Rehoboth commissioners jacked up the city’s residential rental tax from three percent to six percent at their regular meeting November 17. See link below to the ordinance.
Draft Rental Tax Ordinance – 17 November 2017.pdf
The new tax rate would apply to any rental contracts signed after January 1, according to post on the city’s website.
Commissioners decided the later date would be fair to renters that have already signed contracts under the old three percent rate.
The rental tax has not increased since 1995, when the rate was set at three percent.
The additional revenue from the tax increase will be used for capital improvement projects such as upgrades to the Wilmington Avenue storm drains and to drainage systems on Bayard Avenue, the city stated.
The city has also been dealing with cost overruns for a new city hall and a controversial ocean outfall system for its sewage system.
Municipalities along the coast were fiercely opposed to legislation that called for a state rental tax. That proposal went nowhere, despite the state’s nearly $400 million budget shortfall.
Landlords are worried that an excessive rental tax will drive away summer visitors who would opt for options in Virginia and North Carolina.
The rental market has also been disrupted by apps like Airbnb that allow owners to bypass the early year visits to real estate agents. The apps also allow municipalities to easily collect the rental tax.
