Is Airbnb or Vrbo Illegal in Any States?
While no state makes short-term rentals illegal, some cities have restricted or banned them
By Andra DelMonico, J.D. | Reviewed by Canaan Suitt, J.D. | Last updated on October 1, 2024Use these links to jump to different sections:
- What Are the Legal Requirements for Operating an Airbnb?
- Are Short-Term Rentals Like Airbnb or Vrbo Illegal in My State?
- What Are the Penalties for Operating an Illegal Short-Term Rental?
- How Do Local Zoning Laws Affect Short-Term Rentals?
- What Are the Tax Implications of Renting Out My Property on Airbnb?
- Find Experienced Legal Help
Real estate investment and vacation property ownership are not new concepts. Websites like Airbnb and Vrbo have revolutionized both of these concepts to introduce an entirely new industry. Airbnb rentals have led the way in the short-term rental (STR) revolution. With more people owning Airbnb properties, governments took notice and realized that some guidance and parameters were needed. If you want to invest in a short-term rental property, you must learn the law to protect your investment.
What Are the Legal Requirements for Operating an Airbnb?
The legal requirements for owning and operating a short-term rental vary. Generally, you must register for a business license, rental permit, or both. The requirements for the type of license or permit you obtain can vary based on whether the rental is owner-occupied or non-owner-occupied. It can also depend on the type of property, whether it is a single-family or multi-family dwelling. Others consider whether it is a residential vs. commercial or mixed-use zone.
Local governments often restrict the number of short-term rental properties in a particular area. Limits are also often placed on the number of consecutive rental nights and the total number of nights annually.
Are Short-Term Rentals Like Airbnb or Vrbo Illegal in My State?
No state laws have made short-term rentals illegal. However, some cities have outlawed services like Airbnb and Vrbo. Irvine and Temecula in California have completely banned them. Others have placed strict limits on short-term rentals, making them essentially illegal.
The goal of the majority of local restrictions is to protect homeowners who live in the city full-time. That way, short-term rental properties don’t hinder permanent residents’ ability to enjoy their lives. New laws are enacted routinely because the short-term rental industry is relatively new. While many people refer to them as Airbnb laws, they apply to a much broader category of rentals.
For example, Orlando made short-term rentals illegal until 2018. Then, laws changed on a state level, preventing local governments from banning them. The local municipalities in Orlando responded by regulating where and how short-term rentals operate.
Another example would be New York City (NYC), where the restrictions are much stricter within city limits than in the rest of the state. Short-term rental property owners must register with the city. They must also be present in the unit during the rental and not allow more than two guests at a time.
Because laws vary so much, it is important to check the applicable local laws before starting to operate your short-term rental. Speaking with a real estate lawyer can help you comply with the law.
What Are the Penalties for Operating an Illegal Short-Term Rental?
The penalty for getting caught operating an illegal short-term rental can be significant. The penalties vary based on the state, county, and city short-term rental laws. The penalties can also vary based on the type of violation you commit.
For example, you could be fined for entering the rental market before processing your permit application. Others will fine you for allowing guests to stay longer than the limit or renting out the property for more days annually than permitted. For example, some Florida cities impose fines that range from $500 to $1,000 per day. However, penalties can be much harsher. The City of Garden Grove is located just outside of Los Angeles. In this city, illegal short-term rentals are punishable by fines of up to $1,000 per day and a misdemeanor charge. Owners could face up to six months in jail. Making the punishment even harsher, each day the illegal rental operates is considered a separate offense.
How Do Local Zoning Laws Affect Short-Term Rentals?
While states have laws that impact short-term rentals, the majority of governing laws are local regulations. This is because the county, city, or municipality oversees governance. Many local governments require Airbnb hosts and short-term rental owners to obtain a business license or short-term rental permit. Common restrictions in local laws include limits on the number of consecutive days, onsite host or property management, or residence requirements.
As a short-term rental owner, you must also comply with local laws that apply to all residents. This could include parking restrictions, noise ordinances, or parties. While all states have laws that impact short-term rental owners, these states have the most well-known and commonly discussed laws.
Florida
Because Florida heavily depends on tourism, many local governments have specific laws about short-term rentals. Today, homeowners in Orlando must obtain a rental permit before renting out their property. Next to Orlando is Kissimmee, where short-term rentals are only allowed in certain zoning districts. This protects permanent residents from being surrounded by vacation rentals that could disturb their daily lives. In Miami, there is an occupancy limit of two people per bedroom plus two additional people per property. There is also a maximum occupancy limit of 12 people.
California
California’s short-term rental laws are some of the strictest in the country, and local laws vary significantly. In San Francisco, a short-term rental is allowed, but only if the property is the host’s primary residence, where they live for at least 275 days a year. They can’t rent the property out for more than 90 days per year. They must also obtain a business and short-term rental registration certificate.
In Los Angeles, the Home-Sharing Ordinance went into effect in 2019. It restricts short-term rentals to the host’s primary residence. The host has to live at the property for at least six months of the year. The host must also register with the city. Hosts can only run a single short-term rental. Palm Springs implemented new laws in 2022 that restrict the number of short-term rentals in its jurisdiction to 20 percent of the homes. Hosts are limited to renting out their short-term rental to 26 days.
Tennessee
Nashville is located in Davidson County, and it has implemented short-term rental laws. Property owners must register for a permit before listing their property. Permits are categorized as owner-occupied and non-owner-occupied. The non-owner-occupied permits are limited to specific non-residential zones. This is Tennessee’s attempt to address the same quiet enjoyment issue that Florida deals with.
What Are the Tax Implications of Renting Out My Property on Airbnb?
Property owners who choose to have a short-term rental unit have several tax liabilities. Simply owning real estate means you will have to pay property taxes. Some states do have exemptions for property taxes if you can show that the property is your primary residence.
There are also several taxes associated with vacation rental properties. You may owe federal and state income taxes. These are paid annually. Depending on where the property is located, there could be state and local sales taxes. Depending on how you manage your property, some online marketplaces collect your sales taxes.
Some states charge a use tax. The goal of applying this tax to short-term rentals is to balance out-of-state purchases that sales tax wouldn’t apply to. When you register for a license to operate the short-term rental, this signals to the county or city that you are operating a business. You may owe business taxes for operating the business within a jurisdiction.
Finally, some states and cities require short-term rentals to pay a transient occupancy tax (TOT). This is the same tax that hotels, motels, and bed and breakfasts pay. The TOT can vary significantly, from 4 percent to 14 percent.
Find Experienced Legal Help
If you plan to operate a short-term rental, consult an attorney before taking action. Look for a local real estate lawyer focusing on short-term rentals. A lawyer will be able to guide rental owners on short-term rental regulations. With the high stakes for getting caught operating an illegal short-term rental, it is wise to ensure you follow the law from day one.
Visit the Super Lawyers directory to begin your search for an experienced real estate attorney. For more information, read our guide on land use and zoning law.
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