Host Compliance, a leader in helping governments address their short-term rental challenges, is now part of Granicus.
Short-Term Vacation Rentals (STRs) are generally rentals of a residential residence for under 30 days. They could range from a couch in a living room to a whole apartment or mansion.
STRs, often referred to as boarding houses, a house rental, and a variety of other terms, have existed for hundreds of years. Within the last decade, however, STRs have exploded as a substitute of (or even a preferred option to) traditional lodging, like hotel rooms. The industry is worth an estimated $115 billion (Skift Travel, 2019), and STRs total more than 10% of the traditional U.S. hotel room supply (CBRE, 2020). In rural and suburban areas, the ratio of STRs to hotel rooms increases substantially.
This explosion is attributed to the ease of managing advertisements and bookings online through websites that offer a one-stop shop for millions of listings. Hosts no longer depend on Craigslist, newspaper listings, and word of mouth to rent their extra space. Rental websites offer hosts reduced risk in the form of insurance, guest histories, and other safeguards that come with working through a third party. For guests, these websites provide reviews of rentals and hosts before booking. They also offer cancellation safeguards from a corporation, rather than an individual host.
Ninety-nine percent of the STR market in North America is made up of more than 60 active online rental platforms. Household names include:
There are also providers who cater to niche markets, such as luxury stays, pet friendly, and more added each day. The market is fragmenting, making it ever difficult to identify who is listing and how much the market is worth.
Some of the reasons why government leaders want to have STRs in their community include:
Unfortunately, an unregulated or unenforced STR market in communities can bring more negatives than positives:
Short-term vacation rentals need to be treated like the businesses and lodging they are. Local and state governments’ roles should minimize STRs’ negative impacts while maximizing their benefits. Governments also have a responsibility to create an even playing field between traditional lodging providers and STRs through fair permitting and licensing regulations and through the fair application of tax law. Unfortunately, governments face challenges in enforcing these regulations.
As with most of the sharing economy, short-term vacation rentals (STRs), create unique challenges in ordinance creation and enforcement. When local governments try to approach STRs with manual or reactive enforcement, they’re faced with:
Many governments without a compliance and monitoring solution use reactive enforcement based on complaints, but complaints form only a small piece of the STR market in a jurisdiction. Reactive enforcement puts the onus on proactive or upset residents, rather than addressing the core issue: whether legal or not, STRs will continue to operate. Local governments who depend on reactive enforcement aren’t minimizing the negative aspects of STRS.
Short-term vacation rentals (STRs) also create unique challenges at the state level. State governments often have clear guidelines on tax collection from STRs but lack the resources and insights to enforce the thousands (or millions) of STRs within the state.
For key functions of state governments, such as the Department of Revenue this means:
Unfortunately, state governments often don’t have the resources to tackle this challenge. They need the ability to identify non-compliant properties, communicate with hosts, and flag hosts that should be audited automatically. Without the use of technology, like STR compliance and monitoring software, this is impossible.
A good short-term vacation rental (STR) ordinance should have these basics:
It’s best to create ordinances based on the STR market in your local community and accurate data (i.e. avoid a one-size-fits-all approach, like state preemption). If you’d like complimentary insight on the short-term rental market in your community, book an assessment here.
If your community or state already has regulations in place, the next step is to increase compliance. Without proactive enforcement, only about 10% of STR hosts will be compliant. It’s possible to increase that number to 90% through this process:
In order to execute on steps 6 through 10, you’ll need the ability to identify individual hosts, gather evidence in a cost-effective way, and have a method of communicating with STR hosts directly. This will need to be done with technology as it’s nearly impossible to execute these steps with manual enforcement processes.
There are numerous benefits to improving compliance in the STR market, including:
Ultimately, there are three key ways to ensure the short-term vacation rental market works for everyone in your community:
