Municipalities would be allowed to collect impact fees on housing units not inhabited by permanent residents under a bill before the Legislature.

The Taxation Committee voted along party lines Thursday to endorse an amended version of a bill sponsored last session by Rep. Christopher Kessler, D-South Portland. The goal is to discourage short-term rentals and raise money for affordable housing programs.

The amended bill would allow, but not require, communities to create ordinances to impose impact fees on short-term rentals and use that money to support affordable housing, either through subsidizing development of new affordable housing or by providing financial assistance to people struggling to afford their homes.

“This does not require any town to do such a thing, but it makes it clear to town councils that they can do this sort of thing,” Kessler said. 

The bill is much different from the original version proposed last session. That measure would have adopted a statewide vacancy impact fee on residential properties that are not occupied by a permanent resident for at least 180 days a year. The bill had a host of exemptions for low- to moderate-income owners and those with seasonal camps that could be used as year-round residences. And the money would have been split between state and municipal affordable housing programs.

Kessler said he went back to the drawing board after it became clear that the original version lacked support among Democrats, who control both the House and Senate. He said the amended bill provides a local option for municipalities like Portland and South Portland that are struggling with housing affordability to design their own impact fee programs.

“Some of the really hardcore proponents of the bill think that this is a watered down version and they’re not happy with it,” Kessler said. “I’m sorry, but that’s the legislative process and the political reality (is) that original bill is not going to fly.”

Only properties that are “designed for year-round habitation” would be covered, so truly seasonal cabins and camps would likely be excluded. But it would be up to each municipality to design its own program.

A permanent residence is described in state law as a “place where an individual has a true, fixed and permanent home and principal establishment to which the individual, whenever absent, has the intention of returning. An individual may have only one permanent residence at a time and, once a permanent residence is established, that residence is presumed to continue until circumstances indicate otherwise.”

The amended bill was supported by the Maine Municipal Association, but it was uniformly opposed by committee Republicans, who characterized the fee as a tax and argued the proposal would not result in more housing.

Sen. Matthew Pouliot, R-Augusta, and others said the best way to address the shortage of housing is to reduce zoning restrictions and other barriers to housing development. He noted that was the focus of House Speaker Ryan Fecteau’s Commission to Increase Housing Opportunities in Maine by Studying Zoning and Land Use Restrictions.

The tax committee flagged short-term rentals as a concern and issued an informal recommendation to study how they are impacting the housing supply.

“This is nothing more than a feel-good legislation,” Pouliot said. “I hate to say it folks, but I don’t think this is going to move the needle.”

Several communities have struggled to regulate short-term rentals. For example, Portland has created licensing and registration requirements, including fees to administer their programs, and capped the number of unhosted mainland short-term rentals at 400. Activists put forward a referendum to ban unhosted short-term rentals in 2020 and increase fees, but it was the only one of six citizen initiatives that voters defeated, albeit narrowly.

The bill now advances to the full Legislature.

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