Whether you are starting from scratch with an ordinance, or updating an already working ordinance, the goal is the same for a municipality: to balance the accommodations and tourism needs of visitors with those residents and members of the community. Drawing on the details presented in our short term rental ordinance tool, below are important considerations for cities and counties:
- Bans versus regulation. Having a ban on short term rentals in residential neighborhoods is an uphill battle, because a) it is difficult to eliminate every web platform from advertising short term rentals in your neighborhood, and b) similar to the rideshare versus taxi disputes, consumers and tourists have an influence on touristic cities to demand such accommodations alternatives. Therefore, setting a legal framework for responsible operation of short term rentals is critical, and supplements the lodging tax base that would otherwise go uncollected.
- Primary Residency: If your municipality is both a working/living city and a touristic attraction, then you should strongly consider adding Primary Residency language that restricts the short term rental operator to only rent out their primary home / principal residence. Even stronger language includes requiring the resident to be on-site during the guest’s stay. As of writing, Harmari has found 34 of the top 100 US Cities by population have some form of Primary Residency language included in their short term rental ordinance. This is an effective tool to deter nuisance problems for the community, because that resident host has to go to work the next day just like every other city resident. If your municipality is more of a play destination, then Primary Residency may not be so important, but that’s when the Nuisance Response Plan is even more important.
- Platform Compliance. Holding the platforms accountable for tax collection and/or disruptive short term rental activities is prudent to include in your ordinance. Otherwise, it’s akin to having the foxes watch the hen-house. At a minimum, each platform should be co-operative to take down non-compliant listings per a city request, similar to what happened in Boston in December 2019 or in San Francisco in 2018. However, they will definitely fight the inclusion of “caps” on short term rental growth in the area so be prepared for that. The past 12 months, Airbnb has been settling with Cities in their litigation battles, to pave the way for a smooth IPO.
- Nuisance Response Plan. If a Hotel has a security or nuisance incident, the hotel is the first line of defence to handle that incident, 24/7. Why shouldn’t short term rentals have that same accountability? Therefore, it is wise to include a nuisance response. So the city sets up a call-center “311” style, where neighbors can report nuisances specifically related to short term rentals. Once the nuisance is documented by the operator, the call center phones the 24/7 designated responsible agent, appointed by the short term rental host, to receive nuisance calls and deal with them within a set time frame of about 1 hour. If that nuisance is not handled within the hour, then the call center phones code compliance, or the police department depending on the hour of the day. By holding the short term rental host accountable, the City can cut down on police or code calls by up to 50%. We also recommend disciplinary action or even permit revocation if the short term rental host fails to respond on more than one occasion.
- Reasonable Registration Fees. To cover the costs of enforcement, inspection and administration, a reasonable annual fee should be introduced payable by the host. The City can provide a registration or sign-up form asking all the details and complete all checklist items for health and safety before scheduling an on-site inspection (if required). The registration fees should not be so onerous as to deter short term rental operators from voluntarily coming forth rather than staying “underground”.
- Setting Caps. To deter unreasonable growth of speculative short term rental activities and to protect housing stock for residents, caps are critical. Examples of caps include a) setting a maximum number of permits for the city b) setting a maximum number of nights a rental can be booked per year c) setting a maximum density of short term rentals by neighborhood, census tract, or street d) setting a minimum distance between any 2 short term rentals. Each of these have their pros and cons and challenges from an enforcability perspective. Depending on existing legislation or rules, some caps may also work better than others. Ex. California Coastal Commission agreed to caps on a “maximum number of permits” basis for at least one California coastal City.
- Safety, Inspection and Insurance. If a catastrophic event happens at a short term rental, the guests may hold the City accountable due to lack of health or safety obligations placed on the short term rental in which they stayed. We’ve heard of roofs collapsing from over-crowding, fires from misplaced BBQs, of course safety dangers with pools, saunas, decks and hot tubs. Typically insurance companies will not cover the claim on a short term rental because it is considered a commercial use of the property. Therefore, a commercial liability insurance should be required for every host. Secondly, depending on existing permitting obligations, a physical inspection every few years would also be useful to ensure safety of guests.
By considering these important issues with short term rentals, Cities and Counties can ensure all major aspects of how short term rentals impact the community can be covered.
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Important Considerations for drafting your short term rental ordinance