10 Things You Need to Know About Short-Term Rentals and Government
Because of the success of platforms like Airbnb, VRBO, and Flipkey, the short-term rental (STR) market is a growing phenomenon that’s here to stay. While it was once considered a “big city problem,” STRs have slowly permeated the globe. Whether or not STRs have become an issue in your area, you will need a thoughtful ordinance and enforcement tools to address this behemoth of a market at some point. If you haven’t developed an ordinance already, it’s wise to do so sooner rather than later, especially as economies open back up to tourism on a broad scale.
We’ve created a helpful overview covering everything from ordinance best practices, enforcement strategies, and insights on the ever-changing STR landscape. Our experts, urban planner Jeffrey Goodman, public policy expert Alex Marqusee, and director of implementations and customer success for Host Compliance at Granicus, Stacy Pobatschnig, highlight the top 10 things you should know about STRs and government.
#1. STRs are businesses.
STRs are home-based, commercial businesses. That is something that should be incontrovertible. Organizing them as a business brings them under a certain standard. And standards support accountability in the form of licenses and permits that facilitate peace in a community by establishing requirements and boundaries, subsequently exposing bad apples who choose not to operate within those guidelines.
#2. Good STR ordinances are contextual.
Your STR ordinance should reflect your community. What works in Los Angeles won’t work in Dubuque. Overall density and the presence or absence of other hospitality and tourism fixtures like hotels and bed and breakfasts will impact the feasible number of STRs and the types of permits or licenses that are necessary in your area, for example.
#3. Collecting fees for licenses, permits, and taxes is a good idea.
Many municipalities don’t collect taxes related to STRs and are therefore missing out on a lot of revenue. In larger communities with lots of STRs, tax revenue for STRs often equals tax revenue for hotels, which is a vital source of revenue. Make your tax rates and percentages clear and provide an easy way for your hosts to report revenue and pay their taxes. Our Host Compliance software makes this simple. Requiring tax payments and license and permit registration often generates enough money to fund at least one part- or full-time staff member who can own the responsibility of managing the STR ordinance.
Many municipality’s permitting and licensing fee structures are set up for the STR market of yesteryear and don’t fit the current landscape. For example, enforcement costs for STRs in a community with less than 50 rental units—which was much more common before the ‘10s—will be much lower than those who have over 100 rental units, which is the makeup of thousands of communities today. STRs are also generating more revenue per unit than ever before, thanks to increased marketability and access to renters. A general best practice, without getting into a full accounting analysis: double the average nightly rate of STRs in your community as a starting point for your permitting and license fee. This method covers enforcement costs without being cost-prohibitive for STR hosts.
Also require that hosts keep detailed, auditable records of their bookings. Most major booking platforms (like Airbnb) make it easy to track bookings.
#4. A complaint hotline or portal will help to identify and resolve issues quickly.
A complaint hotline is an open line of communication that identifies problem units and allows the host to address and correct the problem to reduce or eliminate the need to involve law enforcement. Our Host Compliance software includes a 24/7 hotline that allows neighbors to report, prove, and resolve non-emergency STR-related problems in real-time, any day or hour. Appoint a local contact person—who will also be available 24/7—to address the reported problematic guest behavior issues. Include a pre-determined number of complaints allowed at one address (three, for example) before the matter is escalated.
Contrary to popular belief, the fear of false or overblown complaints made by hyper-aware, “curtain-twitching” neighbors statistically don’t happen as often as you might think. These hotlines have proven very effective.
#5. Smart STR programs prioritize long-term rentals.
Discourage gentrification or other negative impacts on housing in your area by prioritizing long-term renters in your ordinance. Primary residence- and owner-occupancy-led ordinances are great because they build-in host accountability while also allowing people to participate in the STR market.
However, refrain from the use of the blanket “primary dwelling stipulation” so you don’t miss out on the potential of detached accessory dwellings also known as in-law suites that provide extra income for residents and added tax benefits for municipalities.
#6. Having clear noise, trash, and parking rules will bring peace to your community.
Include stipulations for noise, trash, and parking in your ordinance by requiring that hosts communicate those rules to guests either in the advertisement for the unit and/or using in-unit signage. Many responsible hosts have signage that indicates trash day, emergency numbers, parking rules, etc.
#7. Clear safety guidelines are imperative.
Instead of merely requiring hosts to attest to meeting all the necessary safety standards, we recommend you require an inspection from a certified safety inspector to evaluate each rental and ensure it follows basic living and safety standards. Compliance with state and federal regulations should be established by the issue of a warranty of habitability.
#8. Ambiguity can ruin an ordinance.
In your ordinance, be clear about all requirements and what will happen in the event of noncompliance. Be proactive. The goal is to create an ordinance that will weed out problems upstream and heighten the probability that everyone participating in the market is participating legally. Of course, it’ll be necessary to be reactive as well, but be fair and prompt (reference tip #4).
#9. Everyone has a role to play.
For a good ordinance to be effective, everyone—hosts, guests, neighbors, and the local jurisdiction—has a role to play. A good ordinance will address each player and make their roles clear, as well as the process and purpose for every aspect to work well together.
#10. Some regulation is better than no regulation.
Any regulation is better than no regulation. A lack of regulation usually results in more conflict between hosts, residents, and local government. We’ve seen unsavory examples in the news of how things play out when there is no regulation, so it’s better to address the issue (even in a limited capacity) rather than not address it at all. But of course, our recommendation is to develop a sound, thoughtful ordinance that suits the nuances of your community and is nimble enough to iterate as the market evolves.
To see how Granicus can help you develop, implement, and enforce fair and effective STR rules that address your community’s needs, book a complimentary assessment here.