To Address Vermont's Housing Crunch, Lawmakers Consider $2-Per-Night Hotel Tax

Feb 15, 2017

Vermont lawmakers are eyeing a $2-per-night fee on hotel stays to raise the $10 million a year they say is needed to solve the state’s affordable housing crunch.

Vermont has a well-documented shortage of affordable housing in parts of the state, and even middle-income residents often struggle to find decent homes or apartments.

Erhard Mahnke has worked on housing issues for more than 25 years in Vermont, and he says it’s harder than ever to for many residents to find decent living accommodations.

“It’s not just at the lower end of the economic spectrum. It really goes up into the moderate and even middle-income folks,” Mahnke says.

A person has to earn on average about $21 an hour to afford a decent apartment in Vermont, according to the National Low-Income Housing Coalition. In Chittenden County, the so-called “housing wage” is closer to $25 an hour.

“If you’re working at a low-wage service-sector job, like in the hospitality industry, you really can’t afford a modest apartment to rent in the state of Vermont,” Mahnke says.

Mahnke, the coordinator at the Vermont Affordable Housing Coalition, is among the advocates pushing for a bill that would deliver a major boost to affordable housing stock.

The legislation would use a $2-per-night “occupancy fee” on stays in hotels, inns, bed and breakfasts and Airbnb lodgings to subsidize construction of new housing stock — and the rehabilitation of existing dwellings.

"If you’re working at a low-wage service-sector job ... you really can’t afford a modest apartment to rent in the state of Vermont." — Erhard Mahnke, housing advocate

“We’re increasingly hearing about working families who cannot find stable housing, so those are the people we’re going to try to help,” says Burlington Rep. Joey Donovan. Donovan, the lead sponsor of one of two bills that would use the hotel tax to support affordable housing development.

Donovan, a Democrat, says one major benefit to the hotel tax is that it’s paid for by mostly out-of-staters. According to a report issued by the Governor’s Pathways from Poverty Council, non-Vermont residents account for 93 percent of overnight hotel visits in Vermont.

Donovan says she doesn’t think the surcharge will do anything to dent the tourism industry. On a recent visit to New York, she says her hotel bill included $4 or $5 worth of city and state occupancy charges. She says those costs wouldn’t keep her from seeing Manhattan.

“And I certainly think that folks that come to enjoy the beauties of this state would not allow a $2 increase in a hotel bill to keep them from not coming,” Donovan says.

Stowe Rep. Heidi Scheuermann takes a different view.

“We compete in a global tourism industry, and that competition is fierce,” Scheuermann says. “And I don’t think the advocates truly understand or care to understand those challenges.”

"They live on very small margins, the folks who own these small inns and bed and breakfasts and lodges." — Stowe Rep. Heidi Scheuermann

Scheuermann, a Republican, says she appreciates the need for more affordable housing. But she says small and medium-sized hotels and inns especially are already at the whims of weather, seasonality and economic conditions.  

“They live on very small margins, the folks who own these small inns and bed and breakfasts and lodges. They live on very small margins, and in some cases no margin at all,” Scheuermann says.

Scheuermann says pressure to keep lodging rates as low as possible means hotel owners will end up eating that $2-per-night assessment themselves, rather than pass it on to customers.

Cathy Davis, executive vice-president of the Lake Champlain Regional Chamber of Commerce, says her organization is acutely aware of the housing crunch in Vermont. But she says it's poor public policy to place the financial burden of solving its housing problems on the tourists who come here to work or play.

Davis says the new fee will hurt business.

“When you’re trying to attract a conference or a meeting, we are often competing with other localities, properties in New Hampshire or some of our neighboring states,” Davis says. “And they are price sensitive.”

Gov. Phil Scott has proposed a plan that would pour more than $35 million into affordable housing activity. But advocates say it won’t go far enough. And they say vulnerable populations will suffer if Vermont doesn’t proceed with more significant housing investments.

"Lack of safe and affordable housing is a major barrier to survivors when they’re leaving abusive relationships." — Kara Casey, Vermont Network Against Domestic and Sexual Violence

“And lack of safe and affordable housing is a major barrier to survivors when they’re leaving abusive relationships,” says Kara Casey, the economic justice and housing specialist at the Vermont Network Against Domestic and Sexual Violence. “So they’re forced to make the decision sometimes between staying in a violent relationship and homelessness.”

Casey says the hotel surcharge, unlike Scott’s proposal, would also fund critical cash-assistance programs to keep people from losing their homes or apartments. Donovan’s bill would also fund financial literacy, counseling, and other services for people with mental health or substance-abuse issues at risk of becoming homeless.