Short-Term Rental Regulations in the USA

Thinking of venturing into the arena of short-term rentals across the USA? We’re about to give you a tour through a landscape as diverse as the destinations you offer. Whether you're showcasing a booming city or a seaside retreat, the short-term rental market offers plenty of opportunities. At the same time, regulations can be tricky to navigate.

This article offers guidance on understanding and adapting to these regulations, balancing the stricter laws in populous cities with the freer landscapes of less-regulated areas. Our goal is to keep you informed in making the complex world of short-term rental regulations both accessible and actionable.

An Overview of Short-Term Rental Regulations

Short-term rental regulations, established by government entities from federal to local levels, dictate the operation of properties rented for short durations — typically less than 30 days. These rules are essential for hosts and property managers and aim to balance the rental market's growth with community interests.

They tackle important concerns such as housing preservation and the effects of temporary guests on neighborhoods, influencing the landscape of short-term rentals.

Licensing and registration

Many jurisdictions require hosts to obtain a license, or register their property, as a short-term rental, which may involve inspections, fees, and safety requirements.

Zoning laws

The zoning laws of a community ensure that short-term rentals are located in appropriate locations. Some areas may be exclusively residential or commercial, restricting their ability to conduct short-term rentals.

Occupancy limits

Regulations often limit the number of guests allowed per rental to prevent overcrowding and ensure guest safety.

Taxation

Short-term rentals are subject to local and state taxes, which hosts must collect and remit to the appropriate government agencies.

Operational rules

Rental operations are subject to noise ordinances, parking regulations, and waste disposal rules, all intended to minimize their impact on neighbors.

Best States for Short-term Rentals in the USA

1. Florida

Known for its welcoming attitude toward short-term rentals, Florida's state law prohibits cities and counties from banning them outright.

In Florida, short-term rental regulations focus on licensing, zoning, taxes, and operational limits, governed by state law and local ordinances. Statewide, owners must register with the Florida Department of business and professional regulation. Local laws, varying significantly by city and county, dictate zoning restrictions and occupancy rules. Additionally, operators are required to collect and remit state sales tax and local tourist development taxes. Rentals must meet hygiene standards and display licenses visibly, with the state imposing taxes on bookings, which Airbnb collects and remits.

Compliance with these regulations is essential for legally operating short-term rentals in Florida.

2. Arizona

Arizona state laws have greatly limited local government's ability to restrict short-term rentals, making cities like Phoenix and Scottsdale hotbeds for short-term rentals.

In Arizona, state law preempts cities and counties from outright banning short-term rentals but allows for reasonable noise, safety, and insurance regulations. Operators must obtain a transaction privilege tax (TPT) license and collect state, county, and city taxes, which vary by location. Local municipalities have additional rules regarding registration and neighborhood notification. Owners should check with local city or county governments to ensure they comply with all applicable regulations and tax obligations.

In Arizona, short-term rental properties are subject to state regulations that prohibit cities and towns from restricting their use except to address issues related to noise, traffic, and safety. Owners are required to register with the Arizona Department of Revenue for tax purposes and collect transaction privilege tax on rental income.

3. Texas

Texas offers a favorable environment for short-term rentals thanks to its robust real estate market and friendly regulatory environment. Even though cities like Austin have their own rules, they still present significant opportunities for hosts, provided they follow local ordinances.

The short-term rental regulations are primarily managed at the local level. Cities like Austin, Houston, and Dallas implement their own ordinances that include permit requirements, occupancy limits, and zoning restrictions.

Statewide, owners must collect a 6% hotel occupancy tax from guests. Local jurisdictions impose additional taxes and regulations, making it vital for short-term rental operators to familiarize themselves with the specific requirements of the municipalities where their properties are located.

4. Tennessee

Tennessee offers a relatively easy path for short-term rental operators, especially in tourist-heavy cities like Nashville and Memphis. The state requires a permit for operation but generally supports the short-term rental industry.

Short-term rental regulations vary by city and county. Major cities like Nashville and Memphis implement specific ordinances that include permit requirements, zoning restrictions, and safety inspections. Statewide, owners are required to collect and remit sales tax and any applicable local occupancy taxes.

Short-term rental operators must check local laws to ensure compliance with both municipal regulations and state tax obligations.

5. Indiana

Known for its straightforward and host-friendly regulations, Indiana allows for easy entry into the short-term rental market. Regulations vary by city, but the overall state stance is permissive, encouraging the growth of short-term rentals. Legislation permits short-term rentals of an owner's primary residence under any ordinance and restricts local governments from unreasonably banning or limiting short-term rentals, allowing for regulations and a one-time permit fee up to $150.

It is the local municipalities that determine short-term rental regulations in Indiana, with some cities such as Indianapolis mandating permits and safety standards, while others, such as Bloomington and Fort Wayne, set their own regulations, including zoning and occupancy limits. Specific requirements must be consulted by the local government.

Further States with Promising Short-Term Rental Markets

6. Colorado

Famous for its ski resorts and outdoor activities, Colorado has a booming short-term rental market. While some cities, such as Denver and Boulder have specific regulations, Colorado is generally popular with tourists.

In Colorado, short-term rental regulations vary by location, with cities like Denver requiring licenses and adherence to specific safety and neighborhood compatibility standards. In addition, statewide tax obligations include collecting and remitting sales tax, lodging tax, and local taxes. Owners should check local regulations for detailed compliance requirements.

7. Maine

Maine's picturesque landscapes and coastal attractions make it a great destination for vacation rentals. Regulators focus on safety and local compliance without stifling the short-term rental market.

In Maine, short-term rental operators must comply with state health and safety standards, register with the state, and collect a 9% lodging tax. Local ordinances, particularly in tourist-heavy areas like Portland and Bar Harbor, impose additional licensing, zoning restrictions, and operational guidelines. Owners need to consult local regulations for precise rules.

8. Michigan

Michigan's appeal lies in its Great Lakes shoreline and seasonal tourism. Areas like Traverse City and the Lake Michigan coast are hotspots for vacation rentals. State and local regulations are generally manageable for diligent hosts.

In Michigan, the approach to short-term rentals varies significantly by locality, with some cities requiring permits and others imposing few restrictions. Statewide, operators are generally expected to collect a 6% sales tax on rental transactions. Local governments have specific zoning laws, occupancy rules, and additional tax requirements, making it essential for owners to check with local authorities for compliance.

9. Oregon

Especially in cities like Portland and coastal communities, Oregon's market for short-term rentals is thriving. The state balances regulatory oversight with the need to support tourism, making it an appealing option for hosts.

Short-term rental regulations are largely determined by local jurisdictions, with notable cities like Portland requiring permits, safety inspections, and adherence to occupancy limits. Statewide, owners must register for a Transient Lodging Tax Certificate to collect and remit a 1.8% state lodging tax, in addition to any local taxes. It's important for short-term rental operators to consult with their city or county government to ensure compliance with local ordinances.

10. Wisconsin

Wisconsin's lakes, national parks, and seasonal sports draw a wide range of tourists year-round. Its regulatory environment is relatively friendly to short-term rentals, especially in tourist areas like Door County and Lake Geneva.

In Wisconsin, short-term rental operations are regulated at both the state and local level. Owners are required to obtain a license if they rent out their property for more than 10 days a year subject to health and safety inspections. Local municipalities impose additional zoning laws, occupancy restrictions and require the collection of a room tax on top of the state sales tax. It’s important for owners to check specific local ordinances to ensure full compliance with all regulatory requirements.

Stricter Regulations in Populous Cities in the USA

Cities with stringent regulations often have detailed host requirements. These cities represent a trend towards tighter control, so compliance is a major concern for hosts.

1. New York City

The state has some of the toughest restrictions, where short-term rentals are mostly illegal in multi-family buildings if the host is not present. In New York, short-term rentals face stringent regulations especially in New York City where rentals under 30 days are generally illegal unless the host is present during the stay. Statewide, operators must collect and remit sales tax and a lodging tax, with additional regulations and taxes varying by locality. It's essential for owners to comply with both state and local laws, which include obtaining permits and adhering to zoning and safety standards, to legally operate short-term rentals.

2. Los Angeles

The state requires hosts to register with the city and caps the number of rental days per year. In order to rent out their property for short periods of time, owners must obtain a city-issued registration number and adhere to a 120-day cap. The Transient Occupancy Tax (TOT) must also be collected by hosts from guests.

There are strict regulations governing the location of short-term rentals in Los Angeles, focusing on primary residences so as to prevent the conversion of housing stock into de facto hotels.

3. San Francisco

State mandates a registration process and limits rentals to primary residences only.

A business registration certificate and a short-term residential rental certificate are required for short-term rentals in San Francisco. In addition to collecting 14% Transient Occupancy Tax from guests hosts are required to limit rentals to their primary residence and cap them at 90 days per year for unhosted rentals. In order to offer short-term rentals legally operators must comply with strict city regulations in order to maintain housing stock and maintain neighborhood compatibility.

4. Chicago

The state’s shared housing ordinance necessitates a license imposing strict rules on where and how hosts can operate.

Obtaining a license and registering with the city are requirements for short-term rental operators in Chicago. According to the city's Shared Housing Ordinance, the number of units a building can rent out is restricted, and guests must pay an occupancy tax, which includes a 4.5% Hotel Accommodation Tax, a 6% City of Chicago Hotel Tax, and other applicable taxes.

Furthermore, Chicago enforces strict rules regarding short-term rentals to ensure safety and compliance with local laws, including maintaining guest records and adhering to zoning guidelines.

The Role of Short-Term Rental Software in Compliance and Management

Technology plays a pivotal role in managing the complexities of short-term rental regulations. Short-term rental software such as Hostaway, offers powerful tools for managing listings and bookings and ensuring compliance with local regulations. The platform helps streamline operations from tracking rental days to generating reports for tax purposes making it indispensable for savvy hosts and property managers who aim for efficiency and compliance.

Looking Ahead

For hosts and managers aspiring for success, mastering the diverse regulations of the short-term rental industry is pivotal. It is easy to build a profitable and fulfilling rental business aligned perfectly with both legal requirements and community expectations with the right tools and sharp insights. Staying up-to-date on local regulations is crucial in an ever-evolving rental landscape.

The ability to adapt and stay informed is not just important — it's the cornerstone of flourishing in this vibrant short-term rental market.

FAQs

1. Do I need a license to operate a short-term rental in the USA?

Yes, many jurisdictions in the USA require hosts to obtain a license or register their property as a short-term rental. This process may involve inspections, fees, and adhering to safety requirements.

2. Are there any restrictions on where I can operate my short-term rental?

Yes, zoning laws in various communities dictate where short-term rentals can be operated. Some areas may be zoned exclusively for residential or commercial use, limiting the ability to offer short-term rentals.

3. What are the typical occupancy limits for short-term rentals?

Regulations often limit the number of guests allowed in a short-term rental to prevent overcrowding and ensure safety. These limits vary by jurisdiction.

4. What taxes do I need to collect and remit for my short-term rental?

Short-term rentals are subject to local and state taxes, which hosts are responsible for collecting from guests and remitting to the appropriate government agencies.

5. How do I ensure my short-term rental complies with operational rules?

Rental operations must adhere to local noise ordinances, parking regulations, and waste disposal rules to minimize impact on neighbors. Compliance involves staying informed about and adhering to these local regulations.