Vacation rentals, once a niche segment of the travel and accommodation industry, have proliferated at an unprecedented pace over the past decade. Fueled by platforms like Airbnb, Vrbo, and numerous other local variants, this market shift has not only revolutionized the way travelers perceive and access accommodation but has also led to a myriad of regulatory challenges. As this industry matures, cities, states, and even countries have been grappling with the delicate balance of fostering tourism, ensuring housing affordability, protecting neighborhood characteristics, and ensuring that travelers have safe and authentic experiences.
In the dynamic landscape of 2023, the third quarter alone witnessed a torrent of regulatory updates at both the state and local levels. These changes, ranging from stringent licensing requirements to nuanced tax structures, have been enacted in response to the evolving nature of the vacation rental market, the challenges posed by the global pandemic, and the ever-shifting economic and socio-political climates of regions around the globe. Due to this, many property managers and owners have no alternative but to shift toward the mid-term rental (MTR) model.
This article, curated for our dedicated readers of the Monthly Vacationer, seeks to provide a comprehensive overview of these regulation changes. We understand the importance of keeping our community informed, not only to ensure compliance but also to anticipate and navigate the future trajectory of the vacation rental landscape. Whether you are a property owner, a traveler, a local resident, or just a curious reader, this piece promises to shed light on the intricate web of policies that are redefining the way we think about short-term rentals.
This year alone, regulations have emerged in diverse forms, each tailored to the unique challenges and opportunities presented by their respective locales. As we delve deeper into this topic, our hope is to provide clarity in an otherwise complex environment, and to empower our readers with the knowledge to make informed decisions in their vacation rental endeavors. So, buckle up as we embark on a journey through the regulatory maze of Quarter 3.
1. Florida: According to Skift, the state of Florida has a preemption rule that supersedes local regulations, preventing them from banning short-term rentals. While local governments can regulate some aspects of vacation rentals, they cannot limit how often or for how long rentals can occur.
State legislators have since amended the law permitting communities to oversee rentals under certain conditions. As long as they refrained from outright bans or imposing strict limits on their frequency and duration, all Florida local governments retain a range of tools, including code enforcement, licensing, and occupancy restrictions.
Florida has tried to balance the interests of investors, its economy, and the wellbeing of locals. However, increased rental demand and soaring housing prices are pricing locals and the working class out, often creating a shortage of labor needed to maintain and service these rentals. These issues are leading to discussions of potential change in rental regulations in Florida as we move forward.
1. Austin, Texas: A federal judge ruled this summer in a lawsuit against the City of Austin for its short-term rental ordinance prohibiting people from operating an STR without living at the property, according to KXAN Austin. In 2016, the City of Austin issued an ordinance that prohibited non-residents from listing properties as STRs. In a previous case in 2019, an Austin Appeals Court ruled against the City’s ordinance as unconstitutionally retroactive.
In this ruling, a Houston couple said the newest short-term rental ordinance prevented them from listing their Austin home for rent. According to court documents, the ruling from Senior U.S. District Judge David Alan Ezra granted Robert and Roberta Anding’s motion for summary judgment and rejected the City’s motion to dismiss the Andings’ claims.
During the ruling, the Andings claimed that the City of Austin never granted their application for a STR license in 2019 after the ordinance was ruled unconstitutional. View the full ruling here.
2. New York City, New York: After a recent court ruling, a new law has officially taken effect in New York City, outlawing thousands of Airbnb rentals overnight, according to Inman. In January 2022, New York City passed Local Law 18 that required short-term rental owners to register with the city and prevented companies like Airbnb from processing transactions for unregistered rentals.
Airbnb challenged the law in a New York state court in June, calling the law a “de facto ban” on its business in the city, but the case was dismissed in early September. AirDNA estimated there were 22,500 nightly rentals in New York City, meaning about 99 percent of listings have become illegal in the city as of September.
3. Phoenix, Arizona: The Phoenix City Council voted on September 20 to change the city code on STRs, including additional regulations requiring a short-term rental permit process, according to ABC 15 Arizona. The new requirements for STRs include registering with the Maricopa County Assessor's Office, notifying neighbors of their intent to operate a STR, and requiring criminal background checks.
There are also civil penalties for violations, and these violations can lead to a short-term rental operator having their permit suspended. The city's Planning and Development Department will manage the submittal and approval process, while the Neighborhood Services Department will oversee permit enforcement and violations. The Phoenix Police Department will also be involved, where an officer can identify calls for service at short-term rentals and notify the city.
AirDNA’s Newest Regulations Tool
With the rise in rental regulations, AirDNA developed a new feature in their software to rank cities based on their rental restrictions using a Revedy score. This allows investors to avoid highly-regulated areas before buying and investing into new properties across the country. View the tool here.
The world of vacation rentals, much like the broader landscapes of travel and technology, is ever-evolving. The myriad of regulations introduced in this quarter is a testament to the continuous efforts of policymakers to strike a harmonious balance between diverse interests. For stakeholders in this arena, it's essential to remember that behind every regulation lies a motive to craft a more sustainable, inclusive, and safe travel ecosystem. Adapting to these new norms may pose initial challenges, but they pave the way for a more responsible and resilient future for vacation rentals.
These rapid changes in regulations for the STR market have begun to fuel the flames of property owners and vacation rental managers to shift toward an MTR model within their businesses. This could potentially cause a major shift in the STR market as we know it.
As we bid adieu to Quarter 3 and anticipate future regulatory shifts, let's champion a culture of informed adaptability, ensuring that the vacation rental industry remains a cherished aspect of our global travel tapestry for generations to come.