For a quick introduction to the vacation rental debates taking place in municipalities across the U.S., you don’t need to look much further than the most recent midterm elections.

Rental restrictions, tax dollars, and the vacation rental industry

As demand for short-term rentals grows in urban areas and popular travel destinations alike, governments are struggling to find the right balance between addressing community concerns and supporting the tourism industry. And, among midterm voters in four geographies, tighter restrictions and penalties won out.

  • In South Lake Tahoe, CA, voters narrowly passed a ballot initiative that will see 80 percent of the city’s short-term rentals — 1,400 units — phased out by 2021.
  • In Pacific Grove, CA, the passing of a similar initiative will shutter short-term rentals outside the municipality’s “coastal zone” within 18 months.
  • In Maui County, HI, voters elected to come down hard on illegal units, approving fines of up to $20,000 for rentals without a permit — with a $10,000-per-day fine if operations continue.
  • In South Portland, ME, residents voted to keep a ban on unhosted short-term rentals in residential areas, an ordinance passed by city council earlier in the year.

The challenge? Minimizing community impact while supporting tourism

The concerns driving these initiatives aren’t unique. On one hand, residents are concerned about the impact this industry can have on the community such as the move from long-term rentals to short-term rentals, the potential impact on safety and security with a revolving cast of neighbors, and concerns around parking, noise, and garbage.

On the other hand, short-term rentals add inventory for tourists who in turn add significant revenue to local coffers: In Pacific Grove, the short-term rental industry has added $1.4 million a year in tax revenue alone for city projects such as infrastructure improvements.

As leisure and corporate travelers opt for the comfort and value vacation rentals can provide, business is thriving for many owners, property managers, and service providers. And there’s the reality that many property owners rely on this additional income to help cover their bills.

Current status: Tighter regulations, higher penalties

Some governments, such as those on the north shore of Lake Tahoe, leverage existing regulations - such as noise and parking ordinances - to address concerns. But many governments are moving toward tighter regulations for vacation rentals, such as capping the number of permits issued, banning short-term rentals in residential zones, or limiting the number of days a property can be rented in a calendar year.

Other regulations focus on the types of rental properties:

  • Orlando, FL, has embraced what it calls “home share rentals” - short-term rentals where a resident or host is present at all times.
  • Los Angeles, CA, recently passed restrictions that bar residents from renting out a home or apartment that isn’t their primary residence.
  • Las Vegas, NV, passed regulations that prohibit the rental of homes with more than three bedrooms.

And there could be more change on the horizon. Pacific Grove’s short-term rental program has already been through multiple iterations since it started in 2010. And Stu Roberson of RnR Vacation Rentals in South Lake Tahoe told VRM Intel that he expects vacation rental proponents will likely explore their options to have the new ban overturned. “I truly believe there is a solution at hand. [The ordinance] will change, it will address the concerns everybody has.”

Keep your business on the community’s good side

As vacation rental owners and property managers impacted by the midterm elections figure out what these new regulations could mean for their businesses, there are steps you can take to help build more positive relationships with your neighbors:

  • Register your property. Governments are on the lookout for unregistered properties. Avoid hefty fines by making sure your property is registered correctly and that your payments are up-to-date with the local tax authority.
  • Be a good neighbor. From traffic to parties, complaints from neighbors often aren’t without cause. Stay ahead of their concerns with sensible vacation rental policies, which could help address pets, smoking, noise, and other potential issues.
  • Be familiar with your options. If new regulations might be coming your way, learn more about alternative options for your vacation rental, such as repositioning your property as an extended rental or exploring the potential of a live-in host.

Another way to get involved? Speak up. Numerous industry groups, from individual owners to companies like HomeAway and Airbnb, are actively working with governments to help find the right balance. The only way to ensure your voice is heard is to join in.

The information above is intended for informational purposes only; it is not legal advice and should not be relied upon as such. If you need legal advice, you should consult a licensed attorney in your area.