Nationwide, cities continue to impose new regulations on short-term rentals, effectively putting Airbnb hosts out of business in some areas.
In about 80% of Airbnb markets, regulations impact short-term rentals, according to the company. Some cities are concerned about lost tax revenue and have imposed the same tax rates on vacation property owners that hotels are subject to. Those moves impact a property owner’s profit margins at a time when revenue per listing is down in many cities due to an oversupply of vacation rentals. But in other areas, the restrictions mean that many rental property owners can no longer operate.
The cities of Denver and San Francisco have similar rules. These rules benefit homeowners renting out a space room since they reduce competition but prevent most investment property owners from doing business.
While not as extreme as New York’s restrictions, these ordinances leave some investment property owners out in the cold.
The Impact on Listings
Listings have fallen significantly in some cities since new restrictions were enacted. In New York, there were 39% fewer listings in July when compared to 2018. Meanwhile, listings are thriving in cities without significant regulations. Though the extent to which revenue is falling depends on who you ask.
But at least hosts in cities with little oversight can try to compete for bookings. In some cities, hosts are forced to switch to long-term rentals to collect some income, which may not be enough to cover their expenses.
How to Navigate Short-Term Rental Laws
To determine whether a property is affected by short-term rental restriction, an investor should obtain all relevant property information from the homeowner’s association, if applicable, and do the same at the city, municipality, country and state level for similar regulations.
In addition, an accidental violation can be a nightmare for investors. “Violation of rental restrictions at the association and government level can cause the investor to face penalties and fines associated with the breach, which can sometimes quickly escalate daily and lead to a lien against the property to enforce payment.”
Bottom Line
As more localities crack down on short-term rentals, property owners and aspiring investors alike need to prepare for a regulatory scenario that would prevent them from earning rental income or short-term rental property.
