Despite claims to the contrary, affordable housing challenges in many parts of the country have long predated the growth in popularity of short-term rentals. Unfortunately, short-term rental opponents have seized upon affordable housing issues, particularly in urban areas, and offered it up as a “boogie man” to help explain the struggles of cities and communities slow to address a lack of affordable housing. In reality, cities with affordable housing challenges can’t solve or even significantly improve their housing situation by banning or limiting short-term rentals. The short-term rental inventory pool is just too small.
As larger towns and cities experience population growth through an influx of residents looking to take advantage of all that municipalities have to offer, so too, are travelers more frequently visiting these communities looking for those unique experiences. Less than two years ago, the World Health Organization estimated that 70 percent of the global population would live in cities and towns by 2050, up from just 50 percent today. Which means that cities everywhere are feeling the housing crunch, and that trend is likely to continue. But because short-term rentals are such a small fraction of the total residential housing inventory in a given market, they don’t offer a potential solution for municipalities struggling with this issue. There are real solutions to affordable housing challenges, and no lack of academic research that can help municipalities to addresses this issue. But blaming short-term rentals, and then imposing onerous restrictions and/or bans on the activity fails to address the problem. Ultimately, it simply translates to decreased income for those workers who rely on travel and tourism, either directly or indirectly, for a living.
Good short-term rental regulations are arrived at through an open and transparent dialogue between policymakers, owners, operators, hosts, platforms, and the community. Because each municipality is unique, local policymakers need to weigh the balance between the value that short-term rentals bring to the community and the needs of local residents. STRAC believes that in the vast majority of cases, the market will not support an excessive number of short-term rentals in a neighborhood. After all, travelers often utilize this alternative accommodations method because they want to live like a local.
In cities like Nashville and Austin, the city councils took steps to limit the volume of short-term rentals in a given area by enacting caps on the number of short-term rental permits they granted in a given census block. Other cities have used caps on the number of short-term rental permits within a given neighborhood or mileage radius.
If a city or municipality does seek to limit the number of short-term rentals in a given area, it is also important to recognize the value that these accommodations bring to the character of a neighborhood. Often, investments in dilapidated properties and their rehabilitation as short-term rentals, have an enormous positive impact on local residents, home values, and the community overall. One local group of short-term rental providers in Galveston even highlights some of their rehabilitation work on their webpage. And we know other cities have embarked on similar projects or expect to follow suit in the coming months.
STRAC believes cities should recognize that short-term rentals of any kind are a non-commercial activity that should considered under the same or similar guidelines and laws as those governing long-term residential rental properties. Additionally, as cities develop regulations and ordinances to formalize and legalize short-term rentals, they should ensure that these laws apply to all types of short-term rentals without differentiations between residency, use, advertising or booking platforms or business models.
STRAC believes that short-term rental providers should be responsible for collecting and remitting all local applicable taxes. But in order for cities to collect short-term rental tax revenue, they must create formalized regulations that legalize short-term rentals, and include making tax collection and remittance obligations clear and concise, as to avoid confusion among owners, operators, and hosts. While short-term rental platforms may offer tax collection and remittance as an added benefit of utilizing their services, states and municipalities should never mandate that short-term rental intermediaries take on the responsibility of collecting or remitting taxes on behalf of those providers that advertise on their platforms.
Short-term rental platforms have created a vibrant industry in which travelers seeking alternative accommodations can connect with short-term rental providers. A state or municipality’s ordinance or regulations should never include language that imposes platform liability of any kind. This includes, but is not limited to:
Courts in Florida, Texas, and California, as well as the California Coastal Commission, have both found and upheld appeals that define short-term rentals as a residential use, rather than a commercial one. While a hotel is a hotel today and will be the same hotel tomorrow, a short-term rental could be occupied by resident owners this week, short-term renters over a holiday weekend, and then go back to being a full-time residence again. Short-term rentals are without question, a residential use, and enjoy this flexibility under the law. Attempts to commercialize or redefine short-term rentals as hotels are tantamount to a ban or severely limiting action by states and municipalities because commercialization could ultimately wipe out this activity due to zoning restrictions. It might also make other owners susceptible to infrastructure changes such as fire and safety upgrades, ADA requirements, and health inspections. Because short-term rentals are a residential use, the implementation of commercial requirements effectively changes the nature of the structure and would act as a deterrent to those looking to offer their homes as a short-term rental accommodation for travelers.