing for local families.

Concerns About Housing Availability: On Bigger Pockets, a prospective host asked about the viability of Airbnb rentals on the Cape year-round. Respondents noted the shortage of affordable housing for year-round residents and seasonal workers, with one commenting, "Seasonal homes have gutted our communities." Some feel STRs are exacerbating the housing crisis.

Desire for Consistent Regulations: Cape-wide registration requirements and occupancy limits were another hot topic on local forums. One Reddit user envisioned a system where towns could control the number of STR permits issued, similar to restrictions in New York City. However, others pointed out the logistical challenges of coordinating policies across the Cape's 15 independent towns.

Polarized Opinions: Online discussions reveal strong feelings on both sides of the issue. While some blame STRs for eroding community character and raising housing costs, others defend their right to maximize income from their properties. A balanced approach remains elusive, as one Redditor concluded, "Homeowners in the towns vote, and they vote for what lines their pocketbooks."

The contentious debate surrounding short-term rental regulations on Cape Cod mirrors the challenges faced in vacation destinations nationwide. As towns grapple with the unintended consequences of the STR boom, hosts are left to navigate an uncertain and rapidly changing landscape.

Disclaimer: While we here at BNBCalc strive to keep all of our city regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each city and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.