Fueled in part by the recession-- as well as such things like a difficult housing bust and Web-savvy travelers looking to save a penny or two-- short-term vacation rentals had once been booming from Manhattan to the Midwest and all the way to Maui. Despite that fact, numerous controversies over vacation rentals also increased, as irate neighbors complained about the negative impact of noisy guests, the diminished values of investment properties, the reduced amounts of housing stock, and the competitive disadvantage rentals continue to cause for more traditional establishments. In the last several years, numerous officials have turned vacation rentals into convenient scapegoats for regional economic declines.
It’s well known that vacation rental restrictions are at an all-time high in popular European cities such as Barcelona and Paris, and now states such as New York and California have chosen to follow suit by placing restrictions on short-term rentals. The newest rules vary significantly from city to county to state, and only time will tell whether or not the added regulations will ultimately be beneficial or detrimental to the industry, the owners, and the cities in which they all reside. For now, sites such as Airbnb, FlipKey, HomeAway, and TripAdvisor have joined forces to positively influence cities' attempts to regulate or ban the popular travel trend. You can check out the Short Term Rental Advocacy Center for details on current U.S. legislation. But to make it just that much easier, here’s a quick low down on some of the major rules would-be renters might need or want to know. You’re welcome.
U.S. Vacation Rental Restrictions: What You Need To Know
For three decades, locals in neighborhoods around town have complained about illegal vacation rentals, yet city officials always lacked enough inspectors to fully investigate. The Honolulu City Council has since set aside $300,000 to hire specialists on contract to start finding violators—it also began a huge crackdown on illegal vacation rentals last year, and though inspectors have since then continued to find violations in Kailua, Oahu, as well as in other spots around the Big Island, these added aggressive measures seem to be working. One of eight Kailua homes -- of the twenty so far island wide -- were cited this past spring, which is a much larger number of violations if far compared to the 37 violations in all of 2015.
For the most part, Honolulu’s residential zone neighborhoods are limited to minimum rental terms of 30 days, meaning no short-term vacation rentals whatsoever. And if properties are in fact ever rented out, the appropriate taxes must be passed along to the state accordingly, including the General Excess Tax (“GET”) and the Transient Accommodation Tax (“TAT”).
2. New York
Among the most controversial legislation is NYC, where hotel rates are among the highest in the country. The city has got Draconian laws which render nearly all short-term rentals and B&Bs illegal. There is basically a ban more or less on all rentals for fewer than 30 days in buildings with three or more units, unless the tenant is present throughout the stay or unless there is no money exchanged between the parties involved. The law was intended to prevent large-scale commercial operations—i.e., illegal hotels—but is broad enough to encompass the activities of more casual renters as well, and aims to promote the safety and well-being of travelers staying in homes of people who are not in the primary business of providing lodging.
Though it was enacted back in 2011, Forbes reported in 2012 that the city did 828 inspections and issued 2,239 violations. So, for now, short-term rentals still seem to be widely operating in America's largest city despite the constant threat of fines.
The Sunshine State continues to adapt to the sharing economy—and it’s been rather tricky, as Florida’s hospitality industry remains one of the largest in the state, producing significant income in terms of tourism taxes. Earlier this year, it was reported that Miami ranks in Airbnb’s top five markets in the U.S., behind New York, Los Angeles, San Francisco, and Boston, and though legislative efforts have been made to restrict vacation rentals through sites like AirBnb.com and VRBO.com, it’s widely known that various sharing economy businesses continue to add instant lodging inventory. They also encourage more people to vacation in the state, which is why Florida’s regulations have been way laxer.
For now, city codes allow for vacation and short-term rentals (less than six months and one day) in certain zoning districts, but are banned in all single-family homes and in a number of zoning districts. Violating and getting caught can result in hefty fees as well as the eviction of tenants and visitors (costs range from $500 to $7,500). Last fall, the city of Fort Lauderdale passed an ordinance regulating vacation rentals that are not timeshares, and in the Florida Keys, short-term rentals are also under scrutiny. Monroe County, for example, now requires rental licenses and permits for vacation rentals, as do the cities of Key West, Marathon, and Islamorada. Properties legally registered with the city must also pass a maintenance and life safety inspection.
On the West Coast, the controversies are all the same—muddled and messy. In Ojai, no vacation rentals are allowed, but in Palm Springs, there is currently no ban for the time being on new vacation rentals as city leaders try to explore changes to better accommodate the tourism industry and neighborhood groups.
The debate is rather simple: lawmakers and activists feel that vacation rentals divert permanent housing. Airbnb and its supporters, however, continue to counter that claim, noting that renting to travelers helps middle-class people make ends meet. What to do? Well, In the Bay Area, at least, there’s a decades-old city code prohibiting renting any apartment or house for fewer than 30 days, and as of right now, San Francisco law only allows homeowners to rent out their own homes (remember: since no one can reside in more than one home, having more than one listing on any site is a red flag). Airbnb is also making an added effort to play nice with the Golden Gate city, despite the tense relationship that has heated up between the two in recent months with the vacation-rental company suing city lawmakers considering new restrictions on rentals in private homes.
Advocates of the home sharing economy can find a friend in Arizona, where state senators voted to block local governments from restricting property owners from renting out their homes for short-term or vacation rentals earlier this year. It’s an unprecedented move, with legislation specifically outlining that counties, cities, and towns cannot use the fact that a short-term rental is not classified as a hotel to prohibit or restrict vacation rental properties.
No restrictions doesn’t mean no regulations however. Vacation rental owners in Arizona are still required to pay taxes to their city and to the state. Laws are also on the books ensuring that neighborhoods with vacation rentals are protected in terms of health and safety, issuing requirements such as the need for potential residences to conform with local fire and building codes, the prohibition of vacation rentals from housing sex offenders, selling illegal drugs, and creating or providing any ‘adult-oriented business.’ Different taxes range by city, but most homeowners can expect to pay anywhere from 7-15% in taxes from their vacation rental earnings, which ensures that their small business contributes to the communities in which they own their homes. The state is even looking ahead to possible problems with businesses who’ll try to take advantage of the more lenient short-term rental regulations. David Drennon, the executive vice president of the Arizona Lodging and Tourism Association, notes that his organization will be looking to create changes to ensure that abuses don’t occur.
Cities such as Denver, Atlanta, and New Orleans are among the most restrictive in the U.S. when it comes to short-term rentals, and yes, Colorado is one of the few who have really put short term rentals under the gun. Denver took a mighty stand earlier this year, while the city of Boulder allows short-term rentals if, and only if, the rental property is the owner’s primary residence. Owners need to register with the city and apply for special licenses to operate any short-term rental (they are also required to report and pay taxes on their rental income). Denver’s City Council is currently considering a similar legislation for vacation rentals in the state’s capital.
The fight continues, as some argue that a primary residence requirement actually works against legitimizing short term rentals, saying that such regulations are impossible to enforce, and that any unenforceable law will inevitably be disobeyed. Hence, there are multiple cities across the state scrambling to find more lenient regulations that’ll still provide the city with much-needed economic benefits: The resort town of Breckenridge, for example, collects 5.9% of every short-term rental transaction for the city (the state of Colorado receives an additional 2.9% sales tax). They’ve also got special rules for short-term rentals regarding respect for one’s neighbors, which in the long run, all seems like a much more solid attempt to solve the problems at hand: providing economic benefit to the city while still protecting its residents and their neighborhoods.
While Colorado focuses on primary residency as a solution to prevent ‘bad’ owners, the Lone Star State believes that primary residency will actually combat their current housing crisis. The City of Austin found that it would need to add a minimum of 69,000 housing units by 2025 to keep up with its housing demand. The Real Estate Council of Austin even recommended the city add 100,000 new housing units, as they seem to think that adding short-term rentals back into the long-term rental market will make a difference in figures.
Most popular Texan destinations have very specific rules and regulations regarding short-term rentals, which includes vacation rentals, as well as home sharing arrangements like those offered on Airbnb. For now, the Texas’ capital requires licenses, collects taxes, and imposes caps on the percentage of housing stock that can be used for such rentals. Officials even passed further occupancy restrictions for all short-term rentals in February and are rumored to be rolling out plans to phase out vacation rentals entirely by 2022. Regulations in Galveston also require homeowners to register their ‘business’ with the city, pay taxes on income received through the business, and have owners provide local contacts who can handle problems such as noise complaints during a renters’ stay. Seems like we’ll just have to wait and see how it all pans out.
This article was written by Pamela Chan.