How Are Municipalities Regulating Short Term Rentals?

As short-term rentals are taking the rental market by storm, municipalities are responding in different ways across the country. Some cities, particularly those that value tourism and want to encourage revitalization of urban areas, are embracing the short-term rental trend, while others are imposing more strict regulations in order to preserve neighborhoods with single-family homes. 

The goals of a municipality in terms of a city’s growth and economic development will impact how they respond to an increase in short term rentals. Property owners interested in short-term or vacation rentals should be aware of a governing body’s attitude toward these types of rentals. For example, some larger cities like New York City are cracking down on short-term rentals, implementing strict regulations or outright bans in order to preserve available housing for residents. More tourist-oriented cities like Las Vegas are more accepting of the new rental trends, and property owners may experience more success and fewer restrictions managing short-term rentals in these areas.

There are a variety of other factors that may influence a municipality’s rules and regulations on short-term rentals. These are some of the top considerations owners should make when choosing to convert their property to a short-term rental:

State Laws

Of course, the state laws surrounding short-term rentals may override or influence a municipality’s regulation. There aren’t any states that impose statewide regulations on short-term rentals, but there are quite a few states that restrict the regulations that municipalities can impose. Many states, such as Florida, have enacted legislation that prevents cities from banning short-term rentals. Others prohibit cities from restricting short-term rentals to properties primarily used for residential purposes, a common regulation imposed by more conservative cities. In these cases, municipalities often limit short-term leases by creating additional requirements or limitations for owners. Some examples include requiring a provision of notice of zoning ordinances to tenants or requiring home inspection before a property is used for short-term rentals.

Permitting Systems

If the state doesn’t impose restrictions on regulating short-term rentals, the zoning ordinance of a city may restrict or fully ban them. Two cities in California, Irvine and Temecula, have outright bans on short-term rentals. Commonly, cities implement a permitting system to track and regulate short-term rentals. Sometimes, cities impose permanent residency requirements, which can limit the amount of time a property may be used for short-term rentals. In Los Angeles, the Home-Sharing Ordinance limits short-term rentals to the property owners primary residence, and rentals are capped at 120 days per year. Another common regulation is requiring STR owners to pay a transient occupancy tax, or TOT, which typically ranges anywhere from 6% to 14%.

While these effectively additional requirements and limitations for property owners, they are typically difficult to enforce, as there is a lack of public record on when or where such rentals occur. Permitting system enforcement usually relies on reports from neighbors or HOAs that become aware of violations. Even services like AirBnb don’t provide rental addresses, making it easier for owners of short-term renters to remain anonymous.

HOA Regulations

Sometimes HOAs will impose their own restrictions on short-term rentals in order to protect the homogeneity of a neighborhood. In these cases, rentals are typically monitored more closely and are consistently enforced. If an HOA lacks the ability to impose such restrictions, they may rely on municipal enforcement, and many cities lack the manpower to strictly enforce such regulations. Enforcement is easier if there are clear-cut penalties for violations, such as scheduled fines. Property owners should be aware of the penalty for short-term rental violations in their city.