2022 trends in STR regulation — and what to expect in 2023
- Nov 30, 2022 | Jennifer Sokolowsky
The short-term rental (STR) industry moved its way back toward business as usual in 2022, following two years of disruption brought on by the COVID-19 pandemic. But business as usual in the STR realm has never meant smooth sailing, especially when it comes to local regulation.
Communities have been very busy over the past several years creating new laws to govern vacation rentals, and 2022 was no exception. In the same vein, short-term rental industry players, from online platforms such as Airbnb and Vrbo to grassroots community operators, have been busy making sure new rules don’t adversely affect their business.
In both cases, results have been mixed. While many communities have implemented new STR regulations — and many more will continue to do so — some high-profile attempts to create stricter rules for STRs have been met with defeat in court. However, more moderate measures, such as limiting the number of STRs allowed in particular areas, have been more successful.
Here’s a look at some of the most important developments in STR regulation from 2022.
New rules in big cities
Some major U.S. cities saw changes in their STR rules in 2022.
In Washington, D.C., a three-year-old ordinance finally went into effect. The City Council passed the law in late 2018, but the District’s Department of Consumer and Regulatory Affairs didn’t announce that it was ready to implement and enforce the measure until December of 2021. The law requires short-term rental hosts to obtain permits and limit the amount of time they rent properties every year, among other rules.
In San Diego, after years of controversy and delays, another long-awaited ordinance finally got California Coastal Commission approval in March. The ordinance, which goes into effect in May of 2023, caps vacation rental permits to around 5,400 throughout the city, a reduction of almost half from the approximately 12,300 STRs currently operating.
And in New York City, short-term rental hosts are now required to register with the city and obtain a short-term rental registration number under a new law designed to cut down on illegal vacation rentals.
Courts say no
Strict STR laws in some large markets were denied in court, forcing governments to adjust their approach or go back to the drawing board.
In October 2022, a federal judge blocked part of a restrictive Honolulu short-term rental law that prohibits rentals of between 30 and 89 days in non-resort areas. Under older laws, short-term rentals were defined as rentals of at least 30 days. While the city said it would not enforce the ban of rentals due to the order, officials said they would aggressively enforce other provisions of the law, including the ban of rentals of less than 30 days in residential areas.
The New Orleans City Council issued a moratorium on new short-term rental permits in residential areas until at least March of 2023. In the meantime, the city is rewriting its short-term rental law in response to a federal appeals court decision that invalidated key parts of the current ordinance.
Short-term rental regulation is a hot community topic for voters in several communities in 2022.
In Colorado, multiple cities voted to increase lodging taxes on short-term rentals in the November election, including Aspen, Steamboat Springs, and Summit County. Voters in Frisco approved a lodging tax hike on short-term rentals in an April election.
Putting new STR permits on hold
For years, many communities have opted to deal with contentious STR issues by pausing new permits for short-term rental operators, usually for at least six months, but often for much longer. Communities implementing moratoria on new permits from late 2021 through 2022 included:
In a slightly different twist, Maui officials banned new construction of all transient accommodations, including short-term rental properties, timeshares, and hotels, for up to two years amid concerns about overtourism. The Maui County Council approved the moratorium on January 7, 2022, overriding Maui Mayor Michael Victorino’s veto of the measure in December.
Capping numbers of STRs
Limiting the number of STRs that can operate in certain areas has also been a popular measure for cities. Communities that have put these types of limits into place include:
However, in Norfolk, Virginia, the City Council actually increased the number of STRs allowed in certain neighborhoods in an update of the city’s vacation rental law.
Short-term rental issues often pit industry players against regulators, but these questions also often find local governments opposing state legislators who want to limit the ways in which local officials can regulate short-term rentals.
In Arizona, which allows local governments little say in short-term rental rules, local officials got a small victory with a new state law that allows cities and towns slightly more control over short-term rentals. Several Arizona cities approved new laws incorporating these changes after the state legislation passed.
In many other states, however, state-mandated control of short-term rental rules hasn’t been very successful in the past few years. Bills have been introduced in several state legislatures to keep a tight rein on local regulation of STRs — including in Michigan, North Carolina, and South Carolina, but none of these have become law.
In a slightly different scenario, the state of Nevada forced Clark County, along with the cities of Las Vegas, Henderson, and North Las Vegas, to regulate vacation rentals. Previously, short-term rentals were banned in unincorporated areas of the county, and state legislators wanted to make sure STRs were allowed and that rules were created for them.
Looking ahead to 2023
The trends that marked the industry in 2022 will no doubt continue in 2023, with communities continuing to grapple with how best to manage STRs and hosts seeking to have their input included in new regulations — then adjusting once they’re passed.
At this point, many states and larger cities now have STR laws that are well-established, and regulation activity should slow down in many of these areas (with some exceptions, such as Hawaii). However, many smaller communities where STR activity flew under the radar for years are now starting to look at how to manage the industry, as well as benefit from STR tax revenue, and this will be a hot spot for regulation.
Moving forward, extreme positions on STR regulation — from total STR bans on the government side to a complete lack of rules on the operators’ side — will not be the norm. Instead, many communities will find that a more balanced approach will likely achieve the most success. In this best-case scenario, communities will be able to take advantage of the many benefits STRs bring, while having mechanisms in place to effectively curb any negative effects and giving all sides an opportunity to contribute.
MyLodgeTax can help short-term rental hosts simplify and automate lodging tax compliance. See our state lodging tax guides for more on short-term rental taxes in your state. If you have tax questions related to properties, drop us a line and we’ll get back to you with answers.