How Will Short-Term Rental Regulations Impact Rental Property Investors?

The rise of Airbnb-type properties in popular tourist spots has been a tricky situation over the past few years. Residents are often poorly affected in multiple ways.

Cities such as Virginia Beach have taken steps to limit short-term rentals’ disturbances on the local community and residents. In the case of Virginia Beach, they have been trying to ban them altogether.

In fact, a recent vote at the Virginia Beach City Council on July 13th, 2021, agreed to ban all new vacation rental properties in the city. This type of legislation is gaining traction throughout major cities in the U.S., facing increased waves of tourists and short-term rental problems.

How does this type of legislation impact short-term rental property owners?

Legislation like this can affect short-term rental property owners in a few ways. In Virginia Beach, only new properties are banned outright. So if you were thinking about converting your property into a short-term rental in this area, you’d no longer be able to do so here.

This city has had regulations in place that were agreed on January 15, 2019, to limit the damage of short-term rentals.

The City Council agreed that short-term rental owners would need a Conditional Use Permit (CUP) and follow the agreed-upon regulations. Those who had a short-term rental before July 1, 2018, will remain grandfathered into the rules and don’t need a CUP.

However, if you stop renting it out or the rental has increased in square footage by 25% or 1,000 square feet (whichever is less), the grandfather clause will cease to apply. Everyone else will need to follow the guidelines outlined in 2019:

• At least one parking space must be provided per bedroom
• You must provide contact details of a responsible party who can address any problem within 30 minutes of being reported
• You will need to pay all applicable taxes and maintain registration status
• $1 million of liability insurance is required
• For events with more than 50 people, a special event permit is required. Up to three of these are permitted per year.
• No more than two contracts are permitted within seven consecutive days
• Overnight occupancy cannot exceed three people per bedroom
• All health and safety regulations (smoke and carbon monoxide detectors) must be adhered to

Similar regulations to these can be found in multiple cities across the country. In some cases, such as in New York, you can only have up to two paying guests, and you can’t rent out an entire apartment. Chicago now requires hosts to have a license for any vacation rentals, as does Boston.

How does this type of legislation impact the local community as a whole?

The rise of short-term rental properties has had a huge effect on residents, which is why these new rules have been brought in. Residents have faced problems like increased noise, trash issues, heavy traffic, affecting house prices in the area.

With many investors buying properties to turn them into short-term rentals, it makes it tougher for locals to purchase property to live in. Increased noise and disturbances can reduce house prices which can also affect homeowners in the area.

That’s why regulations like these were brought in to halt these problems from getting worse. While it doesn’t mean the problem goes away entirely, cities with stricter regulations will likely see fewer issues in the local community. In Virginia Beach’s case, the local area will see no more new short-term rentals. The existing rentals rules should help reduce disturbances, issues with traffic flow, parking space availability, and noise from large groups staying in those rentals.

Why is legislation like this trending?

Since Airbnb launched in 2008, the entire hospitality industry has changed, subject to many controversies.

Over the past few years, short-term rentals have grown in popularity. It may be great for property investors and tourists, but the local area tends to face problems as a result.

City councils have been under increasing pressure to apply regulations like in Virginia Beach to preserve local culture and keep residents from being priced out of their hometowns.

Legislation like this isn’t just limited to Virginia Beach; multiple cities around the U.S. have implemented short-term rental laws. For example, New York, San Francisco, Los Angeles, Washington D.C., and many other major cities limit what investors can do with short-term rental properties.

Always check regulations in your state and city

If you dream of owning a short-term rental, set up an annual mortgage review with your loan officer to map out a financing game plan. We can also help you determine the best location for your short-term rental with the help of our preferred real estate partners.