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In post 1.1 (pros/cons of selling v. renting) one of the major cons of renting is that you’re at the whim of local regulations. We went back and forth to determine if local regulations and HOAs should be part of the decision making chapter or a step in the next chapter. We believe you need to understand your market’s full potential before moving full steam ahead. We recommend understanding local regulations and HOA restrictions for your property and using them as a data point in the decision making process - in this post, we’ll dive a little deeper into local regulations (with examples), why they matter, and how you can check yours easily.
What are Local Regulations?
Short-term rentals have experienced rapid growth, which has led to an increased need for regulation. In terms of short-term rentals, local regulations refer to laws and guidelines established by local governments (cities, counties, states) to govern the operation of rental properties. These regulations often address aspects such as zoning, occupancy limits, safety standards, taxation, noise ordinances, and permits required for short-term rental operations.
Local regulations are typically put in place to protect community character, ensure safety & compliance, address neighborhood concerns, increase housing market supply, and generate revenue. Overall, local regulations for short-term rentals play a crucial role in balancing the interests of property owners, residents, and the community at large.
Many owners think of local regulations as an annoyance, but this isn’t necessarily true all the time - it might be lucrative to invest in strictly regulated markets that have a finite supply of available STRs. While going through the decision making process, think of local regulations as another data point as you can’t understand your market’s full potential without first considering the influence of regulations and whether that influence will be positive or negative.
3 Examples of Local Regulations at Play
New York City, New York
In September 2023, New York City implemented stringent regulations on STRs to alleviate housing scarcity and reduce rent prices by freeing up apartments. The new law prohibits individuals from renting out their homes for less than 30 days unless the host is present during the stay and restricts the number of guests to less than two. As a result, approximately 15,000 short-term rentals were swiftly eliminated and violators of the regulations could face fines of up to $5,000.
Paris, France
In Paris, regulations dictate a maximum rental period of 120 days, allowing hosts to rent out only their primary residence for a total of 120 days per year. Since 2017, authorities have inspected approximately 13,500 apartments, resulting in fines totaling over 2 million euros.
Palm Springs, California
Palm Springs passed Ordinance 2075 in November of 2022, which limited vacation rentals to single-family dwellings, established a more rigorous regulatory program, and introduced a stricter permitting process. The most controversial aspect of the ordinance was Palm Springs’ establishment of a cap on vacation rental certificates, allowing only 20% of total residential dwelling units to be used for short-term rentals.
The Repercussions
Most local regulations aren’t as strict as the examples above, but it’s good to know what regulations you’re facing before starting to ensure that you don’t run into any roadblocks while setting up your rental. Failure to comply with local regulations inadvertently could result in:
Fines & penalties, which can vary widely depending on the city and the severity of the violation
Cease and desist orders, which would require you to stop renting out your property for short-term stays immediately
Legal action (e.g., civil lawsuits, injunctions, etc.), which may lead to a headache and legal fees
Loss of permits, which would shut down your rental operation
Researching Local Regulations
Local regulations encompass not only those of your city but also potential county and state regulations; make sure you check all three before proceeding to ensure you don’t encounter any issues down the road.
With Rental Revelations, when providing guidance, we’ll strive to highlight both the most cost-effective and the easiest approaches; however, it’s important to note that the easiest route often comes with additional costs.
Easiest Way
If you don’t want to spend time researching local regulations, AirDNA compiles personal zoning data as part of their pro subscription ($25/month). This service summarizes essential local regulations for your property in one convenient location, saving you time on research.
AirDNA has a lot of other offerings that we’re going to discuss in future posts. If you’re looking to streamline your process and save time, investing in AirDNA’s features now might make sense. Some of AirDNA pro features include: market insights, smart pricing, regulatory data, custom map layers, plus other functionality
Link to AirDNA:Â www.AirDNA.co
Cheapest Way
If you don’t want to pay for an AirDNA subscription, here are our tips to review zoning requirements for your property.
Go to your local government sites to find the most up to date and official zoning laws, ordinances, and licensing requirements (here is an example: Seattle’s Zoning Rules). Government sites typically end in .gov so double check that you’re on a government site. Remember to check state, county, and city websites to make sure your bases are covered.
Airbnb is also a great resource; Airbnb wants to make sure you’re following local regulations as they are also subject to fines and lawsuits if hosts aren’t following local regulations. Their help center has articles that clearly outline the rules & regulations to follow for major cities.
Link to Airbnb Help Center: https://www.airbnb.com/help
If you’re still unsure, contact your local planning or zoning department, they are responsible for enforcing regulations related to property use. Your local planning or zoning department can help you understand specific STR regulations in your area and walk you through the permitting process if applicable.
Our Thoughts
Local regulations may seem like a pain, but they’re in place for a reason (e.g., community impact, housing market support, tax revenue, etc.). Please make sure that you review your local regulations before proceeding to avoid future roadblocks, disappointment, or legal action. If you’re still ready to rock & roll, go to our next chapter where we’ll dive deeper into the straps to set up your business.
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