Several weeks ago, as letters arrived from the tax assessor’s office notifying some Portland taxpayers that their property values have increased from 50-100 percent in the last 15 years, there were predictable outcries of protest from across the city.
Mayor Kate Snyder correctly pointed out that 15 years is far too long to wait between revaluations, but that is not the only reason that property values have gone up so drastically.
There is a close correlation between the presence of short-term rentals and increased housing prices in a community. In 2006 Airbnb did not yet exist; in the last decade and a half, hundreds of formerly residential properties have been converted into professional businesses and income properties for non-owner-occupied short-term rentals through online services, like Airbnb.
So far, neither the city nor the state has been able to classify and regulate them properly. The proliferation of STRs has fundamentally altered the housing market and contributed significantly to the worsening housing crisis. Yet regulators still largely turn a blind eye to them and treat them as though they were the same as residential properties.
The city calculates the value of “income properties” differently than “residential properties” when assessing taxes, in order to ensure profitable businesses are paying their fair share. However, there is no official definition of what constitutes an income property in Portland. According to the city tax assessor’s office, an income property is an apartment building with five or more units, an office building, or retail space that the owner rents out for income.
The one glaring omission from this definition is STRs, of which there are now hundreds in residential neighborhoods scattered throughout Portland. These rentals range in price from $100-$500 a night. A person running a professional STR in a non-owner-occupied unit can easily make tens of thousands of dollars a year on each unit.
In order to not shift the burden of property taxes onto residents, it is critical that the city figures out how to properly assess the value of STRs. By any standard, those properties should be considered income properties and their value calculated accordingly.
There were several bills that came to the state Legislature this year that would have helped regulate STRs and raise needed revenue for affordable housing from these ventures. Unfortunately, those measures faced strong headwinds, similar to the 2020 referendum in Portland that came up just a few hundred votes short.
In a year that saw voters in Portland ratify rent stabilization, a significant minimum wage increase, and much stronger green and affordable building standards, voters were still hesitant to rein in STRs – demonstrating the political power these tech companies exert in our communities. (Airbnb spent more than $100,000 and leveraged their huge email list of Portland users to defeat the referendum).
There is also a constitutional issue in Maine that prevents properties from being taxed differently based on their use. That is something that should be revisited in the era of STRs.
Thankfully, the state took some steps toward alleviating property taxes, like increasing revenue sharing and finally fulfilling the 55 percent funding obligation for school funding. Additionally, increases were made to the homestead exemption and to the Property Tax Fairness Credit program, for which homeowners and renters are eligible.
City staff conducted a thorough reevaluation process using the tools they were given by state law and city ordinances. This revaluation process should serve as a wake-up call to property taxpayers in Portland, as well as a signal to city and state regulators to finally act to get it right on short-term rentals. We’ve waited too long as it is.
First-term Maine state Legislator Grayson Lookner, a Democrat, represents Portland’s House District 37.
