How to Handle Short Term Rentals in Your Community

18 Jun How to Handle Short Term Rentals in Your Community

Summer is here – that means playing in the pool, enjoying the outdoors, soaking up the sun, and vacationing in new places. Exploring new cities is a fun and exciting time and often comes with staying in a hotel, or a more popular option now, staying in a short term rental like AirBnB or VRBO. These are homes being utilized as a short term (<180 days) rental property either because the owner only uses it for only a period of time during the year or the house/apartment/condominium was purchased with the sole intent of using it as a short term rental property. These rentals are popping up more and more with COVID dying down and travel becoming more prominent as more people get vaccinated and feel comfortable taking vacations.

Some Homeowners Associations have strict policies regarding the use of a home as a short term rental property, while others may not due to the documents being drafted before short term rentals were popular. Short term rentals are often a good source of income for owners; however, they often pose many issues for communities – here are just a few:

Home sales in the community or neighborhood. Someone who wishes to purchase a second home with the ability to rent it when they are not occupying it (either permanently or just when it isn’t being used on their own vacation) would not consider purchasing a home in an HOA because of a rental restriction. In a different case where short term rentals are allowed in a particular HOA, some people may not buy a home in that HOA because they don’t want to be near a unit or home that has the potential for late night parties, loud noises, or obnoxious occupants that are apathetic to the surrounding homeowners.

Neighborhood diversity takes a nosedive. Commercialized short term rentals make it impossible for most families to live in some neighborhoods due to rent inflation. Rental homeowners have figured out they can profit from evading city laws and converting long-term living spaces into short term rentals, resulting in fewer homes on the market for long-term renters or potential home buyers. Your community can say goodbye to new families, young couples looking to settle down, students looking to rent a home, or anyone who typically can’t afford to compete with vacationers’ budgets.

Economic downturn in the local community. These short term rentals are frequently operated without paying taxes that benefit the surrounding communities, particularly the local restaurants, shops, or any local small business that relies on long-term residents for generating income. Illegal short term rentals are often argued as being unfair to the hotel industry and rarely follow fire and safety codes, provide worker benefits for cleaners, or pay transient occupancy taxes.

These reasons, plus so many more, should be enough for you to investigate what is happening at your property. What can you do as a Property Manager to combat these short term rental home issues?  

First and foremost, your association Board must decide: are short term rentals allowed in your community? Are the residents and the Board content with allowing these short term rentals? If not, it’s important to look at how many units or homes are being used currently. If only a few are being used, it will be fairly easy to eliminate the problem at the source; if you find that a large number of units are being used for rentals, it will become very difficult to regulate these. Getting guidance from your property management company can help ease the strain on this process, no matter what your HOA ultimately decides to do about the short term rentals. One tool you can use to gain insight into which units are being rented out is Property Guard, a short term rental monitoring system. It analyzes rental activity, searches for keywords, descriptions, photos, and other data to produce a likelihood score on each listing. Daily reports will be sent to you and your team when a listing matches the criteria you have set, increasing your chances of catching a homeowner renting out their unit without prior approval. This software eliminates the need to search through online ads and websites for countless hours and can help you better manage your property.

Once you have determined how many units in your condominium building or how many homes in the neighborhood are being rented out short term, you need to check the local laws and your governing documents. Doing so will assist you if an argument arises between the Board and homeowners; they will most likely not want to give up the extra income and will try to persuade the Board to allow short term renting. If your association resides in an area where local laws restrict how short term rentals operate, your problem is half-solved. For example, the city of San Francisco enacted a policy that capped rentals at 90 days and required hosts to register with the city, among other laws.

There may also be permits and extra taxes involved, such as the transient occupancy tax. Speak with your association’s attorney, or your property management company if you do not have an attorney, to see what regulations apply to your city and county. Next, after checking these local laws and state-wide laws regarding short term rentals, you must look over every inch of your governing documents to see how (and if) they can help your association enforce rules around the rentals. If they are restricted, you can follow protocols listed out in the documents to move forward with eliminating the problem.

If your Board and residents decide, however, that they do not mind short term rentals in the community, there are several things your association can do to simply regulate them and ensure they don’t get out of hand or cause large problems down the road. It’s a good idea to create rules surrounding the renting of homes or condominium units to keep them under control. Bring your association’s Board together and an attorney to create a short term Rental Policy for your community. These policies will vary among associations, but as a good rule of thumb they should include the following:

• Property owners must provide rental information to property management, including start and end dates as well as tenant details (name and contact information)
• A reasonable short term rental fee to cover any added costs of home or community maintenance
• Property owners and tenants must sign a short term Rental Agreement, which outlines the rules of the community. These can typically be signed or agreed upon when booked through sites like AirBnB or VRBO – tenants typically take on the understanding and agreement that they abide by all HOA rules currently instated, just like long-term residents of the community.
• The Board may impose fines against property owners who violate the short term Rental Policy
• Maximum occupancy limits, per the fire laws of the city or county

It is crucial that homeowners understand they are responsible for their tenants. Any violations could result in fines, penalties, or eventually the elimination of short term renting privileges of their home if repeated offenses occur.

Homeowner feedback is important when it comes to allowing or prohibiting short term rentals in your community. They can be hard to manage as laws change constantly and new short term rental services continue to pop up regularly. Ensure you get comments or answer any questions that your homeowners have in relation to the topic, just like with anything. If you are unsure which direction to go in with regards to short term rentals, speak with your property management company. Their team can provide expert guidance on the topic so you can make the best decision for your association and residents.