Congratulations, you’ve decided to rent out your second home. Now for the big question: are you allowed to?
While vacation rentals used to be largely unregulated, local and state governments are beginning to push for more restrictions on short-term rentals. Before venturing into vacation rental as a business, it’s important to be aware of the rules, regulations and tax requirements in your area.
Here’s the good news: as long as the regulations in place are clearly stated and transparent, you’ll actually benefit from them. Regulations become troublesome when cities have either outdated short-term rental laws or no specific regulations targeting vacation rentals, which makes it difficult or near impossible for owners to comply with the city’s requirements.
If no regulations currently exist or if your local regulations are prohibitive, we’ll give you some tips and tricks for getting involved in regulation and proposing measures that protect your community while giving you free rein to operate a successful vacation rental.
Ready to get your vacation rental off to a fully compliant start? Let’s dive in.
An easy way to get familiar with the regulations in your area is a good old-fashioned online search. Plug in the name of your town or municipality and “short-term rental regulation” or, failing that attempt, “vacation rental regulation”. This should bring up the relevant legislation in your area, either on a local government site or through your area’s short-term rental advocacy group.
To be sure you’re satisfying all your local requirements, we highly recommend stopping by city hall and asking for clarification on every regulation required. Your local city hall employees should be able to make sure your list of regulations is complete, provide the necessary documents, and make recommendations to ensure success.
Most local regulations are quite simple: you are required to purchase a short-term rental license or pay a fee to operate a short-term rental (usually less than $100 expense) and to pay local, state, and federal taxes on the income you earn. You may also see parking requirements or restrictions on noise and occupancy.
That said, some areas are particularly prohibitive, and you may wish to re-assess your intention to operate a short-term rental if your local regulations are too strict. We do not recommend trying to supercede the regulations in any area. Vacation rentals are a hot topic right now for many cities, and fines for violations can be severe. Protect yourself and follow the local regulations!
Despite the growing conversation surrounding regulatory requirements for short-term rentals, you may find that there are no rules in place within your area. Don’t think this provides you free rein to operate, however – without regulation, you may find your vacation rental is unexpectedly shut down once your local government decides to pass new legislation!
Short-term rental regulations help you ensure that your business is acknowledged and protected by your local laws. Regulations also provide peace of mind to your neighbors and community that your business won’t impinge on them. You want everyone to be on board with your vacation rental’s presence and to be assured you’re a responsible owner who respects your neighbors’ needs.
Unhappy residents who feel their concerns aren’t being addressed may well influence your local government to enact regulations against short-term rentals, ruining your business prospects.
We don’t want that! That’s why it’s important to help create regulations if none currently exist. Your regulations should address neighborhood concerns, create a safe transactional environment for both providers and travelers, and offer a framework that promotes compliance.
While it’s possible to go solo, we recommend collecting a group of like-minded homeowners, business owners, and community members to aid in the push for sensible policies.
This team of STR advocates should be made up of as many fellow homeowners and providers as possible, as well as groups who share a vested interest in the success of the short-term rental economy. Do a quick online search to see if there’s a local short term rental alliance in your area – there may already be a push for regulations in full swing!
We highly recommend getting as many types of people on your side as possible; an advocacy group consisting solely of owners will naturally be viewed as biased. You want local businesses and residents to tell the city that they vocally support and encourage the operation of vacation rentals.
Good groups to reach out to include your local:
To get local businesses and residents on board with vacation rentals, be sure to emphasize the value vacation rentals bring to a community. Your motivations as an owner are quite clear – you’d like to make an income on your second home – but your community wants to know how they will benefit.
Thankfully, there are a lot of great benefits to your local community! Vacation rentals encourage travelers to spend their money in areas where they might not otherwise visit, bringing more income to local businesses. Your vacation rental business will also likely provide income directly to the community, as you will be hiring cleaning services, maintenance, and perhaps even a local contact person if you don’t live in the area.
You as an owner will pay taxes on the local, state, and federal level just like any small business, and perhaps also a licensing fee. Money talks, so be sure to emphasize the monetary benefits your business will bring your community and your local government!
Finally, be sure to address the concerns of your neighbors. Many people who have never stayed in a vacation rental are only familiar with the concept through highly publicized stories about disastrous Airbnb rentals, and they fear they’ll suddenly be living next to a “party house” with round-the-clock noise and distressing visitors.
Remember to stress that you’re advocating for rentals to have requirements regarding noise, occupancy, and cleanliness, and that any rentals that violate these rules consistently will have their licenses revoked. These policies are in your own best interest; you don’t want a few bad apples to spoil vacation rental for you in the future!
When the community has reason to dislike vacation rentals, they will advocate for a ban, but when they have nothing but pleasant experiences to report, they will be glad to have short-term rentals bringing tourist dollars to their local economy.
Got your argument ready to present? Let’s talk about who needs to be persuaded that your vacation rental business will be an asset to your community.
In general, your city council will be the best entity to address vacation rental regulation. Visit your local city hall and ask which council member generally handles residential regulations, and appeal to that councilperson directly. If possible, arrange a formal meeting with your advocacy group, but you can also simply send a concise email or letter laying out your argument in favor of regulation.
Be sure to get as many voices involved as possible! Your council wants to know you’re not only advocating for yourself, but for your entire community. Ask your neighbors, local businesspeople, and service providers in the area to weigh in and present the arguments in favor of regulation from their own perspectives, emphasizing the points that are most important to them.
Got questions about vacation rental regulation? Leave them in the comments and we’ll be glad to help.
This post is part of Evolve’s Vacation Rental 101: The Expanded Ultimate Guide to Success series, where we discuss the ins and outs of vacation rental ownership for newcomers and experienced veterans alike. Tune in next week for our 101 post on vacation rental taxes!
Have questions or want to know how we make vacation rental ownership easy and profitable? Click here to learn more about Evolve.