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Where things stand on short term rentals in Austin

Austin and the state of Texas sometimes have different opinions on regulations, policies and laws. One recent high-profile example involves the issue of short-term rentals (STRS), which are a room or home rentals of 30 days or less. This is a hot-button topic as other parts of the country have embraced or sought or regulate the use of Air BNBs and other online STRS services.

Austin drafted a law in 2016 that hits STRS with a stringent set of regulations and a Hotel Occupancy Tax split between the city (9%) and the state (6%) of the total amount charged for the rental. The city sees this law as a way to generate a substantial amount of tax revenue for good reason:

  • Austin is the ninth most expensive city for STRS with an average daily rate of $245
  • The STRS has an average occupancy rate of 71%
  • There are an estimated 10,825 active rentals in the city, which makes it the most of any city in Texas

Many rentals are not legal

The city claims it is not getting its slice of the lucrative STRS pie, claiming that a majority of the units advertised are not legally permitted by the city to operate. So, the city finds itself in the awkward position of trying to regulate and collect taxes on rentals it did not approve, or follow through with a labor-intensive effort to enforce the law -- regulations stipulate that owners are fined $2,000 per day for advertising unlawful rentals online.

Phasing out rentals

The 2016 law not only sought to freeze the number of these Type 2 rentals (owners do not live on-premise nor associated with the property) but also end these rentals in residential areas by 2022 while still allowing these rentals in commercially zoned areas. The idea is to eliminate the “party house” syndrome where visitors come into town and disturb the natural rhythm of the neighborhood by creating noise or causing parking problems. STRS advocates claim they are against this, but do advocate for better-written laws that address recent developments on this quickly evolving issue.

Potential for disputes is high

The tangled nature of this issue has left many unsure of how to proceed. Those hit with a fine or trying to resolve a dispute involving an STRS will likely need guidance from a knowledgeable real estate law attorney working locally here in Austin. They can help clients wade through the policies and politics at the municipal and state level to resolve these matters quickly and effectively.

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William T. Peckham
1104 Nueces Street, Suite 104
Austin, TX 78701
Phone: 512-487-7604
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