Chatham raises short-term rental registration fee to $325 in second hike in two months

The Chatham select board voted Sept. 29 to raise the town's short-term rental registration fee to $325 effective Jan. 1, marking the second time in two months that municipal officials have increased the cost of registration. The decision, reported by the Cape Cod Chronicle, follows an earlier fee increase in August that raised the registration charge from $50 to $200.

Based on the number of short-term rentals currently registered with the town, municipal officials estimate that the higher fee of $325 will generate sufficient revenue to cover the approximately $281,000 annual cost of the regulatory program. This program includes both the administrative expenses of registration and the costs associated with annual safety inspections for short-term rental properties.

What the data shows

The data shows a rapid escalation in the fees required to operate a short-term rental in Chatham. In August, the select board increased the registration fee from $50 to $200. On Sept. 29, the board voted to raise that fee again to $325, effective Jan. 1. This represents a substantial shift in the regulatory cost structure for local property owners within a two-month period.

According to figures from the health department, which oversees the registration program, there are currently 901 short-term rentals registered with the town. The distribution of these properties by size is concentrated in mid-sized homes. Health department records show that 41 percent of the registered rentals, representing 372 properties, have three bedrooms. Properties with four bedrooms account for 25 percent of the registry. The remaining portion of the short-term rental inventory consists of a smaller number of properties with one, two and five bedrooms, alongside a scattering of rentals with six to 10 bedrooms.

Before settling on the $325 rate, the select board analyzed several alternative fee structures. One option considered was a $350 flat registration fee. An analysis conducted by the town estimated that a $350 fee, when applied to the current 901 registered properties, would generate $315,350 in annual revenue. This total would exceed the program's estimated annual costs of approximately $281,000 by about $30,000. Board member Dean Nicastro objected to this higher rate, stating that a fee of $350 would “bring in more than I’m comfortable with.”

By contrast, the approved $325 fee is projected to generate $292,825 in annual revenue. This revenue projection brings the town's collections closer to the actual operating costs of the program, aligning with municipal guidelines that restrict towns from charging fees that exceed the overall cost of providing a specific service.

How it was measured

The figures were measured and compiled by Chatham municipal staff, including the health department and town administration. The registration count of 901 properties reflects the active database of short-term rentals registered with the health department, which is the municipal agency tasked with overseeing the registration program.

The financial projections were calculated by the town using the active registry count of 901 properties and the estimated annual program cost of approximately $281,000. This baseline cost of approximately $281,000 represents the town's projection for administering the registration program and conducting mandatory safety inspections. The town administration did not publish a highly detailed, itemized breakdown of how the approximately $281,000 cost is split between administrative salaries, software, and physical inspection hours, but presented the figure as the total operational cost of the program.

The data also reveals a discrepancy between local and state records. Town officials noted that the municipality's registration figures are lower than the number of properties registered with the state of Massachusetts. This indicates that the town's measurement of 901 registered properties does not capture the full scale of the local market, as some owners have registered with the state but have not yet registered with the town of Chatham.

The mechanics of municipal fees

The debate over the fee structure highlights the legal and administrative boundaries that Massachusetts municipalities must navigate when setting local charges. Under state guidelines, towns are not permitted to charge fees that are higher than the overall cost of a particular service. This legal constraint directly influenced the select board's decision to reject the $350 fee, which would have generated about $30,000 in excess revenue.

The board also discussed alternative fee structures, including a sliding scale based on the number of bedrooms in a rental. Natural Resources Director Greg Berman noted that a sliding scale based on the bedroom count would be “unique to Massachusetts and Cape Cod.” Berman cautioned that “there’s somewhat of a risk being a groundbreaker like that,” which influenced the board's decision to avoid a tiered system.

Town Counsel Jason Talerman advised the board that a “reasonable nexus” is required to charge higher fees for properties with more bedrooms. Talerman suggested that properties with more bedrooms would likely require a higher level of inspections, which could legally justify a higher fee. While select board chair Jeffrey Dykens favored a structure charging $100 per bedroom, the board ultimately decided that a single flat fee was a more practical approach.

Who it affects

The fee increase directly affects short-term rental owners, property managers, and investors operating in Chatham. For these operators, the annual cost of maintaining a local registration will rise to $325 starting Jan. 1. Select board vice chair Cory Metters dismissed the financial impact on owners, characterizing the higher fee as “a drop in the bucket” and stating that “no one’s going to give a hoot.”

The policy also affects the broader Chatham community and the local housing market. Chatham and other Cape Cod towns are actively wrestling with the growth of short-term rentals. There is widespread concern among residents and officials that short-term rentals are supplanting year-round rentals and causing disruption to neighborhoods because of overcrowding. The registration program, funded by these fees, is designed to address these concerns by requiring registration and annual safety inspections.

Furthermore, the fee structure affects the efficiency of municipal operations. Vice chair Cory Metters noted that a single higher fee would be more efficient and help cover costs if pending state legislation requiring additional inspections for short-term rentals is approved. This suggests that the flat fee of $325 provides the town with a more stable administrative framework to handle potential state-mandated regulatory changes.

Enforcement and compliance

The town is actively enforcing its registration requirements through financial penalties administered by the health board. The health board continues to fine short-term rental owners who fail to register their properties with the town, demonstrating that registration is not voluntary.

On Sept. 28, the health board voted to institute $200 a day fines on unregistered rentals located on Sam Ryder Road, Cedar Swamp Lane and Pine Drive. According to Short-term Rental Administrator/Inspector Karen Chimwaza, the owners of these properties were notified of their failure to register by both regular mail and registered mail before the fines were instituted.

The imposition of $200 daily fines indicates that the town is willing to use significant financial penalties to compel compliance. For an unregistered operator, the daily fine quickly surpasses the annual $325 registration fee, creating a strong financial incentive to comply with the town's registration and inspection requirements.

What the data does not tell you

While the town's data provides a clear picture of registered properties and program costs, it does not reveal the total size of Chatham's short-term rental market. Because the town's registration figures are lower than the number of properties registered with the state of Massachusetts, the data does not tell us exactly how many unregistered rentals are currently operating in the municipality.

The data also does not quantify the precise impact of short-term rentals on Chatham's year-round housing supply. Although officials express concern that short-term rentals are supplanting year-round rentals, the municipal registry does not track how many of the 901 registered properties were previously rented on a long-term basis, or how many are primary residences, secondary homes, or dedicated investment properties.

Furthermore, the financial projections assume that the number of registered properties will remain stable at 901. If more owners register to avoid the $200 daily fines, or if the market expands, the revenue generated by the $325 fee will exceed the projected $292,825. Town Counsel Jason Talerman noted that since the registry is likely to grow, requiring more inspections and administration, the potential for higher revenue is justified under municipal guidelines.

What to watch

The regulatory environment for short-term rentals in Chatham remains in transition, with several upcoming decisions that will affect local operators.

• The select board's planned discussion later this month regarding the adoption of a new general bylaw governing short-term rentals.
• The progress of pending state legislation that could require additional inspections for short-term rentals and impact municipal administrative costs.
• The health board's ongoing enforcement actions and whether the imposition of $200 daily fines is expanded to additional streets beyond Sam Ryder Road, Cedar Swamp Lane and Pine Drive.
• The alignment of the town's registration database with the state of Massachusetts registry, which could significantly increase the number of officially recognized local rentals.