Travelers of every stripe — from corporate road warriors to nurses and technicians and first responders, to vacationers and “staycationers” — have more lodging options today than at any other time. Many of them choose to take advantage of multiple lodging types every year, from hotels, motor lodges and family-run bed & breakfast inns, to short-term rentals (STRs), depending on their needs and wants for a particular journey. And just as with the aforementioned traditional lodging types, travelers have embraced and adopted STRs for their distinct, purpose-built attributes.
Given the trends we’ve seen over the last couple of years, as well as what we can generally expect to see through the rest of 2024, it’s safe to say that STRs have made it through their difficult teen years and are well on their way to “growing up” and more consistently figuring out the responsibilities of following the rules and being a good citizen.
Communities, too, have been learning through trial and error, often making drastic course corrections that limit the full range of benefits a variety of lodging options can offer. We need look no further than cities such as New York, San Diego and Los Angeles to see that heavy-handed STR regulations don’t always achieve the desired results, and very often do exactly the opposite.
Rather than blanket bans, municipalities have been shown to do better with thoughtful, “compliance first” STR regulations, which allow for a host of benefits. These include revenue streams from lodging tax, license, registration and permit fees, a boost to retail businesses from a strong flow of tourists and even improved home values through regular upkeep of STR properties. As nearly every region of the country grapples with the question of STR regulation, cities have a choice to make — and they’d do well to consider it carefully.
The recently hard-won maturity of STRs may be well-timed to help cities make this choice, especially given the economic forecast. Municipal budget projections in select areas look rocky as we move toward 2025, particularly in the cities that have opted for blanket bans of STRs rather than a more measured approach. Despite these efforts to curb and curtail STRs, this lodging segment has proven time and again its staying power.
The fact of the matter is that, empirically speaking, bans have proven to be a poor solution. A new study out of the Harvard Business Review has found that, while improving the availability of affordable housing stock is often one of the key reasons for banning STRs, these bans haven’t been shown to correlate with an increase in affordability. They actually have a negative impact on both housing prices and small businesses. The Milken Institute had similar findings when looking specifically at California, and early reports coming out of New York don’t seem any more promising regarding the effectiveness of the recent STR ban.
Sensible and sustainable STR policies, along with strong compliance measures, are a much more desirable solution for municipalities to ensuring ongoing choices for tourists and other travelers, in addition to bolstering local retailers and businesses directly serving the STR ecosystem. As cities move into a new fiscal era absent emergency pandemic funding, a predictable influx of transient occupancy tax (or lodging tax) and other revenue from STRs becomes an attractive option.
Just as requesting an Uber is now fully integrated into modern transportation, along with personal vehicles, taxis, mass transit or asking a friend for a ride, STRs maintain an unstoppable trajectory in lodging preference for travelers, equals alongside hotels and other preferred options for spending time away from home.
Continued maturation of STRs in the vacation lodging sector, led by tenacious, resilient front runners like Airbnb, will benefit travelers, hosts and municipal coffers alike, enabling growth and sustainability in this sector.
Pamela Knudsen
Senior Director of Compliance Services
Avalara MyLodgeTax
255 South King Street, Suite 1200
Seattle, WA 98104
pamela.knudsen@avalara.com
(206)826-4900 x1039
