Shortly after bursting onto the scene in 2008, Airbnb disrupted the short-term rental market.
According to ipropertymanagement.com, Airbnb is experiencing 152 percent global compound growth since 2009. And falling occupancy rates in hotels around the world suggest Airbnb’s quest to take over the vacation rental market is far from over.
It’s easy to see why.
Airbnb offers affordable and comfortable options when they travel, and it also gives people the chance to make some money on their apartments and homes when they themselves will be away.
However, don’t let the rapid growth of Airbnb fool you into thinking it faces no resistance.
City officials around the world, under pressure from hotels and homeowners, have adopted legislation to regulate “home-sharing” through Airbnb and other companies like HomeAway.
This means that there may be a few local laws you need to abide by before can start with home rentals to make some extra income.
In most cities, these aren’t a big deal, but it’s still important to know what you might be up against so that you can avoid any fines or other costly penalties.
To help you be sure you’re in the clear, consider the following areas where Airbnb is most closely regulated.
We’re going to outline the most common types of short-term rental laws, but always remember that things will be different according to the city in which you live.
Most large cities have separate commissions within the municipal government that are designed to regulate short0term rentals like Airbnb, and these are usually the first places you should look when trying to figure out what laws you need to follow to be an Airbnb host.
To help you, we’ve included a list of regulations in some of the larger cities in the U.S at the end of this article.
Another thing to remember is that many of the new laws on the books are being fought by Airbnb.
The company’s business model is based on growing the number of hosts in their database, which means they are keen to fight any regulation that might limit these laws.
As a result, make it a habit of regularly checking up on various norms and regulations. Resolved lawsuits might change them, and this could have a big impact on you and your ability to host.
The Most Important Hosting Laws
When checking up on laws for being an Airbnb host, you’ll likely find things in one of the following categories.
Cities use zoning as a form of urban planning. It allows them to encourage residential growth, business development, and both in a more strategic way.
In some places, renting your apartment out through Airbnb is considered running a business, and if your property is not zoned for commercial use, then you could be at risk of breaking the law should you decide to go ahead and host anyway.
A good example of this is in New York City. The law states that any building that has more than three independent families living in it can only be used for “permanent residential purposes.”
This type of law effectively bans people who live in these types of building from renting their property on Airbnb.
Airbnb has tried to fight many of these regulations, arguing that hosting on Airbnb is not a business but rather a part of the sharing economy.
But until these laws are changed, they will apply, so you should make sure to check how your property is zoned before you begin offering it via the Airbnb platform.
Host Registration and Business Licenses
Airbnb likes to consider itself the poster child of the sharing economy. In many ways, this image is correct. However, many cities don’t see it this way. Instead, they see Airbnb as a business.
Because of this, many cities, especially larger ones, will want you to register with the local authorities before hosting on Airbnb.
This could be as simple as notifying your city government that you’re going to use the property on the platform, or it could be as complicated as applying for a business license and a unique host registration number. Again, it depends heavily on the city in which you live.
In some places, doing this may require you to then turn around and register guests as they start coming to use your apartment, much like a hotel would do.
Check with you local government to see if any of this is necessary, and if it is, consider putting some processes in place that will make things easier for you down the road.
For example, you could leave a guest registration form in the property so that you can easily collect all of the information you need from people who come to stay.
They say there are only two things in life that are completely certain: death and taxes. As a result, it should come as no surprise that one of the biggest areas of regulation around Airbnb is taxes.
The most important thing to remember is that the money you make from Airbnb is not all yours. Some of it belongs the government. Whether you see this as fair or not doesn’t really matter. The law is the law.
Exactly how much you pay, and who you pay, will, once again, depend on the laws in your city.
For example, in places where there are fewer regulations, you may only need to pay income taxes on the money you make as a host.
This involves merely declaring your Airbnb income on your tax returns so that you can adjust your tax rate accordingly.
However, if you’re going to go this route, then you’d be wise to save some of the money you earn throughout the year as a host. This will limit the burden of paying owed taxes at the end of the year; the money will already be saved and put to aside.
Another thing to look out for is property and occupancy taxes. In cities where Airbnb is more closely regulated, you may need to pay a different property tax rate for using your apartment as an Airbnb rental. Unfortunately, this “different” status usually means you’ll need to pay more.
Figuring out exactly how much you owe in taxes from your Airbnb income can be a bit tricky, especially since Airbnb leaves most of this work to you.
If you can’t find clear answers through your local government, and you suspect you’ll make a decent amount of money as a host (more than $1,000), then you may want to schedule an appointment with a tax professional.
This will ensure you’re not missing something and putting yourself at risk of being fined, or worse, down the road.
Building and Construction Standards
You may be subjected to different building standards if you rent out your space. And perhaps more importantly, you may need to deal with more vigilant regulators. There aren’t enough resources to check up on individual properties, but there are for commercial ones.
The best thing you can do is to check with the local government to see if there are any different norms you must follow.
You could also speak with your landlord, or building administrator, to find out if they are aware of any different regulations they may apply to your property.
Additional Things to Consider
Above we’ve discussed some of the more prevalent laws pertaining to Airbnb hosting. However, there are other things to consider that aren’t necessarily laws but that can have an equally dramatic impact if you’re not prepared.
Here are the two most important:
Any time someone comes onto your property, you could be held responsible for anything that happens to them.
For example, if someone slips on your icy driveway, gets hit by a brand that falls from a tree, or hurts themselves when your homemade swing breaks, you could be found at fault, which means you would need to pay out damages.
This is why most people invest in homeowner’s insurance. It covers them in the event they are found liable for these incidents.
However, many insurance policies do not cover things that happen during an Airbnb rental, which means you could be in a lot of trouble should something happen.
Airbnb does have a commercial insurance policy that provides you with up to $1 million dollars in protection.
But there is a caveat: this policy only kicks in if Airbnb deems the owner was found negligent.
This means that you’re covered, but should there be an accident, you could still be in trouble. People can bring a personal case against you, and the ruling could be much different than the one issued by Airbnb.
In this scenario, you’d be left without coverage from Airbnb as well as from your personal policy.
The best thing you can do is to look for an insurance policy that covers you when you’re renting your place out via Airbnb.
It’s true that this may slightly raise your monthly premium, but this is a small price to pay for peace of mind. No one wants to rent their place out and then sweat out the guest’s entire stay hoping nothing bad happens.
For those who don’t own the apartment they’re living in, you will also need to make sure hosting on Airbnb doesn’t violate the terms of your lease agreement.
Depending on where you live, landlords may restrict your ability to sublet your apartment. Some landlords may prohibit the practice altogether, whereas others may want you to go through a specific procedure that ensures they still have control over the tenant screening process.
As a result, one of the things you should do before listing your apartment on Airbnb is to look over your lease.
There is some debate as to whether or not renting on Airbnb is the same as subletting, but in many cities the law has been written that way, so the debate doesn’t really matter.
In fact, some newer leases may even make specific references to Airbnb. If this is the case, make sure to carefully read over what you’ve signed, as breaking the terms of your lease can result in you sacrificing your security deposit, or a hefty fine.
If you’re really uncertain, then the best thing to do is to consult with your landlord. This way everyone knows what’s going on, and there is a reduced risk that you get hit with a major penalty at some point in the future.
Does it Even Matter?
As you can see, depending on where you live, it’s quite possible that you may need to deal with a wide range of laws before you’re able to host on Airbnb.
However, you may be asking at this point: does this stuff even matter?
The answer is: YES. Stay compliant with local and federal regulations and you’ll avoid major headaches down the road.
Many of us likely already know people renting their places out on Airbnb, and they may not be following all the rules.
In general, don’t take this as a license to do whatever you want. Depending on the city, regulation may be more or less strictly enforced. But if it’s there, then you should assume someone will come looking at some point make sure you’re following the rules.
For most places, getting compliant isn’t all that hard. You may just need to fill out a few forms and be on your way.
But for others, such as New York and San Francisco, things may be different, so be sure to do your homework before listing your apartment.
Airbnb Hosting Laws By City
As we’ve mentioned, variation amongst cities makes it impossible to come up with a list of regulations that all Airbnb hosts must follow. However, to give you an idea as to what you might expect, here are some of the laws in some of the larger markets in the U.S.
New York City
In Manhattan and other boroughs, New Yorkers may need to:
- Acquire a business license. You can check if this is needed by clicking here.
- Be present during your guests’ stay. NYC laws prevents most people from renting out their apartment for less than 30 days when they themselves will not be there.
- Refrain from advertising
- Pay extra taxes
To learn more, you can visit Airbnb’s NYC-specific help page.
City councils all over California are cracking down on Airbnb, in hopes of providing more affordable housing. In LA, you may be required to:
- File for a business license
- Pay an additional 14 percent transient tax
- Get clarification about zoning laws
More information can be found here.
There is an affordable housing crisis in San Francisco, so it is no surprise the city’s laws are fairly strict:
- Only permanent residents can rent out their apartments
- Rentals where the host is not present are limited to 90 days per year
- Each day you rent in excess of these 90 is subject to a daily fee of $484 for first offenders and $968 for repeat rulebreakers.
- You must apply for a Short-Term Residential Rental Certificate and a Business License if you want to rent your apartment
The Mile High City also has some considerable regulations for Airbnb hosts. For example:
- Only your “primary residence” can be used for short-term rentals.
- You must obtain either a “short-term rental” license or a “lodging facility” business license.
- You are required to list your license number on your Airbnb listing.
- You need general liability insurance to receive your license.
- You will be charged additional taxes, which Airbnb typically calculates for you.
To get more details about what you need to host in Denver, here is a resource provided by Airbnb.
Elsewhere, things are a little less clear. For example:
- In Seattle, there is little to no regulatory oversight of Airbnb hosts
- In Chicago, many of the regulations on the books are not being enforced, as most are laws have been stamped with a “city registration pending.”
- In Austin, you need a short term rental license, but the city is no longer accepting applications.
- In Philadelphia, you can rent out your apartment for 90 days or less without a permit, but no one guest can rent it for more than 30 days.
- In Las Vegas, short term rentals are essentially illegal.
- In Boston, short-term rentals are unregulated
- In San Diego, short-term rentals are unregulated
- In Washington, D.C., short term rentals of 30 days or less are currently banned, although these laws are set to change in the near future, so stay tuned.
Don’t let this long list of laws deter you from earning income by renting your apartment through Airbnb.
It might seem daunting, but these laws are in place for a reason. Take your time to do everything right, and this will help make sure that your experience as an Airbnb host goes as smoothly, and as profitably, as possible.