Regulating Short-Term Rentals
Thinking about getting away for New Year’s Eve this year? Maybe flying down to Western Florida and be in a vacationer’s paradise away from the hustle and bustle of your daily grind, and ring in 2019 with your toes in the sand?
Madeira Beach, with its white sand, situated right on the clear blue water of the Gulf of Mexico, is just minutes from St. Petersburg.
A mid-August search on AirBnB found 583 rentals available for a couple to get away for an extended weekend at the end of December.
One problem – Madeira Beach has made short-term rentals, defined in their community as rentals of less than 30 days, illegal.
It’s a conundrum and one tourist areas all over the country are suddenly dealing with on a much more frequent basis.
According to Joe Farrell, director of public affairs for the Pinellas REALTOR® Organization, “a couple of communities in Pinellas County did whatever they could to make it inhospitable or illegal for vacation rentals to operate. Now, the same number of vacation rentals still operate in those areas, they just operate in the dark.
“We try to work with communities to say, let’s allow these rentals, but let’s be responsible,” Farrell said. “You can outlaw them all you want, if you don’t have the enforcement ability, they’re just going to go underground.”
In Florida, taxes on registered rental properties are currently 13% per rental – which includes a 7% sales tax and a 6% bed tax. Farrell pointed out if a renter goes underground, they stop remitting that money to the local municipality so then there is no funding to enforce, creating a vicious circle.
At The Local Level
This isn’t just germane to Florida. Short-term rentals through social media or internet platforms are becoming the norm and every community is struggling with how to manage it.
In Tennessee, there were such varying beliefs in how to deal with short-term rentals across communities the state had to intervene and spent the better part of the past two years crafting legislation that split the difference between the two.
Thanks to Nashville’s booming music and culinary scenes, it has become a popular tourist destination. The city would like to steer overnight guests toward new hotels and keep the tourists to a confined area of the city that is vibrant and welcoming of tourism rather than have people renting properties in quieter residential neighborhoods and communities.
“There are million-dollar homes in private communities being rented out short-term because the owners realize there is a real market for them and that big groups of people will pay top dollar for them,” said Jennifer Farrar, Government Affairs Director for Tennessee REALTORS®. “It makes sense, but at the same time, you can imagine why neighbors might not be happy with that.”
The General Assembly of Tennessee passed legislation in May that determined that existing short-term rentals that are not occupied by the owner were grandfathered in to prior to January 1, 2014. So, as long as the owner has owned that property since that time, they can continue to rent it out short-term, all others can no longer be permitted.
Across The Country
“From a state perspective, it’s hard to find the right balance – finding what works for one municipality may not work for another,” Farrar said. “It took two years of planning in session and amendments galore to come to the decision that they did. The outcome is about as neutral as can be and the legislation wasn’t a feather in the cap for anyone. It allowed for private property rights but also gave local control and gave a path to close the door on short-term rentals over time.”
It didn’t really address platforms such as AirBnB, but there are often so many homes on there that are not permitted as rental properties that it is too hard to really crack down, although Farrar thinks some municipalities, particularly a city like Nashville, will find the resources to curb some of the unpermitted properties from being rented.
“[The National Association of REALTORS® (NAR)] has been watching this issue for a while,” said Adriann Murawski, State and Local Government Affairs Director Representative for NAR. “We haven’t taken a position, although we will always protect property rights. When it comes to short-term rentals, you really have to look at a few different things. The response we’re getting at the local level is it’s really hard to pick one side of the argument because there are mixed opinions by our members.
“We are hearing of issues all over the country, whether it’s a small town in Wisconsin with access to a lake, or a college in Alabama that doesn’t have a lot of hotel options; it’s not just the traditional tourist areas anymore that seek to regulate short-term rentals.”
Murawski added, “The ease of online platforms and renting out your house have created opportunities that did not widely exist a decade ago. The ability to rent homes on a short-term basis is financially advantageous to the owner and the city. The renters will spend money at the local businesses so that is a huge element that might get overlooked by local governments. Cities need to consider only reasonable regulations to ensure a balance without shooting themselves in the foot, so to speak. It’s a tricky situation and we’re adamant about protecting property rights at all levels of government.”
Be an informed homeowner. Learn more about vacation properties, investment properties and short-term rentals.