When Airbnb launched in 2008, a new era began, and the
short-term rental (STR) industry was born. Since then, the industry has seen
substantial growth and the launch of additional (STR) platforms like Vrbo and
HometoGo. Now, millions of overnight stays are booked each year on STR
platforms, leading to an industry estimated to be worth over $30 billion per
year in the United States.
As the industry matures, many cities have experienced
growing pains and have attempted to manage noise complaints, parking concerns,
excessive parties, and overcrowding by passing onerous STR regulations. One
question remains: are these regulations best for cities and residents? Let's
explore.
In 2022, New York City passed STR restrictions
requiring owners to be onsite while hosting and limiting the number of guests
in any short-term rental to a maximum of two. Additionally, STR platforms are
now prohibited from processing payments within New York unless the listing is
included on the city's approved short-term rental list. Since this legislation
passed, the number of legal STRs in New York City has gone from 10,800 to just
over 800 licensed units at the beginning of December 2023.
Los Angeles County is ground zero for the nation's
homeless epidemic, and a lack of affordable housing is an ongoing issue elected
officials have been trying to address for years. In April of 2024, the Los
Angeles County Board of Supervisors passed additional STR regulations for
unincorporated areas of the county. The new rules require a $914 registration
fee to be paid annually, prohibit the use of accessory dwelling units for
short-term rentals, and require hosts to be reachable 24 hours a day while only
allowing STRs in primary residences. In addition to registering with the
county, hosts must also obtain a police permit as well as a Transient Occupancy
Tax Registration Certificate. Only time will tell if these restrictions have
any meaningful impact on increasing affordable housing.
Clark County, where the city of Las Vegas is located,
recently passed a law requiring STR hosts to obtain a license before listing on
rental platforms. The law mandates that STRs cannot be located within 2,500
feet of a resort hotel, and there must be a 1,000-foot distance separation
between licensed STRs. Owners must pay a registration fee of $1,000, and
listings must also be inspected to meet health and safety standards. However,
the County's registration system has seen many delays, and some have chosen to
list their rentals despite the new law. The county has taken notice. One
homeowner was recently leveled a file of $180,000 ($500 per day for 360 days
listed) for an illegal listing on Airbnb. Given the delays with issuing
permits, the STR occupancy rate in Las Vegas is 23%.
Critics have raised the concern that STRs can deplete
the inventory of affordable housing. But research has proven otherwise.
According to a Harvard Business Review survey, most STRs are
in touristy areas with higher incomes and not in areas that serve lower-income
populations or where affordable housing is located.
Since the end of the COVID-19 pandemic, inflation has been top-of-mind, with consumers
paying more for everything, including housing. Elected officials and economists
closely monitor housing costs and are aware of the rent increases and home
prices. Consequently, some municipalities have been cautious about the
expansion of STRs. However, there is little evidence that short-term rentals
have had much of an impact on home costs or rising rents. While rent has
skyrocketed in many cities, Harvard Business Review found that STRs account for
1% of the 32% growth in rental costs in New York City between 2010 and 2020.
When it comes to STR regulations, a commonsense
approach can be beneficial for both rental hosts and the community. STR income
puts more money back into local economies. This is in addition to all the money
tourists spend on meals, entertainment, and shopping when they visit. A healthy
STR economy also helps bolster employment and business success across
categories, including property managers, house cleaners, gardeners, pool
services, and other essential services needed to keep STRs in tip-top shape and
presentable for the next visit.
STR curbs and bans are problematic because they are
challenging to enforce. Listings will simply move from a regulated platform to
less transparent or easily searchable platforms, making it difficult for
municipalities to gain accurate data on how many STRs are operating in any
area. An even greater loss is an opportunity to collect tax, license and
permitting revenue, which can be reinvested into communities and help alleviate
the budget shortfalls many cities, states and municipalities face. These recurring
revenues can also be invested in tourism advertising, generating even more
income to improve residents' quality of life year-round. As STRs mature into a
new era of compliance and stake their claim as an established lodging option,
communities should consider taking a measured approach to regulating STRs.
*Written by Avalara.
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