I sorta have a dog in this fight. It would be nice for the Mongolian Hordes to pay more since they totally disrupt the peace and serenity of this place for 2 months every year. On the other hand, they don't have kids in the local schools, and that is almost 50% of the property taxes. A bigger Homestead Exemption would be a nice gift, it's a paltry $25K reduction in the assessed value of the property...
Who Should Shoulder the Tax Burden in a Resort Town?
There’s no easy answer as Massachusetts communities contemplate changing taxes for part-time residents.
Tom McNamara has been coming to the Cape Cod town of Eastham since he was a boy, when his parents would rent cottages there and he and his cousins would spend idyllic summer days hanging out at the beach. When he had children, he continued the tradition, ultimately buying a place of his own.
“I love the town,” said Mr. McNamara, 65, who is now retired.
But these days, his relationship with Eastham is showing signs of strain.
In 2024, Massachusetts passed a law increasing the property tax exemption that vacation towns like Eastham can give their full-time residents. The exemption — which can now go as high as 50 percent — shifts much of the tax burden to the town’s large community of second-home owners, dividing the area like never before, opponents say.
The exemption is part of an effort by Massachusetts to deal with a devastating rise in real estate prices that’s made it all but impossible for middle-income residents such as teachers and police officers to afford housing, especially in vacation spots like the Berkshires, Cape Cod, Nantucket and Martha’s Vineyard.
“It’s a very steep challenge,” said State Senator Julian Cyr, who represents Cape Cod. “We are now at a point where most working year-round people cannot afford to purchase any property in the towns where they work and live.”
In the aftermath of the pandemic, a wave of outsiders fled to resort areas like Cape Cod, driving up house prices. Eastham officials estimate that the number of properties owned by outside residents went from 55 to 60 percent. In nearby Truro and Provincetown, the number is higher.
The median cost of a single-family home in Cape Cod rose 60 percent between 2019 and 2022, according to the Cape Cod Commission.
Town officials argue that the steady increase in part-time residents over the years has put a strain on local resources, forcing them to invest more in areas like police and road services.
At the same time, revenue from commercial taxes fell in many places because many businesses closed down, making towns more dependent on residential property taxes, said Adam Langley, associate director of tax policy at the Lincoln Institute of Land Policy.
To ease the fiscal burden, states including Montana and Vermont have approved or considered higher taxes on second-home owners. Last year, Rhode Island approved what’s been
dubbed the “Taylor Swift tax” on expensive vacation properties, after the singer purchased a $17 million mansion in Watch Hill in 2013.
Like many states, Massachusetts already had tax laws favoring full-time residents. But the new law targets vacation spots, allowing specific towns to raise the full-time exemption from 35 to 50 percent. While none has done so yet, several towns are actively considering it, which is sparking debate in places like Truro and Eastham.
In places like Provincetown, the exemption can go a long way toward easing the affordability crunch for the dwindling population of full-timers, said the town manager, Alex Morse.
“It’s not a great policy that’s going to solve every issue, but I think it’s one tool that the town can use to allow people to continue calling Provincetown home,” he said.
Under state law, the exemption has to be revenue-neutral, so cutting taxes on full-time residents automatically raises them on part-time neighbors such as Mr. McNamara, who lives full-time in the Boston suburb of Weymouth. The increase can be hefty: If Eastham raised its exemption to 50 percent, a part-time resident who owns a house worth $755,900 (the median price in town) would pay $3,535 more than a full-time resident in an identical home, according to numbers provided by the town. Depending on how many residents ultimately take the exemption, the number could climb higher.
The hike in the exemption has galvanized part-time residents in the state, who have formed the Massachusetts Part-time Resident Taxpayers Alliance in opposition. But it may be hard to win public sympathy for second-home owners who possess a highly desirable asset that’s grown in value and can be rented out.
“If you are someone who is fortunate and lucky enough to own a second home or a third home or a fourth home on Cape Cod or Martha’s Vineyard or Nantucket, you can pay for the property taxes here in a week or two of rentals,” said Senator Cyr.
Part-timers opposing the exemption acknowledge that the housing crunch is real and say Cape Cod residents struggling to make ends meet deserve all the help they can get.
But the exemption in Massachusetts isn’t means-tested, so a billionaire living full-time in a mansion overlooking Cape Cod Bay qualifies for the break, while a part-timer with a much more modest property does not, noted Regan McCarthy, the former president of the Truro Part-time Resident Taxpayers’ Association.
Ms. McCarthy maintained that the exemption also allows towns to spend more with no accountability, by passing the cost on to second-home owners who can’t vote locally and can do little about it but complain, even as their spending fuels the local economy.
“We have no say, no voice, no control over it,” said Ms. McCarthy. “That’s the issue that people fail to understand. It’s not the tax per se. It’s that the tax is shifted onto us as if we’re a hostage class.”
Still, the exemption remains politically popular with full-time residents like Brigid McKenna, 40, a marine biologist. She and her husband, a bartender, bought their home in 2018, before housing got so expensive, she said. But they still struggle to pay child care and grocery bills. “All of our bills are going up, so anything to offset that helps,” she said.
The tax exemption will make it easier for middle-class people like her to remain in the area, and ultimately be better for the Cape, she said.
The dispute raises a question: In an age of short-term rentals like Airbnb and real estate companies that amass huge portfolios of rental properties, what qualifies someone as a resident of a place?
For people like Mr. McNamara, being called a second-home owner doesn’t begin to convey his attachment to the town.
More than a decade ago, he spent $487,000 to purchase his cedar shake bow-roof colonial a mile from the ocean, in a quiet Eastham neighborhood of winding roads just off Route 6, Cape Cod’s main highway. Houses in the area are nice but not luxurious. There are no Taylor Swifts here.
“It’s not a property I bought as an investment. It’s not something I’m going to flip. It’s something that’s going to be there for the kids, and, I hope, the grandkids to use,” he said.
Today he spends half his summers and maybe a third of his winters in Eastham. He volunteers on town boards. His ties to the town are deep and real, he maintained.
For many part-time residents, that’s one of the reasons the residential tax exemption stings. Their hearts may lie on the Cape. But as far as their tax bills are concerned, they’re still outsiders.
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