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Local governments turn to technology to help enforce STR laws

  • Apr 25, 2023 | Jennifer Sokolowsky

As the popularity of short-term rentals (STRs) has skyrocketed over the past several years, local governments have responded by creating laws to regulate the industry. However, it’s one thing to make laws and another for them to be effective. In many cases, short-term rental regulations have had little enforcement to back them up, resulting in an explosion of illegal vacation rentals, especially in popular tourist destinations.

For example, a 2022 study by McGill University found that 45% of Los Angeles short-term rentals are illegal. The city estimated in late 2022 that approximately 8,000 short-term rentals are listed across the city.

For governments, illegal STRs can cause headaches in terms of neighborhood disruption as well as serious safety issues. In New Orleans, a hotbed of STR controversy, one person was killed and two wounded recently in a shooting in an illegal short-term rental. In response, the city plans to hire more inspectors to enforce short-term rental laws.

Governments are also turning to technological solutions for short-term rental compliance, not only to promote order and safety, but to ensure short-term rental businesses are submitting their share of lodging taxes. In the case of Los Angeles, the McGill study estimated that STR hosts may have failed to pay up to $14.2 million in transient occupancy tax in a single year.

In the past, it’s often been difficult for governments to find unregistered short-term rentals that are operating in their jurisdictions, as most online listings don’t include exact addresses or host information. New software helps solve this problem by scraping data from online platforms such as Airbnb and Vrbo to identify listings in a particular area, then comparing that with government information to pinpoint properties that are missing the right permissions.

Many of the companies offering identification software also provide services related to tax and enforcement administration, from license application and processing to running hotlines for citizens to register complaints about vacation rental properties.

Cities and counties where short-term rentals have created huge controversies for years are increasingly partnering these companies to help manage compliance.

Honolulu, for instance, signed up in March for STR identification and monitoring software as well as tax administration and taxpayer support. Short-term rentals have been a contentious issue on Oahu for years, and the city passed a strict new law in April 2022. Although part of that law was blocked by a judge in October, the city is enforcing the rest of the ordinance.

Several mountain resort areas in Colorado have also contracted with short-term rental software providers for both compliance monitoring and hotline services. Other cities working with software for STR compliance include Fort Worth and Galveston, Texas; Hilton Head Island and Charleston, South Carolina; Park City and Summit County, Utah; Fort Lauderdale, Florida; Santa Cruz, California; and many more.

Governments using data to help with STR enforcement have seen positive results. In New Orleans, city leaders have been sharply criticized on short-term rental enforcement for years. In September of 2022, officials increased the number of STR inspectors and started using short-term rental tracking software. By December 2022, the city had identified more than 2,500 noncompliant listings and had a backlog of hundreds of open investigations into short-term rentals.

As governments recognize the impact of the short-term rental industry on their communities, both positive and negative, they’re getting more serious about enforcing the rules and increasingly using technological tools. Short-term rental hosts can no longer count on being able to fly under the radar when it comes to compliance with short-term rental regulations and tax compliance.

MyLodgeTax can help vacation rental hosts automate and simplify lodging tax compliance. For more on short-term rental taxes in your state, see our Vacation Rental Tax Guides. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.

Lodging tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Jennifer Sokolowsky
Avalara Author Jennifer Sokolowsky
Jennifer Sokolowsky writes about tax, legal, and tech topics. She has an extensive international background in journalism and marketing, including work with The Seattle Times, The Prague Post, Avvo, and Marriott.
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