What’s the deal with STRs? City, state officials eye regulation for short term rentals

Making money by renting out your home in order to pay rising housing costs and property taxes has given rise to short-term rentals.

Vacation Rental By Owner (VRBO), Airbnb and Flatswire are just a few companies helping local residents rent out their space.

While this movement brings some people closer to financial freedom it has stirred up controversy over the rights of cities to regulate or to ban short-term rentals altogether.

The city of Austin came under fire in 2017 for imposing strict regulations on short-term rentals. City officials said that, for  properties to generate income, they would have to be zoned commercial.

Because of this city rule, State Sen. Kelly Hancock (R- North Richland Hills), introduced SB 451, a bill that would prevent cities from imposing an outright ban on short-term rentals.

SB 451 failed to pass out of the House Urban Affairs Committee, but Texas lawmakers could bring it back up in two years when the Legislature is back in session.

According to an April press release, Hancock said, “Under SB 451, cities maintain their ability to set residential zoning restrictions, such as density or occupancy limits, and enforce traditional city ordinances.”

“The legislation does not inhibit a city’s ability to regulate short-term rentals, but does prevent them from being banned outright,” the press release said.

Hancock defended the proposed SB 451 bill, saying tourism in Texas needed short-term rentals, and he also noted a desire to protect private property rights.

“Since short-term renting became mainstream, thousands of Texas homeowners have chosen to use their private property as a source of income to help make ends meet,” Hancock said.

“Nonetheless, a number of cities have banned the practice or are heading in that direction. In Texas, we still believe property rights are a foundational freedom worth protecting, and that’s what this bill does,” Hancock said.

Many cities in Hays County now have regulations for short-term rentals in their Code of Ordinances. But some cities have yet to jump on the bandwagon, causing potential confusion for homeowners interested in or already operating a short-term rental.

Dripping Springs City Administrator Michelle Fischer said her city only regulates bed and breakfasts in the city limits but that it requires all short-term rentals to pay the city’s Hotel Occupancy Tax even if located in the ETJ.

“The city (Dripping Springs) wants to protect its natural and built characteristics, and also enhance the local economy through the imposition and use of the Hotel Occupancy Tax collected from bed and breakfasts, hotels and short-term rentals,” Fischer said.

The city of Buda recently updated its Unified Development Code (UDC), to require homeowners or renters to obtain a short-term residential rental permit and have no outstanding issues relating to the rental property.

The Buda UDC also stipulates that short-term rental owners must submit a report to the city each January citing the number of nights the unit was rented, proof of payment of HOT and proof of current property insurance.

Buda Mayor George Haehn said, “The idea that anyone can do anything with their property is absolute, it’s your castle. But when it begins to negatively impact your neighbors or the neighborhood then it becomes a civic issue.”

Buda Assistant City Manager Chance Sparks said, “Under state law, home-rule cities have the ability to regulate where state law is silent and as a result some cities have taken steps to address community and consumer concerns about short-term rentals.”

The city of Wimberley made changes to its ordinance on short-term rentals in January 2017, requiring that owners apply for a permit every two years, provide identification information to renters and receive approval by city council in some cases.

The city of Kyle doesn’t specifically allow short-term rentals in residential areas of the city nor does it have any regulations stipulated for short-term rentals in its Code of Ordinances.

Kyle Director of Planning Howard Koontz said, “Because bed and breakfast and other short-term rentals are called out as allowable in other zoning districts (namely Retail/Services, Warehouse, etc.), then they are not allowed in those districts where the practice is not called out as allowable.”

“In other words, if the code doesn’t say you can do it then you can’t,” Koontz said.

Kyle Mayor Travis Mitchell said  that, after receiving a few resident complaints a few months ago regarding a neighbor’s short-term rental, the city started an information campaign alerting residents via their utility bills that they cannot operate short-term rentals within the city limits.

Mitchell said the city crafts residential ordinances around residential living and that a conversation regarding regulating short-term rentals has not happened yet because city officials have not seen a demand for it yet.

“It’s not explicitly prohibited but I personally think it’s a gray area,” Mitchell said.

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