Recently, a reader of one of our articles about getting started in the vacation-rental business wrote to ask:
“Can my local municipality prevent me from renting out my second home? It’s a house we use for friends and family, and they’re saying that if we rent it out it becomes a commercial pursuit. We do not have a sign out front and we don’t plan to rent it full time. But we do advertise on VRBO.com and hope to cover some of our annual expenses with weekly rentals. Can they stop me from doing that? Help!”
The very same week, HomeAway issued a press release announcing the appointment of Matt Curtis as Director of Government Relations, “with a focus on developing strategy and implementation for cities to fairly regulate and benefit from the vacation rental industry while protecting the interest of property owners and travelers.”
We took these two events as a sign that our next blog post should focus on that nasty bête noire, local vacation-rental bans. This is a topic that has been addressed with more than two dozen posts to the HomeAway Community. And if you do a Google search on “vacation rental bans” (be sure to use the quotation marks), you’ll get over 7,300 hits. Clearly, this is an issue of more than a little interest.
A Bit of Background
For those who are not familiar with the issue, here are the basics: As more and more people (many of them Baby Boomers) acquire second homes in vacation spots and quite sensibly decide to rent them out when they themselves aren’t using them, complaints from the “locals” have risen. Concerns about unruly college kids, loud parties long into the night, overflowing trash cans, and parking problems have motivated local, permanent residents to pass ordinances prohibiting owners from renting by the week and insisting that they rent for 30 days or longer. Some even forbid rentals entirely.
In our opinion, this is one more example of the social effects of the continued coarsening of American culture. (Which isn’t to say that it doesn’t happen worldwide.) But that’s a tirade for another time. The bottom line is that a vacation-rental ban that prevents you from offering your home on a weekly basis will wreak havoc with your business plan, under which rental income essentially pays for the mortgage and many of your expenses.
What Can You Do?
If you own or are planning to buy a vacation property in a distant community, you absolutely must stay alert. Eternal vigilance is essential. Here’s what we recommend:
- Check for rental bans and restrictions before you buy.
- Stay informed about local issues. (Subscribe to the local newspaper and have it sent to your home, for example.)
- Network with your neighbors—both permanent residents and fellow vacation-rental owners—and share your enthusiasm for your vacation home and the community where it’s located.
- Become active in the area’s homeowners’ association (HOA) or neighborhood association if there is one.
- Be extra careful about screening prospective renters, and make sure they know (and are willing to abide by) the community’s rules about trash, parking, and loud, late-night parties.
- Collect and pay local sales and occupancy taxes.
- Make a sincere effort to help local officials and permanent residents understand the financial importance of weekly renters to the local community.
The fact is, even though many of us have been successfully offering our second homes as vacation rentals for years, the concept is still new to the vast majority of people. With that in mind, we need to actively seek out opportunities to spread the word about the benefits of vacation rentals, and the potential negative impact of overly restrictive rules and regulations.
A Recent Example
One of the most famous cases of a vacation-rental ban centered on Venice, Florida. We’ll save a full discussion of the case for another time. But it’s worth noting that in March 2011, interim Venice City Manager Nancy Woodley suspended the enforcement of that town’s ban on short-term rentals. The reason? Cost!
The city spent $100,000 creating a legally indefensible ordinance and $300,000 in a settlement to one multi-property owner, Steve Milo. The town is spending still more money to appeal a second negative court decision. The Florida state legislature is reportedly moving forward with a law that would completely overturn everything the city has done and block any future regulations, according to Eric Ernst of the Sarasota Herald-Tribune.
So, the answer to the reader who e-mailed us about whether her municipality could prevent her from offering her second home as a vacation rental is, “Yes, it can.” But such an ordinance may not stand up in court; it may expose the municipality to paying damages; and it may cost too much to enforce.
The key, in our opinion, is to make these facts known to local residents and elected officials before an ordinance is passed restricting what you can do with your own property. That’s why Tip Number 7 may be the most important of all.
Alfred and Emily Glossbrenner
Alfred and Emily Glossbrenner are the authors of the book/CD package How to Make Your Vacation Property Work for You! and the founders of FullyBookedRentals (www.fullybookedrentals.com), a website focused on helping new and experienced VR owners advertise, market, manage, and make money from their second homes. They also own and operate a very successful vacation-rental property in Bucks County, Pennsylvania (www.buckscountycottage.com).