Owning a short-term rental property – such as with platforms like Airbnb or VRBO – can be a fantastic way to generate passive income, whether to supplement your main job or as a career in itself. But in order to operate a profitable and hassle-free short-term rental property, it’s crucial to understand the legal side of the business.
The Primary Aim of Short-Term Rental Regulations
To begin, it’s useful to understand the aim of most short-term rental regulations. The rise of Airbnb has resulted in many municipalities drafting new laws, and the goals of these laws are often different than those governing other types of rental properties.
Short-term rental properties can have a dramatic impact on housing supply if enough owners decide to rent their properties for vacationers. This has the effect of driving up prices for both home buyers and those looking to rent long-term and live in the area. Frequently, short-term rental regulations look to protect the housing market.
In some cases, these regulations are also driven by an attempt to preserve the character of an area or neighborhood. Short-term renters are frequently noisier and less predictable than long-term residents, and some laws look to lessen the disruption and chaos.
Some municipalities see short-term rental properties as a taxation opportunity. In their view, these properties have become businesses, and this type of law looks to bring some of the profit into the government’s coffers.
Finally, short-term rentals open up issues when it comes to legal liability and guest safety. These types of regulations are attempting to set ground rules in the event that property is damaged or anyone is injured while staying at a short-term rental property.
It’s Crucial to Understand Your Local Regulations
The most important rule in understanding legal considerations for short-term rental properties is to do your research at the local level. The specific nature of the laws governing short-term rentals can vary wildly from municipality to municipality, and you should never make assumptions based on what you know about other areas or national trends.
Local government websites are an outstanding resource for looking into your area’s laws. You can also contact local governmental agencies or authorities directly to ask for guidance. Industry associations, both local and national, can also be excellent sources of legal information.
Common Short-Term Rental Regulations
While you’ll need to determine exactly what your local area allows or prohibits, you’re very likely to encounter certain types of short-term rental regulations. Here are some of the most common topics:
- Occupancy limits, or how many guests are allowed to stay there at once
- Exactly how many nights stay qualify as property as a short-term rental versus a long-term rental
- How many days of the year a property can be short-term rented
- Whether owners must be present during the rental
- Whether certain types of properties are allowed to be used as short-term rentals at all
- What types of special taxes short-term rental owners must pay
- Whether it requires a business license to operate a short-term rental property
- Whether zoning restrictions prohibit operating short-term rentals in certain areas of a municipality
- Whether short-term rental properties have any additional obligations in terms of safety, accessibility, waste management, noise control, or any similar concerns
If you’re planning on operating a long-term rental property, you should be sure you understand exactly how your municipality handles all of the above topics so that you can intelligently assess the viability of your rental operation.
While understanding the legal landscape for short-term rental properties may seem daunting, it also presents an opportunity to gain a competitive advantage in the market. By doing the research and coming to terms with the specifics of your local laws, you can make better decisions and position yourself more profitably with your market.
