Just Because an STR is in Operation, Doesn’t Mean It’s Legal

When short term rental investors – or their lenders – underwrite a property, they may feel more confident in their decision if an STR is already in operation. 

Intuitively, this makes sense: the STR’s operation implies their compliance with local laws. If a restaurant can’t operate without a city permit, then how could an STR operate without permitting?

However, one continuing trend in the U.S. is jurisdictions deciding to enforce short term rental laws already on the books that they were previously ignoring.

Such is the case in Portland, Oregon. The west-coast city was one of the first to pass an STR law, but only recently has decided to enforce them. This is in response to negative news coverage of the administration’s enforcement of the existing law. 

Such a situation isn’t just local to Portland. According to one group, Austin, TX has thousands of illegal short term rentals.

Accordingly, STR investors and underwriters should ensure that subject properties are operating legally, even if the STR is already up-and-running (i.e., with Property Guard’s lending solution).

Below, please find Property Guard's weekly short term rental regulation round-up, highlighting state and local news regarding short term rental regulations to regulate (or prohibit) Airbnbs and other STRs. If you want a comprehensive data solution on STR regulations in all 20,000 state and local jurisdictions, contact us here.

New and Proposed Regulations:

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• Maine: Bill rejected by legislature that would have allowed local jurisdictions to tax short term rentals (link)
• New York: State considering STR legislation, including a state-wide registry (link)
• Troup County, GA: County, home to LaGrange, issuing new STR rules including a cap on the number of permits (link)
• Santa Ana, CA: The city has enacted a full short term rental ban, similar to other cities in the area (link)
• Greensboro, NC: New regulations passed in 2023 have gone into effect, includes various caps on number of rentals (i.e., no more than 25% of a multifamily building), local owners, permitting, etc. (link)
• Lafayette, LA: New legislation concerning short term rentals has gone into effect, with multiple restrictions, including in certain zones (link)
• Highland, NY: Town attorney reinterprets current legislation to require special use permit to operate a short term rental (link)
• Selma Township, NC: New STR rules published (link)
• Camden, ME: Voters are being asked in June to decide new STR rules (link)

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Other Noteworthy News:

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• Phoenix, AZ: City cracks down on unpermitted STRs during the final-four basketball tournament (link)
• Portland, OR: City launches online permitting process as their renewed attempt to enforce STR laws continues (link)

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Is That Short Term Rental Insured Properly?

April 1st, 2024

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Is operating a short term rental property a business? Intuitively, yes, particularly if the property is exclusively serving as a host of short term rentals. 

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However, the designation of STR-is-a-business can cause multiple legal and operational complications. We covered one such case recently, when a Massachusetts judge declared that STRs, as businesses, can’t operate in residentially zoned areas. 

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In March, another example of complications from the STR-is-a-business designation arose: The United States Appeals Court for the Ninth Circuit court sided with an insurance company that denied a property insurance claim after a fire. The reason: when the policyholder purchased the policy, they stated that no business was operating on the property. However, the court found that the property’s use as a short term rental did in fact constitute a business, invalidating their non-commercial insurance policy (link).

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The moral of the story: as STRs continue to grow across the U.S., not only are new rules and regulations being written every day, but how they fit into existing legal and business frameworks is continuing to be defined and debated. 

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Below, please find Property Guard's weekly short term rental regulation round-up, highlighting state and local news regarding short term rental regulations to regulate (or prohibit) Airbnbs and other STRs. If you want a comprehensive data solution on STR regulations in all 20,000 state and local jurisdictions, contact us here.

New and Proposed Regulations:

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• Connecticut Bill: State bill in consideration of the legislation that would give local jurisdictions to regulate and ban STRs (link)
• Florida Bill: Lobbying of Gov. Ron DeSantis to veto the short term rental law passed by the legislation continues across the state, including in places like Jacksonville Beach (link)
• No Maui Ban in Hawaii: No ban on short term rentals in Maui in the near future, says Hawaii Governor Josh Green, as there is enough housing stock to home the survivors of the wildfires in the city (link)
• Long Beach, CA Rule: Following a shooting, Long Beach is considering a set of rules to make short term rentals safer in the community (link)
• San Marcos, TX Rule: New STR rules looking to make short term rentals easier in the city, in the face of new case law that may render some existing rules unconstitutional, including the requirement that an STR is owner-occupied (link)
• Buckland, MA Bylaws Vote: In May, residents of Buckland, MA will vote on a set of STR rules, which include the prohibition of ownership of STRs by non-residents of the town (link)

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Other Noteworthy News:

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• Airbnb Press Release: Airbnb issued a press release detailing the “more than $10 billion in tourism-related taxes [they have remitted] to governments on behalf of our global Host community.” Airbnb’s angle with this announcement is support the pending legislation in many states (i.e. Florida) that will establish Airbnb as the centralized taxation and remittance method. “Laws mandating centralized collection of local taxes by short-term rental platforms ensure all short-term platforms collect and remit tourism taxes on behalf of Hosts at scale while making it easier for local governments to collect a number of taxes, including sales taxes, tourism taxes, and local accommodation taxes,” they wrote. (link)
• Houston Mayor Speaks Out: In an interview with KHOU, Houston Mayor calls STRs a “serious problem” (link)
• Illegal STRs in Lexington: In Lexington, KY, there are at least 200 illegally operating short term rentals, according to the city (link)

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When short term rental investors – or their lenders – underwrite a property, they may feel more confident in their decision if an STR is already in operation.