A: A short-term vacation rental (STR) is most often defined as a rental of a residential dwelling unit or accessory building for periods of less than 31 consecutive days. In some communities, short-term rental housing may be referred to as vacation rentals, transient rentals, short-term vacation rentals or resort dwelling units.
Short-term rentals are often divided into:
In addition some jurisdictions make further distinctions between:
A: Occupancy tax is a tax on the rental of rooms that state or local governments may require. In many places this is known as an occupancy tax, but may also be known as a transient occupancy tax, lodging tax, a room tax, a bed tax, a sales tax, a tourist tax, or a hotel tax. The concept of the occupancy tax is relatively straightforward: guests pay a small additional amount as a percentage of their lodging rate, and that tax is then paid by the business owner to local government on a monthly or quarterly basis. The revenue generated by the tax is usually administered at the local level by a Tourism Development Authority (TDA) consisting of appointed individuals, typically stakeholders in the local tourism economy and elected officials. In some instances, the collection and use of occupancy tax revenue is administered directly by county commissioners or city council members, in the same way that other local tax revenues such as property taxes are administered.
Generally speaking, the use of occupancy tax revenue falls into one of five categories:
In some instances, a lodging guest will need to pay occupancy taxes collected by two different governmental entities. A county may have an occupancy tax that covers all lodging properties in the entire county, and the municipality where the lodging is located may have their own occupancy tax in addition to that county’s tax. Occupancy tax rates and rules vary by city, county and state,. They’re generally owed on the accommodations price plus any fees for other items, like cleanings or extra guests. In some places, occupancy tax is required on a per person, per night basis. There are typically long-term stay exceptions that exempt stays over a certain number of nights (i.e. 30 nights). Occupancy tax is generally paid by the guest, but the obligation to remit the taxes to the government usually falls on the short-term landlord / host.
A: No, the emergence of AirBnb, VRBO, FlipKey and 100’s of other short-term rental websites have created a global boom in short-term rentals of personal residences and contrary to in the past, these rentals are spread all over the country. Traditional residential non-tourist communities that have never had to deal with the consequences of transient populations are therefore now suddenly being forced to deal with new opportunities and challenges, and the problem is not going away. Indeed, the number of short-term rentals have grown at a 45% annual rate over the past 5 years and there is no reason to believe that the growth will slow down in a foreseeable future.
A: As of April 2017, there were more than 125 short-term rental websites operating in the U.S. alone. Here are the top 30 sites listed in alphabetical order: 9flats.com, Agoda.com, Airbnb.com, Alterkeys.com, Aluguest.com, atraveo.com , Booking.com, Casamundo.com, couchsurfing.com, Craigslist.com, Dwellable.com, FlipKey.com, Holiday Lettings, HomeAway.com, Housetrip.com, Interhome.com, Kidandcoe.com, Niumba.com, Only-apartments.com, Rentalspot.com, Roomorama.com, Sleepout.com, Travelmob.com, tripvillas.com, vacationrentals.com, VRBO.com, webchalet.com and Wimdu.com.
The list of websites dedicating to short-term rentals is growing and changing constantly and keeping up with all of the sites requires constant monitoring.
A: If you would like to request a free analysis of the short-term rental market in your city / town / county, please fill out this form and we will set up a meeting to go through a detailed analysis with you in just a few days.
A. The answer to this question depends on the characteristics of your community and whether the short-term rentals operating there are doing so respectfully and not negatively impacting the community directly or in-directly. That said it is often hard to get conclusive evidence to indicate whether this is the case or not. As an example police call logs, code enforcement activity reports, and prosecutorial records seldom specify whether documented incidents are attributable to short-term rental properties or renters. The reason being that most local governments have never kept good records of short-term rental properties in their jurisdiction and police and code-enforcement personnel have generally not been trained to collect and record this type of information. It is also worth noting that many people who have been negatively affected by neighboring short-term rentals, may not have reported the issues they experienced out of fear from ruining their relationship with their neighbors. In many cases affected neighbors may also not know where to report their observations of misconduct related to short-term rentals. All in all, it is therefore very unlikely that one will be able to obtain accurate and/or conclusive evidence to indicate whether short-term rentals are in fact a cause for concern or not without conducting a public hearing or other process for local citizens to speak out on the topic.
A: There are many good reasons why local government leaders are focused on finding ways to manage the rapid growth of short-term rental properties in their communities. To name a few:
A: Yes. The reasons are as follows:
In general, short-term rental restrictions are typically adopted under the specific authority of a state zoning enabling statute or the general police power delegated to local governments by the state constitution, or by statute. Zoning regulations that restrict short-term rentals in residential areas have been upheld where the restrictions are found to be substantially related to land use impacts in the area. Prohibiting short-term occupancy in single-family areas has been held to be within the lawful scope of the zoning power. However, in 2011 the Florida State Legislature enacted legislation that specifically limits the authority of local governments to regulate or prohibit short-term rentals. Enacted as Chapter No. 2011-119 on June 2, 2011, the Florida law (entitled ―”An act relating to public lodging establishments and public food service establishment”) states:
A local law, ordinance, or regulation may not restrict the use of vacation rentals,prohibit vacation rentals, or regulate vacation rentals based solely on their classification, use, or occupancy. This paragraph does not apply to any local law, ordinance, or regulation adopted on or before June 1, 2011.
As of January, 2015, Florida appears to be the only state to have enacted legislation limiting the authority of local governments to regulate or prohibit short-term rentals. It is conceivable, however, that the Florida law may become a model for other states. This would appear to be the most likely in those states where short-term rentals comprise a meaningful segment of the tourist lodging industry.
It is well established that a land use regulation that is excessively restrictive may constitute a taking of property for which compensation must be paid under the state constitution and the Fifth and Fourteenth Amendments to the United States Constitution. The prevailing test for determining whether a regulatory taking has occurred was established in the landmark case of Penn Central Transportation Co. v. City of New York, decided by the United States Supreme Court in 1978. The Penn Central test requires a balancing of the public and private interests involved in each case, weighing the following three factors: (1) the economic impact of the regulation on the property owner; (2) the extent to which the regulation interferes with the property owner‘s ―distinct investment-backed expectations; and (3) the character of the governmental action (i.e., physical invasion v. economic interference). The application of the Penn Central ―balancing test is illustrated in an Oregon case that concerned a takings challenge to a short-term rental ordinance. In that case rental property owners challenged a City of Cannon Beach, Oregon ordinance that prohibited the creation of new transient occupancy uses and required existing transient occupancy uses to end by 1997. The petitioners claimed that Ordinance 92-1 constituted a taking of property without just compensation under the Fifth and Fourteenth Amendments. The Supreme Court of Oregon, however, upheld Ordinance 92-1, focusing ultimately on the economic impact of the restrictions:
We next consider whether Ordinance 92-1, by prohibiting transient occupancy, denies property owners economically viable use of their properties. We conclude that it does not. On its face, Ordinance 92-1 permits rentals of dwellings for periods of 14 days or more. The ordinance also permits the owners themselves to reside in the dwellings. Although those uses may not be as profitable as are shorter-term rentals of the properties, they are economically viable uses.
As the court‘s analysis indicates, plaintiffs who challenge a short-term rental restriction as a taking of property face an uphill battle. As a practical matter, it is difficult to argue that a short-term rental prohibition denies the owner of all economically viable use of his land, particularly where longer-term rentals are still allowed.
A: Regulating and enforcing short-term rental regulation is most often revenue positive for municipalities as the incremental licensing and tax revenue easily offset the additional enforcement costs if done thoughtfully. That said, regulating short-term rentals should not just about revenue, but rather about minimizing the many negative side effects associated with the uncontrolled growth of short-term rentals in residential neighborhoods. The economic questions are therefore only half of the equation, and the non-economic benefits are often much more important to the local citizens than the incremental revenue.
A: A lot. In general most local governments find it practically impossible and/or prohibitively expensive to manually enforce their local ordinances covering short-term rental properties without dedicated staff or help from specialized firms such as Host Compliance. There are several reasons for this:
A: No, audits are not required to get people to do the right thing as just the fact that short-term landlords know that their local government knows who they are (and monitoring their short-term rental activities) will result in a large number of them voluntarily getting a business license and paying their taxes when due. In fact, academic studies estimate that almost 9 out of 10 tax-payers will pay their taxes when due if there is some level of 3rd party reporting or monitoring. As for the remaining 10% it is luckily possible to easily identify the biggest violators so local government officials can decide to audit or pursue legal avenues to collect what it is due. To learn more about the science and data of tax compliance, here is a good short article from the New York Times that summarizes a lot of the research on the topic.
A: Yes, it is easy to cost-effectively outsource most of the short-term rental regulation compliance monitoring and enforcement work to new innovative companies (such as Host Compliance) that specializes in this area and have developed sophisticated “big data” technology and deep domain expertise to bring down the compliance monitoring and code enforcement costs to a minimum. Adopting short-term rental regulation and outsourcing the administration and enforcement can therefore be net-revenue positive for the local government, while adding no or little additional work to the plates of internal staff. What’s more, as the software runs in the “cloud”, getting started generally requires no up-front investment, long-term commitment or complicated IT integration.
A: Yes, virtually all effective short-term rental ordinances require owners who intend to offer their property for use as a short-term rental to obtain a license or permit prior to commencing the use. In general, licensing and registration requirements enable local governments to create and maintain a database of dwelling units being operated as short-term rentals for code enforcement and transient occupancy tax collection in jurisdictions authorized to collect such taxes.
A: Generally no. While many communities require short-term rental properties to pass certain inspections prior to the issuance or renewal of a short-term rental permit. However, mandatory inspection requirements arguably do not advance a community‘s interests in protecting and maintaining residential character or preventing the adverse effects of transient occupancy on residential neighborhoods. Therefore, if a short-term rental ordinance is specifically adopted for reasons related to protection of residential character, then a mandatory inspection requirement is unnecessary and should not be imposed upon rental property owners.
That said, mandatory inspection requirements may be justified in cases where a short-term rental ordinance is adopted for the purpose (at least in part) of ensuring the safety of short-term rental tenants.
However, even if a mandatory inspection requirement can be justified, the scope of the inspection program should be limited to the initial permit issuance and thereafter only on a reasonable periodic basis.
A: Generally yes. people that use their homes for short-term rental purposes would be well advised to get commercial insurance for their properties, as most traditional residential insurance policies explicitly exclude coverage for commercial uses. It would also be highly advisable for short-term rental property owners to get extensive commercial liability insurance as private liability insurance generally also exclude coverage for liability related to commercial activities.
Based on our research commercial coverage cost 3-5x more than non-commercial insurance policies and as a consequence very few short-term rental property owners get it. This can potentially be very problematic in the event that an accident (fire etc) at a short-term rental property results in damage to the neighboring properties, as this damage will generally not be covered by insurance.
