Airbnb has made running and using vacation rentals more simple and straightforward than ever before. Airbnb allows you to list properties for rent and to book listed properties uploaded by its users on a short-term basis. Although Airbnb provides an effortless and creative way to become a short-term rental manager, it has brought up many legal concerns. Different cities may face different Airbnb legal issues.
So, how exactly can you tell whether or not your city has any legal issues conflicting with Airbnb? The R Street Institute offers us a very detailed answer. The institute is a think tank based in Washington, D.C. that examines short-term rentals. R Street’s Roomscore 2016: Short-Term Rental report tells us the legal issues of the largest 59 U.S. cities.
In the study, each city started with a score of 90 points, which were then added or deducted according to the scoring questions. Let’s examine the five scoring questions and see which cities have the least Airbnb legal issues.
1. Is the City’s Legal Framework Short-Term Rental Friendly?
Since short-term rentals are somewhat similar to hotels in terms of services, it is best for cities to construct legal foundations that help short-term rentals function. In the study, if a city recognized and set up a legal structure for short-term rentals, it was awarded 10 points.
Savannah, GA, for example, passed an amendment that recognizes short-term rental services, earning it ten points in this category. If the city ensured laws for only vacation rentals, and not for single bedroom rentals for example, they were given a partial score.
As we can see from the table above, the cities that received the full ten points had the least legal issues for Airbnb and other short-term rentals in terms of framework. These cities include but are not limited to: Anaheim, CA, Boulder, CO, Fort Lauderdale, FL, Galveston, TX, Louisville, KY, Maui County, HI, and Portland, OR.
2. Are Laws Set in Place That Restrict the Ability to Rent Short-Term?
The most common restriction is not permitting short-term rentals if the property owner is not present. Other fairly common ones include limitations on the number of days a host can rent out the property and city zones that permit short-term rentals.
Los Angeles, for example, has recently proposed an ordinance to allow an Airbnb property to be rented for 90 days a year. As of right now, the City of Los Angeles has many Airbnb legal issues, and is illegal in most of its zones.
The more restrictive the city laws were on short-term rentals, the more negative the score. Three cities, Atlanta, Denver, and Oklahoma City, ban short-term rentals entirely and thus received the most negative score of -40. The cities with the least Airbnb legal issues received a score of zero in this category.
3. What Kind of Tax Obligations Must Short-Term Renters Fulfill?
The report focused on tax obligations that were disproportionate or burdensome to short-term rentals. This was actually not much of an influencing factor overall, according to the report. Only five cities lost points in this category.
Two cities, Portland and San Francisco, urge tax collection on short-term rental platforms, even if the platform controls the transactions between the hosts and guests (like Airbnb). Another city, Galveston, requires monthly reports on hotel occupancy tax, which can be an inconvenience for renters.
Airbnb does collect hotel occupancy tax in some U.S. cities. Finally, one city, Oakland, demands an even higher tax rate on short-term rentals than on hotels. Cities that scored a zero in this category have favorable tax obligations with little Airbnb legal issues tied.
4. Are the Number of Required Licenses and Their Costs a Challenge?
Obviously there are required licenses for enforcement purposes that should not be an issue to obtain. However, some cities over-complicate the process, requiring more tedious licenses.
In the study, licensing requirements over a five-year time span and the fees associated with them were analyzed. The more grueling the requirements, the more points were deducted.
For example, in Fort Lauderdale, which is known to have many Airbnb legal issues, a short-term rental property owner would have to complete seven forms and pay more than $2,900 in associated fees over five years. This city was deducted 10 points, tied with the most deducted. Cities that obtained a zero in this field were the least vexatious in this respect.
5. Are There Any Other Restrictions That Don’t Fit in the Previous Categories? Are There Hostile Rules Enforced on Short-Term Rentals?
Various other Airbnb legal issues exist. Some include occupancy limits, initial and ongoing annual property inspections, an allowance of only one license per unit, and disproportionately high insurance requirements.
San Francisco has many of these issues. Potential short-term rentals in San Francisco must submit to an in-person appointment for licensing and licensing only applies to San Francisco residents as well. It limits all licenses to one unit only.
Now that we’ve covered how the cities were scored according to what categories, let’s look at the final grades. The top five cities with the least legal issues on short-term rentals, including Airbnb, are: Galveston, TX (scored a 97), Savannah, GA (97), Louisville, KY (93), San Diego, CA(92), and Cleveland, OH (90).
You can review Roomscore’s full, in-depth analysis here. Ten other cities also had a score of 90, and they include Columbus, Dallas, Detroit, El Paso, Indianapolis, Mesa, Milwaukee, Omaha, Phoenix, and San Antonio.
So what does this all mean? Take advantage of setting up Airbnb properties in the cities with the least Airbnb legal issues. Analyze your current situation, review all the necessary laws and guidelines, and search for Airbnb rental properties on Mashvisor.
This goes without saying, but try to always be on track with the law and make sure your Airbnb rental is completely legal. Laws do change, so it is possible a city that restricts or bans Airbnb rentals takes a 180 degree turn in the future.
Having an Airbnb listing in a city with little legal issues will definitely be a plus. You’ll be reaping the rich experience and financial gain of being an Airbnb host. Finally, you will also face more resilient laws and regulations that can support your journey to being an Airbnb host and investor.