2019 brought big changes to the world of short-term rentals

For the short-term rental industry, 2019 proved to be a year of increased scrutiny, controversy, debate — and change. Here’s a review of some of the highlights.

2019 saw more cities getting serious about controlling short-term rentals amid lobbying by the hotel industry and fears that short-term rentals contribute to a lack of affordable housing and affect neighborhood character. Short-term rental owners also made their voices heard, with concerns about property rights and their livelihoods being disrupted.

Many new laws require short-term rental hosts to register with the city and with tax authorities and make it illegal to advertise unpermitted vacation rentals. Several cities passed laws allowing short-term rental owners to only rent out their primary residences, including Boston, New Orleans, Los Angeles, and Denver.

Other cities passed restrictions on where short-term rentals could be located. In New Orleans, for example, short-term rentals remain illegal in most of the French Quarter, and vacation rentals in the Garden District are newly banned. In Honolulu, a new law bans most unhosted vacation rentals in residential areas. And a new ordinance in Louisville, Kentucky, requires non-owner-occupied short-term rentals to be located at least 600 feet away from each other in residential areas. 

In Jersey City, New Jersey, voters supported tighter rules on short-term rentals at the ballot box, defeating a referendum that would have overturned the city’s vacation rental law. The law requires short-term rental hosts to have a permit, bans vacation rentals in buildings with more than four units, and limits short-term rentals to 60 days per year when the owner is not on site. 

Cities also stepped up enforcement efforts. Denver charged short-term rental hosts with felonies for allegedly making false statements about their rental properties. Meanwhile, in Miami Beach, the city levied fines of $20,000 or more on short-term rental rule-breakers. A Miami-Dade circuit court judge recently invalidated Miami Beach’s short-term rental law based on the fines, but the city has appealed the ruling. Until an appellate court rules on the case, the law is still in effect and the city plans to enforce it.

Cities were not the only ones with their eyes on short-term rentals. Several states also passed laws regulating the industry.

Massachusetts started levying lodging taxes on short-term rentals with a law that went into effect July 1. The new law requires hosts to:

• Register with the Department of Revenue (DOR)
• Collect state room occupancy tax from guests
• File lodging tax returns monthly and pay all taxes due
• Maintain $1 million in liability insurance (unless going through a platform such as Airbnb or Vrbo that has equal or greater coverage)
• Inform their insurance provider that they will be operating a vacation rental

The measure also allows local governments to regulate short-term rentals, including such areas as licensing and registration, health and safety, location and density, taxes, and more. For more on vacation rental lodging taxes in Massachusetts, see our state Vacation Rental Tax Guide.

In New Jersey, Governor Phil Murphy signed a bill that makes some New Jersey short-term rental operators exempt from collecting state lodging taxes. The measure modified a law that went into effect late in 2018 that made all short-term rentals, except those facilitated by real estate agents, subject to lodging taxes. Under the new law, hosts with up to two vacation rental units who manage their rentals directly with guests — rather than using a third-party platform such as Airbnb —are exempt from collecting lodging taxes. For more on short-term lodging taxes in New Jersey, see our state Vacation Rental Tax Guide. 

A New Mexico law closed a loophole that exempted short-term rental hosts offering fewer than three rooms from collecting local lodging tax. Under the new law, short-term rental hosts, no matter how many rooms they offer, must pay local lodgers’ tax in communities that levy the tax.

And in Arizona, a new state law went into effect requiring short-term rental hosts to include a lodging tax license number in all advertisements. Under the measure, short-term operators must have a current transaction privilege tax (TPT) license before offering up a vacation rental to guests, and that license number must be included in all ads. Hosts who break these rules face fines of $250 for a first offense and $1,000 for a second.

Under another Arizona law that went into effect in 2019, all online short-term vacation rental marketplaces, including Airbnb, Vrbo, and HomeAway, must register with the Arizona Department of Revenue and collect lodging tax on bookings, including state TPT, county excise tax, and local transient occupancy tax.

On Halloween night, five people were killed in a shooting at a party in an Airbnb in Orinda, California. Airbnb responded immediately by announcing that it would be cracking down on these kinds of unauthorized events. By the beginning of December, it had put several new rules and policies into place, including:

• A ban on unauthorized parties
• A guest guarantee
• New guest standards regarding noise, unauthorized guests, unauthorized parking, unauthorized smoking, and major cleanliness concerns
• A neighbor hotline and dedicated line for local officials
• Verification of Airbnb’s 7 million listings

The announcements represent a new level of involvement from Airbnb in the day-to-day regulation of Airbnb listings, after years of fighting legal battles against local government efforts to require the company to ban listings of illegal rentals, share data on hosts for enforcement efforts, and collect lodging taxes.

Recently, however, Airbnb has made several deals with local governments that have created more cooperative relationships.

In Hawaii, Airbnb agreed to share short-term rental host data with state tax officials in order to enforce lodging tax laws. Airbnb has also made deals with Miami Beach, Florida, and Portland, Oregon, to help the cities enforce vacation rental laws by providing information on hosts and taking down noncompliant listings.

Also in Florida, both Airbnb and HomeAway have made agreements with Palm Beach County to require short-term rental hosts to obtain and use tax identification numbers.

In New York City, where Airbnb has been fighting the city in court for years, the company agreed to supply data for more than 17,000 listings that the city had asked for in a subpoena.

In Boston, Airbnb settled its lawsuit over the city’s strict short-term rental law, agreeing to rules requiring short-term rental hosts to live in the properties that they rent out for at least nine months a year. Airbnb also created a process for Boston hosts to add registration numbers to their listings. 

Not all legal cases involving big short-term rental issues resulted in settlements. In Santa Monica, California, Airbnb and HomeAway sued the city over its short-term rental law, which made it illegal for anyone, including “hosting platform” operators, to advertise unpermitted short-term rentals. The ruling allowed the city to continue to implement the law.

The ruling from the United States Court of Appeals for the Ninth Circuit invalidated the arguments of Airbnb and HomeAway that the ordinance violated the First Amendment by restricting their commercial speech, as well as the Communications Decency Act, which offers websites immunity from liability for content that users post on their sites. This ruling may put a damper on the ability of short-term rental platforms to successfully use these arguments in court in the future.

In Austin, short-term rental hosts won out when a Texas appeals court struck down key parts of Austin’s embattled short-term rental law. The court ruled that the city could not restrict short-term rentals to primary residences, and that it could not make rules about how guests can use vacation rentals. 

The high profile and growth of short-term rentals has led several governments to impose new or higher taxes on short-term rental guests — taxes which vacation rental hosts must collect and pass on to tax authorities.

In New Orleans, voters approved a ballot measure that raises taxes on short-term rentals by 6.75%. The City Council also raised the existing Neighborhood Housing Improvement Fund fee on short-term rentals from $1 per night to $5 for residential rentals and $12 for commercial properties.

Voters in Telluride, Colorado, also approved a new lodging tax on vacation rentals that will raise the total lodging tax to 15.15%. The tax will help fund affordable housing and go into effect on January 1, 2020.

In Austin, the City Council voted to increase the city’s hotel occupancy tax from 7%  to 9%, and in Hawaii, both Kauai County and Hawaii County added local surcharges to the state general excise tax (GET), which short-term rental hosts must pay and  may pass on to guests.

MyLodgeTax automates short-term rental tax compliance, including registration and filing, to simplify lodging taxes for hosts. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.