Five Things Every Local Government Official Needs to Know About Short-Term Vacation Rentals


The rise and growth of short-term vacation rental platforms has created plenty of debate amongst local governments, the hotel industry, the real estate lobby and local residents about what to do with it. From a local government perspective, there is no single universal regulatory approach that works, but a number of key factors to consider in developing a strategy for short-term vacation rental rules. In this blog, you’ll find five of the most important facts local governments need to know about short-term vacation rentals.

1. It’s already bigger than the hotel industry

Short-term vacation rental platforms, like Airbnb, Homeaway and Flipkey, have been emerging in the last ten years and growing rapidly since their inceptions. The biggest player in the field, Airbnb, has been valuated at $30 billion and with that it surpasses the valuation of major hotel chains such as Hilton, Marriott and Intercontinental. And by all indications, there’s no end in sight to the growth of the short-term vacation rentals industry.

In the early phases short-term vacation rentals were mainly used by some early-adapting millennials looking for an authentic and cheap way to travel, by now it is serving around 5 million guests in different segments ranging from business travelers to young families with children. The initial idea from Airbnb having guests sleep at an air mattress in return for money has long made way for people renting out spare rooms or entire houses. Some are even turning residential housing into vacation rentals making a full-time business out of short-term rentals. With the huge success of the platform, Airbnb is now expanding it services even further into new markets and is expected to hit the milestone of one million bookings a year worldwide by 2025. Meanwhile other platforms such as HomeAway continue to grow as well with an expected rate of 24% in revenue annually.

2. It is impacting communities of all sizes

One of the major impacts of short-term vacation rentals is that they are moving visitors into residential areas that were never meant for such an influx of travellers. For some cities the arrival of short-term vacation rentals is seen as a way to stimulate tourism and for local families to generate some extra income. For other cities it has been accompanied with stories about neighborhood-related challenges and reductions in long-term rental availability, especially in urban areas. In this respect popular tourist destinations like San Francisco, New York, Barcelona and Berlin have been battling with Airbnb because of the impacts on the housing market. At the same time nuisance related complaints and commercialization of neighborhoods are fueling the debate even more.

Short-term vacation rentals however are not only found in bigger cities, they are present in all types of places creating an impact on each and every one of them. At the moment over 1000 local governments in the United States have more than 100 unique short-term rental listings and it’s not just vacation destinations and big cities, but increasingly small towns and rural areas as well. Whether the impact is considered positive or negative, big or small, it is definitely something you can’t ignore.  

3.  It affects housing availability and affordability

What has sparked most of the debate is the effects of short-term vacation rentals on the housing market. Visitors are now staying in apartments or houses reducing already diminished long-term rental stocks. As a consequence, housing affordability also becomes an issue. New York for example claims that short-term rentals have reduced housing stocks by 10% and in San Francisco Airbnb is being is accused of driving housing prices up and availability down. Smaller cities like Madison and Long Beach City have also been wrestling with similar issues on housing availability and affordability.

4. They operate in a vague area of the law

The pace at which the short-term rental vacation industry is growing is far greater than government’s ability to regulate. Many existing ordinances related to accommodation were developed long before the existence of websites like Airbnb - as a result short-term vacation rentals are operating in many communities with no concrete laws, and even for those with updated regulations, many don’t have an effective way to enforce these rules or collect taxes.

Several cities have come up with ways of regulating short-term vacation rentals in the form of restricting or sometimes even banning short-term vacation rentals from the city.  But those cities that have taken a firm stance banning short-term vacation rentals have faced legal action from Airbnb. Santa Monica, CA for example was sued by Airbnb after instituting a law that bans short-term vacation rentals. Best practice is quickly becoming to pass fair regulations that balance the rights of homeowners, while protecting neighborhoods from common short-term vacation rental issues like parking, noise and diminishing long-term rental stocks.    

5. The short-term rental industry won’t share listings information

Companies such as Airbnb, Flipkey and Homeaway refuse to share listings data with governments citing host privacy concerns. Unless local governments are prepared to make major investments in staff, to comb through listings to identify non-complying hosts and drive through city streets to identify them - enforcing short-term vacation rental regulations becomes a nearly impossible task.

Not even major cities have succeeded in obtaining listings information. San Francisco for example gets data from Airbnb about the amount of listings per person but does not get insights to the number of hosts or where they are located. In Amsterdam listings are removed from the website automatically after the rental limit of 60 days has been reached, but no other information is shared. Without address data, all local governments have to go on is pictures on a listing and a rough idea of where that property is located.