Short-term renters are a significant source of revenue for tourist-related businesses and local homeowners, but the sheer volume of rentals has ignited a backlash in dozens of cities and states.

The boom in short-term renting fueled by the success of Airbnb, HomeAway, VRBO and other home-sharing sites is creating millions of new customers for second homes, vacation rentals and primary residences.

In the U.S., about 1 million short-term rentals, both primary and secondary homes, are now listed, according to Rob Stephens, a vacation rental expert and co-founder of Avalara MyLodgeTax, an online platform that helps vacation owners collect, remit and report lodging taxes to state and local authorities.

Residents upset by short-term rentals

Success has come at a price, though. Short-term renters are a significant source of revenue for tourist-related businesses and local homeowners, but the sheer volume of rentals has ignited a backlash in dozens of cities and states.

Residents are complaining about noise, disorderly conduct, traffic, impact on property values and properties with no on-site management. In expensive real estate markets like Seattle and Boston, investors who convert homes to short-term rentals are even being accused of contributing to shortages of affordable homes.

New taxes and regulation are coming

Washington, D.C., New York City, Seattle, Orlando, Las Vegas, New Orleans, Miami, Hawaii County, Long Beach and Boston are just a few of the markets that are considering or have recently approved new taxes and regulations for short-term rentals.

In San Diego, California; Portland, Maine; and Hilton Head, North Carolina; referenda on regulating short-term rentals are on the ballot this fall.

Short-term renters in cities and vacation destinations will be paying new occupancy taxes and lodging fees and staying in homes that are more carefully regulated. New regulations are setting limits on the number of days each year that a property can be rented on a short-term basis or the number of short-term rental units an individual can own.

States are requiring short-term rental owners to be licensed, to meet safety standards and to report their revenues regularly. Some jurisdictions are restricting short-term rentals to primary residences banning short-term rentals altogether.

“From a taxation and regulatory perspective, what’s happening is that 10 years ago communities didn’t even think about short-term rentals. Now they can go to websites and say, ‘Oh my gosh, we have 3,000 of these things?'” Stephens says.

The spotlight on short-term renters has illuminated a problem facing thousands of traditional vacation rental owners. Current laws require owners to collect occupancy, sales and other lodging taxes and fees from short-term guests. These can range from 6 percent to 17 percent in states with higher sales taxes. Owners must submit these revenues on a monthly basis to state or local regulators and also file reports.

Airbnb-type rentals and traditional vacation rentals

The legal definition of a short-term rental varies by jurisdiction, with stays ranging from less than 30 consecutive days to as long as six months in Florida.

Virtually all vacation rentals, as well as Airbnb rentals, fit this definition of short-term rentals, but many of their owners (especially owners who also manage their rentals) remain unaware of their obligations to collect taxes.

Few vacation homeowners are set up to handle the collection and reporting requirements. At least 55 percent to 60 percent of the market is rent-by-owner and the other 40 percent to 45 percent have property managers.

“These are pretty small mom-and-pop type companies. Some are local real estate companies that may have a rental operation,” Stephens says.

“Any type of room that you rent for the short term triggers the requirement to collect and remit taxes. So it’s nothing new, but there is just significant unawareness. That’s changing.

“I think that five years ago nobody was talking about short-term rental regulation and taxes. Now it is rampant, and if you look two or three years out, if you are short-term rental owner, you’re going to have to be collecting and remitting these taxes.

“We are also seeing states clarifying and amending their rules to mention single-family homes or vacation homes specifically,” Stephens added.

When the number of vacation homeowners collecting taxes from renters is added to the new revenues from the 600,000 Airbnb-type owners, the new sources funding can support hundreds of cities and counties across the nation.

Those monies can help improve local infrastructure and provide more municipal services to make destinations even more appealing to short-term renters.

Steve Cook is a communications consultant and editor of Real Estate Economy Watch.

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