Remote work has heightened the demand for short-term rentals as more Americans choose to work from “home” while away from home.
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Short-term rental licenses and regulations
Top of the list for short-term rental investments is the Hawaiian Islands and Alaska’s Kenai Peninsula. But, smaller cities and rural areas, followed by mountain, resort, and coastal areas, continue to generate the highest revenues.
If you’re looking at breaking into the short-term rental market, it’s important that you understand the laws and regulations that govern this sector. Before you list your property, you must obtain the right permits and licenses, check zoning ordinances and restrictions in your city, county, and state, and more.
What is a short-term rental?
A short-term or vacation rental is a dwelling unit or portion of a unit that is rented for no more than 30 days. However, cities and counties often differ in how they define short-term rental.
For example, in Sitka, Alaska, a short-term rental is any property rented for less than 14 days. The city of Savannah, Georgia, defines a short-term rental as the rental of an entire dwelling unit for 30 days or less, while the rental of a room in a unit is regulated separately as a bed and breakfast homestay.
Meanwhile, in Placer County, California, short-term rentals are not permitted in structures not intended for residential occupancy, and short-term rental of tiny homes or mobile or manufactured home units is prohibited.
Short-term rentals regulations
As the industry has boomed, many communities have taken action against the potential impact of short-term rentals. As such, these rentals are increasingly regulated to protect the health, safety, and interests of owners, neighbors, and visitors.
Regulations include municipal zoning codes or city ordinances that define how a short-term rental dwelling differs from other lodging options. Short-term rental regulations also require annual operating licenses or permits, restrict short-term rentals to certain zones, and place a cap on the number of licenses issued.
Some jurisdictions have a residency requirement and may have different rules on non-hosted vs. hosted stays. For example, the city of Santa Monica, California, has a home-sharing ordinance that permits eligible residents to apply for a home-sharing permit and business license so they can home-share their primary residence. Un-hosted rentals of 30 days or less (aka “vacation rentals”) are prohibited.
A few cities ban short-term rentals completely. One such city is Irvine, California, which prohibits short-term rentals in all residential zones. Furthermore, advertising a short-term rental on a booking site, such as Airbnb and VRBO, is a violation of the city’s zoning ordinance.
What licenses and permits do a short-term rental business need?
Cities and counties may require short-term rentals to register and obtain at least one license or permit to operate. These may include the following:
- General business license: Some cities require all businesses to obtain a general business license (sometimes called a privilege or occupation license or a business tax certificate).
- Short-term license/permit: The steps to obtaining a license/permit may involve:
- Reviewing the local ordinance to check eligibility
- Submitting an application
- Providing any required documents (proof of property insurance, possession of property certificate (if applicable)
- Paying a fee
- Getting an inspection
- Certificate of occupancy: States a legal use and/or type of permitted occupancy of a building.
Property owners are also responsible for ensuring their short-term rental properties are maintained in a safe and code-compliant manner.
Other business requirements may include:
- Registering with the Secretary of State
- Obtaining an Employer Identification Number (EIN) from the IRS
- Obtaining a sales tax permit
Note: Most short-term licensing is handled at the local level. However, in Miami, Florida, short-term vacation rentals must be licensed by the State of Florida, including registration with the Florida Department of Revenue for tax purposes, and must comply with all applicable state laws.
Easily manage complex requirements
There are over 75,000 federal, state, and local jurisdictions. As their compliance requirements become more complex, we’re the partner that can help you manage them all.
Short-term rentals and HOAs
If you intend to seek a short-term rental in a community governed by a homeowner’s association (HOA), you may need to obtain a letter of approval. There may also be limitations in the HOA covenants, restrictions, and private codes as to how the property is used.
What are the penalties for operating a short-term rental without a license?
Jurisdictions are beginning to implement laws that regulate the rise in short-term rentals and crack down on license violations.
In early 2022, the mayor of Honolulu signed a bill into law that strengthens enforcement of illegal short-term rentals and raised regulations and fees for legal ones. Fines are as high as $10,000 for non-compliance. In New York City, a lawsuit was filed in July 2022 that shut down an alleged illegal short-term rental operation.
Evolving regulatory landscape
Short-term rental laws and regulations are evolving and fluctuate wildly across the country. Lawmakers also lack consensus on how regulated the industry should be, and laws can change annually or even monthly — adding to the confusion that rental operators face.
If you own a short-term rental business, you must remain vigilant and stay informed of these constant changes.
CT can help
Outsourcing short-term rental business registration and license research, applications, management, and renewals can take the pressure off you. By working with a full-service management provider who specializes in efficiently processing business licenses, permits, and registrations you can free up your time to focus on starting and growing your business while ensuring you keep up with changing compliance requirements.
For more information on CT Corporation services and how we can streamline your business licensing, contact a CT Corporation specialist today.
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