Licensure by States of Short-Term Rentals

The home sharing industry is booming and the sharing economy is more than established in many cities across the United States. Companies like Airbnb and Uber are leading the way for the industry’s boom. As expected, property rights will be a hot topic surrounding these companies and property owners for years to come. Efforts made by the states to regulate this industry, promote economic growth and protect the best interests of their constituents will continue to be under a microscope.

Short-term rentals are often associated with hotels, motels, inns and houses for a family vacation. This definition is evolving. Home sharing industry giants (Airbnb, VRBO, and Homeaway) have revolutionized the way people travel by allowing homeowners to rent rooms in their house to anyone in the world more easily than before. Home sharing corporations such as, have recently experienced pushback from local governments regarding the regulations of short term rental properties. Commonly, this is an issue for local governments to zone and regulate; however, with the growing number of communities who are passing ordinances and regulations regarding the home sharing industry, interest is increasing at the state government level.  

Knoxville, Tennessee, recently adopted an ordinance regarding home sharing. The ordinance required applications for short-term rental unit permits and cited the rise of the sharing economy, quantity of short term rentals and other factors in the ordinance as the basis for the permits.

In San Francisco, a year-long federal court case was settled between home sharing companies and the city. The city wished to have the host/owners of the property register with the city. Those who were not registered were to be reported to the San Francisco Police and removed from Airbnb’s website. In May 2017, the lawsuit was settled and Airbnb agreed to remove illegal (non-registered) listings from their site and the registration process was upheld.

From the state level, attempts have been to provide structure for the short-term rentals. Tennessee state Sen. John Stevens introduced Senate Bill 1086 or the “Short Term Rental Unit Act.” This bill was designed to block an ordinance passed in Nashville that would eliminate non-owner-occupied short-term rentals in residential areas. SB 1086 also established state standards such as following the appropriate building codes and the minimum amount of liability insurance, prohibiting local governments from banning the use of property as a short-term rental, and limiting local government’s ability to restrict the use of property based on the unit’s classification.

In Georgia, House Bill 579 was introduced in March 2017, by state Rep. Matt Dollar. This bill was comparable to Tennessee’s in the context of prohibiting local governments from banning short-term rentals but went further to limit local regulations. Both Tennessee and Georgia added stipulations that limit rentals that affect public health, safety and other laws considered to be criminal offenses. However, House Bill 579 received pushback from cities and Georgia’s bill and has yet to be signed into law.

Hotels are legally defined as commercial establishments offering lodging to permanent residents and often having restaurants, meeting rooms, stores, etc., which may be used by the public. Home-sharing can often fit many of these categories except for stores and restaurants. The border between hotels and short-term rentals is a very thin line. With that, should homeowners who offer home-sharing or short-term rentals be subject to the same regulations hotels are required to follow? States are commonly responsible for the licensing of hotels, whereas a growing number of cities are responsible for the regulation of short-term rental properties. The boom in this industry must be acknowledged and closely watched by the states as policy decisions may loom.