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Even as short-term rental sites like Airbnb continue to amass hundreds of millions of dollars in funding and legitimacy and inflate their valuations, there’s discrepancy in several U.S. cities between their lack of legal foundations for short-term rentals and severe restrictions they impose.
Take Atlanta, for example. The city has no legal framework for short-term rentals such as single bedroom rentals within apartments or homes, yet it has some of the most severe restrictions for such rentals in the U.S. Cities such as Denver, New Orleans and New York City have similar predicaments to Atlanta. That’s according to a recent study from R Street Institute, a Washington, D.C.-based political think tank, which examined short-term rental laws, legal finings and media reports from June 2015 to last month in the 59 largest U.S. cities to access their openness to short-term rentals.
Cities were scored based on their legal frameworks in place, legal restrictions, tax collections, licensing requirements and hostile enforcements for restrictions. Each city started with a score of 90 and points were added and subtracted accordingly based on results from each category. Some 38 of the 59 cities have no legal framework in place for short-term rentals or vacation rentals. Of the 21 cities that received points for having a framework, 14 received the full additional 10 points cities were given if laws specifically reference short-term rentals (see Charts 1).
Though the frameworks of these 21 cities weren’t all ideal for short-term rentals as only four of them received “A” letter grades (the best scores) and only 15 cities overall received some form of an “A” (see Chart 5). Some 32 of the 59 cities included in the study have restrictions in place and 28 cities lost points for having “hostile” measures to enforce restrictions.
The charts below outline where cities won and lost points in the analysis and the last chart tallies the results.
Chart 1: Cities like Austin, Texas; San Francisco, Philadelphia, Nashville, Tennessee and Savannah, Georgia all have some of the country’s most robust frameworks and laws in place that create legal foundations for short-term rentals. Cities with legal frameworks in place were eligible to receive up to 10 additional points and frameworks only accommodating vacation rentals received a smaller number of points. Cities that received fewer than 10 points don’t acknowledge arrangements of single bedroom rentals in an apartment or home.
Chart 2: Cities such as Atlanta, Denver and New Orleans are among the most restrictive in the U.S. when it comes to short-term rentals. A city lost up to 40 points depending on the severity of legal restrictions it has on the books.
Chart 3: The study analyzed how many licensing requirements a city imposes over a five-year time period. It considered how many licenses or filings a property owner would be required to submit within five years and the total cost of any regulatory fees and assessments. Based on the severity of licensing burdens, cities received deductions of up to 10 points. For cities with minimal licensing requirements, such as a single inexpensive filing, no points were deducted. Las Vegas and Fort Lauderdale, Florida, for example, have some of the country’s most burdensome short-term licensing requirements.
Chart 4: This chart looks at how hostile a city’s enforcement regime is for short-term rental restrictions, including restrictions that don’t fit neatly into the prior categories. Rules for this category include burdensome inspection regimes, disproportionately high insurance requirements, restrictive occupancy limits, mandates to provide vehicle parking spaces and prescriptive regulation of a host’s location and/or accessibility. Cities lost up to 10 points based on the severity of such rules–Anaheim, California; Fort Lauderdale, Florida and San Francisco all lost 10 points here.
Chart 5: The final scores (including corresponding letter grades). Some 10 cities got an “F,” 15 got “Ds,” and five got “Cs.” Cities like Dallas, Texas; Indianapolis, Indiana; San Diego, California and Savannah, Georgia earned “A” grades. The total average for cities included in the study, however, is a 74.7. No clear trends emerged from the results in terms of whether conservative or liberal-leaning cities tended to score higher or if cities more dependent on tourism revenue were less restrictive.
Source: R Street Institute