In an era where vacation rentals have proliferated as a popular alternative to traditional hotels and bed and breakfasts, the industry is also seeing a corresponding increase in regulation. These regulations can be broadly defined as the legal parameters within which vacation rental property owners, property managers, and hosting platforms must operate. They are crucial in maintaining a balance between the interests of property owners, neighbors, travelers, and local communities.

Regulations on vacation rentals cover an array of topics, including licensing requirements, tax obligations, safety standards, noise restrictions, and more. For property owners and managers, the legal landscape around vacation rentals presents both opportunities and challenges. Compliance with the evolving regulatory framework is not just a matter of legality, but also affects the reputation of the property and, ultimately, its profitability.

It's important to note that these regulations are not uniform across all states; they vary widely based on the unique characteristics of each community. In some areas, the rules may be relatively lenient, while others have strict licensing, safety, and operational requirements.

While these regulations are designed to protect all stakeholders involved in vacation rentals, they can present significant hurdles for property owners and managers. The complexity and diversity of these laws often require significant effort to navigate, and non-compliance can lead to hefty fines, license revocation, and even litigation.

In the first half of 2023, several new and updated regulations came into effect across multiple states, each with its own potential impact on property owners and managers. The Vacation Rental Management Association plays an active role in educating the industry on any changes or potential updates to regulations. According to VRMA, the following regulations are some of the most prominent to come about so far in 2023.

1. California: California has been actively pursuing Senate Bill (SB) 584, a tax proposal that specifically targets short-term rental stays with an additional 15% tax in addition to existing taxes, fees, and assessments. Due to overwhelming opposition and advocacy work from the short-term vacation rental industry, the bill sponsor has converted SB 584 to a 2-year bill, meaning it will no longer move forward in the 2023 legislative session. While lawmakers may attempt to revive the bill in the 2024 session, this is certainly a major victory to eventually defeat the bill and a sign of its sheer lack of support among lawmakers and their constituents.

2. Florida: Florida Governor Ron DeSantis recently signed into law Senate Bill (SB) 170which will increase protections for short-term vacation rentals (STVRs) and other small businesses against harmful regulations by local governments. Specifically, the new law will allow businesses to sue local governments over unreasonable regulations that conflict with state law. Passage of SB 170 is an important victory and is the result of months of grassroots advocacy by VRMA members and supporters on the ground in Florida. Additional Florida legislations include SB 714/HB 833, a measure that would create stricter parameters around local registrations, require the collection and remittance of taxes and allow ordinances prior to 2011 to be less restrictive without losing their grandfather status. This bill is identical to the 2022 vacation rental bill. SB 1422 is also being discussed, and this bill would require additional proof of inspections and insurance to obtain a state vacation rental license.

3. Maine: Maine’s Land Use Planning Commission (LUPC) recently finished a series of summer community meetings as it considers how to regulate STVRs across the state for the first time. LUPC planners recommended a system that would have property owners provide notice of their rentals to the commission and self-certify that their properties meet a set of standards. More details can be found here.

4. Massachusetts: The Joint Committee on Housing recently held a legislative hearing on S. 895 which would levy a 5% excise tax on the gross annual revenue of non-owner-occupied short-term vacation rentals. The tax revenue would be used to fund affordable housing initiatives across the state.

5. Montana: Senate Bill (SB) 268 is moving through the Montana state legislature which would allow short-term vacation rentals as a residential use for zoning purposes and limit the ability of local municipalities and counties impose regulations on short-term vacation rentals. The bill passed the Senate and received a hearing in the House Judiciary Committee in March.

6. New York: S. 885B has been proposed in New York, which would create a registration system for short-term vacation rentals in New York State and allow for the collection of sales tax and applicable occupancy tax generated from such rentals to the state and localities. The bill passed the state Senate but did not advance in the state Assembly before the chamber adjourned its 2023 session.

7. Texas: According to the VRMA, the state of Texas proposed House Bill (HB) 2665 this spring, which would prohibit local municipalities and counties from outright or effectively banning a homeowner’s right to lease their property for periods of less than 30 days. The bill has been referred to the House Land and Resource Management Committee.  

Local Regulations

1. Dallas, Texas: The Dallas City Council approved new rules on June 14 that restrict where short-term rentals (STRs) can operate and make it mandatory that properties be licensed to allow guests to stay. The council approved recommendations endorsed by the City Plan Commission in December to change zoning rules to ban rentals listed on platforms from operating in single-family neighborhoods, allow only one rental in a single unit, and require off-street parking. The proposal would still allow STRs in multi-family zones. The council also voted to change city code to make it mandatory for properties to annually register with the city, pay regulated fees and taxes, adhere to occupancy and noise limits, have someone on file who can respond to the property within one hour to address any emergency concerns, and other new rules. More details can be found here.

2. Del Mar, California: In early July, the City Council began weighing eight guiding principles for forming a local ordinance to regulate short-term vacation rentals (STVRs), including things like maintaining the residential character of neighborhoods and considering the distribution of STVRs throughout the community. More details can befound here.

3. Flagstaff, Arizona: STVRs will operate under new regulations after the City Council approved a licensing process in early July. The city's new regulations require that the owner of an STVR, defined as any residence that is rented for less than 30 days, acquire an annual license from the city to allow the operation of such a rental. More details can be found here.

As the landscape continues to evolve, it is crucial for vacation rental operators and users to keep aware of these changes. It's clear that the industry is moving toward more regulation and oversight, so understanding the implications of these new laws is vital for anyone participating in the vacation rental market. The common thread in most of these regulations is an emphasis on safety, taxation, and maintaining a balanced housing market.

Remember, stay informed, stay compliant, and most importantly, continue creating unforgettable vacation experiences! Stay tuned for the second half of 2023 as we continue to bring you the latest updates from the vacation rental regulatory world.

Original source of vacation rental regulation information: vrma.org.