Over the last decade, there has been a dramatic rise in short-term rental activity. More small investors are buying second homes not just to escape to a vacation destination or live in a less-populated area, but to make money. And with that boom has come an increase in government efforts to control the short-term rental market.
NAR’s Resort and Second Home Committee held a webinar in July to discuss recent trends in regulations affecting short-term rentals to educate local, state, and regional REALTOR® associations on the issues and help them advocate for equitable solutions that satisfy residents while preserving rental property rights.
Regulatory proposals have traditionally taken the form of tax policy and zoning ordinances, panelists said. New ordinances often cite the preservation of neighborhood character and/or seek to recover tax revenue, and most states now have a lodging or sales tax that applies to short-term rentals. “Typically, it starts with a registration, license, or permitting requirement,” said Tim Twardowski, partner in the Boston office of Robinson+Cole, NAR’s consultant on land use policy and regulation.
With the rapid expansion in short-term rentals in well-touristed locations such as Hawaii and Florida, short-term rental ownership has produced such a drain on the properties available to buy and live in that housing inventory and affordability have plummeted. As a result, some areas have “overcorrected” in an effort to control the market, panelists said.
New proposals tend to seek to limit the number of short-term rentals allowed in specific neighborhoods or the number of days per year a short-term rental can be offered.
“This is the biggest hammer local governments have,” said Tom Martinelli, Southeast public policy director for Airbnb. “If they can restrict the where and the how often [or] eliminate the inventory and the amount of days, that is a huge problem for us.”
In the last few years, Robinson+Cole has also seen proposals emerge in larger cities seeking to prohibit short-term rentals in properties that aren’t also owner occupied. The goal: protecting the city’s residential housing supply. “It’s something we’ll need to keep an eye on going forward,” Twardowski said.
NAR offers robust resources, including access to NAR’s Land Use Initiative. Powered by Robinson+Cole, it is a premier program available to all state and local REALTOR® associations for analyzing land-use issues.
Association executives can submit a proposed ordinance or other legislation to the LUI for review. Robinson+Cole then analyzes the proposal and generates talking points about the issue, what the proposal is trying to accomplish, and what impact it might have on the real estate industry.
In one situation, a popular resort area of South Carolina was working on an ordinance covering short-term rental usage that “turned into an outright ban in one meeting,” said Reah Smith, an agent with Lake Keowee Real Estate in Seneca, S.C., and a member of NAR’s Resort and Second Home Committee. She submitted a request to the LUI and received a memo outlining the areas of the proposal REALTORS® found problematic. Local and state association staff can search by keyword, issue, date, and state to read proposed measures submitted over the last 22 years.
“It gave me great talking points to be able to stand up at the city council meeting and discuss what the full impact of that ordinance would be,” Smith said. “If you end up in one of these scenarios and think, ‘I’m up against a wall,’ they’re ready to support you.”
NAR is now updating a series of white papers on short-term rentals to reflect current market conditions. REALTOR® associations can also turn to NAR’s issues Mobilization Grant program to assist with issue polling and mobilization for or against a proposal circulating in a community. Grants can assist with email campaigns, phone banking, text messaging, and other organizing efforts.
Using an Issues Mobilization Grant, the Delaware Association of REALTORS® recently staged an action campaign that lobbied state and local elected officials to reduce proposed limits on short-term rentals during the summer months.
There were 47.2 million short-term rental units in the U.S. in 2018, and the number is growing. “We’ve gone through negotiations in a majority of markets,” Martinelli said. “We are working with governments—not just responding to government regulations—to get rules in place that are favorable for all stakeholders.”