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Airbnbs Banned? What’s Ahead for Short-Term Rentals

by Emily Koelsch
Airbnb Banned

What’s Ahead for Short-Term Rentals 

There have been countless headlines in recent months about increasingly strict regulations on short-term rentals across the country. This, combined with social media posts and media coverage about increased vacancies, has many investors – and travelers – curious whether this is the beginning of the end of short-term rentals (STRs). 

To help answer that question, here’s a look at the current state of short-term rentals, an overview of the ever-growing local restrictions, and tips to help real estate investors manage changing market conditions. 

Occupancy Rates Remain High 

Despite buzz from social media and news outlets about the end of STRs, occupancy rates have remained high and steady in recent months. According to a report from AirDNA, in September of 2023, demand for STRs was up 12.2% on a year-over-year basis. 

Further, AirDNA’s analysts project that short-term rentals should see continued growth, regardless of economic volatility and recession concerns. Because short-term rentals generally offer travelers more affordability and flexibility, it’s expected that these rentals will become increasingly popular for people who want to travel on a budget. 

The clear takeaway here for investors, from both current data and forecasts, is that short-term rental demand remains strong and is not expected to drop. 

That is obviously good news for investors, making the more pressing and urgent issue the increase in local restrictions limiting, banning, and impacting the operation of short-term rentals. 

Short-Term Rental Restrictions Increasing Across the Country 

While cities and counties across the country have been implementing restrictions on short-term rentals over the last couple of years, New York City’s recent restrictions, which effectively amount to a ban on STRs, have brought increased attention to the issue. 

Those pushing for regulations claim that short-term rentals lead to an increase in transient vacationers to quiet neighborhoods, a rise in noise and disturbance violations, a decline in property maintenance, a decline in property values, a rise in crime rates, increased disruptions to parking, and the loss of available housing in areas where housing supplies are low. To combat these issues, cities have taken a variety of approaches ranging from banning Airbnbs, increasing taxes and fees for property owners, or limiting the operation of STRs. 

In New York City, all property owners have to register with the city to operate a rental for less than 30 days. Registrations are only approved for property owners who live on the property, and owners can only host two guests at a time. Platforms like Airbnb and VRBO will not list rentals for unregistered hosts, and these restrictions are proving to be a de facto ban on STRs in New York City. 

While this is a more extreme policy than most areas have taken, lawmakers across the country have been working to come up with restrictions that balance the increase in tourism and revenue that STRs provide with the disturbances and negative impacts that they bring to communities. Here are a few examples of restrictions cities are implementing:  

  • Honolulu, HI has banned stays of less than 30 days in residential areas. 
  • Atlanta, GA requires hosts to get an annual permit ($150) and taxes rental income at 8%, the same rate that hotels pay. 
  • Burlington, VT requires owners to live on the property, with some exceptions, charges hosts an annual fee and imposes a 9% tax on rental revenue. 
  • Coeur d’Alene, ID requires hosts to apply for a short-term rental permit and pay an annual fee to operate a vacation rental. 
  • Memphis, TN requires property owners to get a license to operate STR. In addition, hosts must provide the name of an adult within 50 miles of the property who can respond to noise violations and disorderly conduct and proof of at least $1 million of insurance. 
  • Dallas, TX has banned STR in single-family residential zones. 
  • Sarasota, FL requires a minimum of 7-night stays, a 10-person maximum for residential properties, and a Certificate of Registration ($250). 
  • Steamboat Springs, CO has imposed a 9% tax on short-term rentals. 
  • San Francisco, CA property owners may only rent out their entire property for 90 days per year and there is a 14% transient occupancy tax for all stays less than 30 days. 

While this provides a snapshot of the measures being taken across the country, it’s important to note that there are ongoing battles over restrictions, and investors should expect new laws and changes to laws as communities decide how they’ll respond to the impacts that STRs have in their area. 

How Should STR Investors Respond to Changing Conditions? 

There are two major points that STR investors should keep in mind when managing or considering investing in short-term rentals: 1) demand remains consistent and 2) there is uncertainty regarding regulations. 

For those currently operating short-term rentals or considering getting started in the industry, it’s vital to stay up to date on local laws and comply with all applicable laws. Failure to do so can lead to significant fines and penalties and can result in your listing being removed from popular rental platforms. 

For investors considering getting started with STRs, focus on properties that offer flexibility and be prepared for increased restrictions and regulations. If you’re interested in investing in STRs, only purchase properties that will also cash flow as mid-term or long-term rentals. This will ensure you’re protected should local restrictions ban STRs or make them unprofitable. 

Good Property Management Leads to Increased Returns 

Whether you operate a short-, mid-, or long-term rental, ezLandlordForms.com can help you manage your property and maximize returns. Use our Tenant Screening, Vacation Rental Forms, & State-Specific Residential Lease Agreements to make your job as a Landlord as easy as possible. Plus, use our Articles Site and Community Forum to stay up to date on changing laws and industry trends.

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