AZ Big Media The Long-Term Considerations of Regulating Short-Term Rentals

Across the country, cities large and small will decide the future of local short-term rental operations and regulations via ballot action on Tuesday, November 8. The topic of short term rental regulation has come to the fore over the years and has proven to be incredibly nuanced with pros and cons that need to be considered. From outright bans, to imposing taxes and licenses, to imposing lottery schemes and adding new layers of compliance and regulation, there are many factors to consider when is to vote on the regulation of short-term rentals.


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Understand the implications of short-term rental regulations

Different regulations have varying impacts on community stakeholders, from full-time residents to small businesses. It is important that voters understand what is at stake in these decisions, long and short term, for tourism, municipal tax coffers, the fiscal health of local retailers and suppliers focused on short term rentals, and housing affordability for local workers.

Here are some examples of upcoming short-term rental votes:

In Portland, Oregon, there are two questions on the ballot that would significantly shape the landscape of short-term rentals in the region. Issue A seeks to prohibit non-local businesses and operators from registering short-term rentals, prevent landlords from evicting residents to convert their homes to short-term rentals, and prevent landlords of affordable housing from becoming short-term tenants. Issue B would reduce the number of short-term rentals in the area and increase fines and fees and update the city’s rate structure to $250 for owner-occupied rentals and $750 for unoccupied homes by the owner.

In La Quinta, Calif., voters will weigh in on a ballot initiative that addresses landlords’ rights to rent their own property. If passed, it would end the rights of landlords located outside a small commercial district to rent their unit for less than 30 days, which forms the basis of the commercial short-term rental structure. Some owners may seek compensation or damages if their ownership rights are revoked.

In Dillon, Colorado, new lodging and excise taxes for short-term rentals are on the ballot. The ballot initiative will give voters the option to create a 5% excise tax on short-term rentals and raise its lodging tax from 2% to 6%. These taxes have the potential to raise approximately $3 million in accommodation tax and $1.5 million in excise tax, which would then be used for a variety of projects, including housing renovations, streets and car parks, taking into account the impact of visitors and other city-oriented line elements. improvement.

Impact of short-term rental on the community

While tourism brings crowds and sometimes loud noise, it also brings big vacation dollars to local communities. Shopping, dining and other holiday splurges all go to local retailers and small businesses as they serve short-term rental visitors.

For example, the San Diego Tourism Marketing District reported that tourism creates 1 in 8 jobs in the city and brings in more than $11 billion a year in visitor spending – not to mention the municipal lodging tax, revenue from STR licenses and more. With San Diego recently passing the Short-Term Residential Occupancy Ordinance, dramatically reducing the number of permitted STRs from the current 13,000 to 5,400, the city risks unintended economic consequences due to future impacts on tourism.

Examples like San Diego demonstrate the inherent gamble of cities reducing their inventory of available housing and hoping to maintain tourism levels. Following recent trends, many families are specifically looking for STRs rather than hotels to better suit their vacation plans. Without these conducive accommodations, a countless percentage of travelers may simply choose alternate locations where STRs are available. This, in turn, has significant ramifications for local retailers. Declining tourist numbers mean less year-round traffic for restaurants, grocery stores, bars, cafes and other businesses serving local visitors. Similarly, companies that directly serve the STR ecosystem would lose a significant portion of their customer base. Cleaners, landscaping companies, property managers, electricians, plumbers, caterers, pool services and so on will all feel the sting of such a significant reduction.

Short-term rentals and affordable housing

Understanding the arguments around affordable housing and the role that short-term rental properties play across cities is complex. Some argue that short-term rentals decrease rental availability for residents by taking a house off the market and turning it into a room for rent, and therefore the price of other available rentals increases with the reduced supply. Others cite inflation, high interest rates and an unstable housing market as causes for the lack of affordable housing. As voters head to the polls, they should look at their specific region and see how short-term rentals affect affordable housing in their specific city or county. One size does not fit all. Understanding the nuances of each area is important because some cities will not necessarily have the same supply and demand for short-term rentals as others, nor the affordable housing deficit.

Short-term rental on the ballot

The vote counts. Residents will shape the future of their city’s relationship with owners of short-term rentals, full-time residents with no stake in the STR business, property managers, small business operators, and tourists. This could mean regulating who can own a short-term rental, what fines and fees are applied, whether landlords are eligible to rent their property, raising taxes on short-term rentals to fund city projects, or even investigate how the short-term rental market is impacting affordable housing. Compliance with these types of regulations will also be important, so short-term rental hosts should pay attention to the voting results of ballot initiatives in their area or hire a property manager to facilitate compliance.

Author: Pam Knudsen is an executive at Avalara and leads multi-tax teams including lodging, liquor, telecommunications, and sales and use tax. She is a leading voice in vacation rental tax compliance and regulation, in addition to bringing deep experience in software/SaaS technology as well as ERP systems. Pam joined Avalara in 2012.