Common Misconceptions Short-Term Rental Hosts Have About Regulations

It was Friday night in a quiet neighborhood. Bob was awakened by loud music and perhaps some yelling. He opened his front door to see cars double-parked on his street. There were dozens of laughing and screaming people with drinks in hand in his neighbor’s house and yard. And someone just parked in his driveway!

The driver told Bob it was a ‘rage party’ at an ‘Airbnb.’ When the police arrived, they said the guy in charge had a four-month lease, so all they could do was ask him to keep the volume down and not let his friends park in neighbors’ driveways. Bob should talk to the landlord about it.

Unfortunately for Bob, social disruptions, like the rage party trend and his neighbor’s lease agreement with a tenant offering events every weekend through popular websites, collided with the current lack of governance for this type of occurrence. It created disturbing behavior in Bob’s neighborhood.

While a party should certainly not be considered part of an overnight stay in the home-like setting of a vacation rental, Bob’s neighbor thought he had the right to do it. And the enforcement official mistook it for a long-term rental home. So, the neighborhood battle, along with loud weekend parties, continued.

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For decades, guests have reserved temporary lodging, or short-term rental (STR) stays, in residential homes usually located in quaint towns with few other lodging options near sunny beaches, snowy mountains, or in historical districts that may not otherwise have been preserved.

Most communities viewed such alternative lodging as a positive way to accommodate the unique needs of visitors in their communities.

However, this once-respected industry changed negatively during the past decade due to relentless and rapid STR growth and the disruptive behavior of many new hosts and guests. It’s markedly different from traditional vacation home practices.

Our world is evolving in ways that influence and support STR consumer demand and the availability of vacation homes/STRs. We’re in the middle of a social change, which can disrupt communities, violate current social norms, and perhaps even create positive opportunities. Social change requires significant modifications to policies and behavior, both working cooperatively, for the disruptive transition to stabilize into a new community norm.

Disrupters know that a ‘window of opportunity’ within a social change may be slim, so they work quickly and intensely. At the same time, officials (who also govern a myriad of other industries and issues) may be slower to recognize the social changes and the ‘good, bad, and ugly’ factors within the disruption. So, too often, officials concentrate on the worst cases (the ‘ugly’) because there is little time to step back and consider the whole picture.

Disrupter messages and misconceptions have created host and guest behavior that can, also too often, negatively disrupt neighborhoods so severely that the many positive effects of the social change are not recognized and supported.

In fact, most STR hosts and guests behave well. Bad operators are a slight fraction of the industry, but the worst offenders seriously harm the community, the emerging industry, and complementary industries. Some communities have been able to shut down the disruptive operators and achieve sustained stabilization of this STR social change using reasonable regulations and zoning, education, sufficient licensing to meet STR consumer demand, compliance support systems, and code enforcement efforts focused on unlawful operations.

While policy change is an essential part of the process, it will not work if it fails to support and inspire behavioral changes.

So, let’s focus on some common STR industry misconceptions regarding regulations — from a host’s perspective — that may be causing disruptive and uncooperative host behavior.

Host Misconception #1:

“If I just list my home on Airbnb or Vrbo, I can make a lot of money — without even working! Renting an STR home is passive income!”

These statements sound ridiculously false to anyone who understands quality vacation home/STR management and regulations. But perhaps these misconceptions are simply what many people believe.

And the false messages sound fantastic! So, a person decides to leap into the industry by listing their home on a popular website, they accept an instant booking, and guests arrive who don’t know (or may not care) how they should behave. The host may be lucky, and nothing terrible happens for a while. But too often, a problem eventually occurs — an issue that could have been avoided through proper STR management practices. Neighbors complain, or a tragedy happens. And the host wonders why.

Reasonable regulations, when applied within time-honored STR management principles, can support hosts and help reduce the chance of harm and disruption to an STR home and neighborhood. Best practices matter because they work.

Section One | Quality STR Hosting Tips:

• A host who accepts compensation from guests for short stays in their residential unit is running a small business subject to various laws.
• There is more to running an STR than just creating a listing. The website or platform is merely an online travel agency that may handle certain reservation details, but the actual management, guest communication, and outcomes regarding the guest’s stay are the host’s responsibility.
• STRs require work and daily attention. There’s nothing ‘passive’ about running an STR safely and correctly.
• Technology-based ‘channel managers,’ reservation platforms, and some ‘co-hosts’ may use the term ‘manage’ as if it can be done remotely. An STR home involves a physical location, not the “cloud.” It requires local management.
• However, there are online solutions, courses, apps, and other resources available to help hosts and managers with the many tasks and best practices involved in STR management.
• Hosts that don’t live near their STR need to contract with a local person who can regularly inspect it between guest stays (beyond housekeeping duties). The local contact must be available 24/7 to physically visit the home within minutes if there’s an emergency or concern involving the STR.
• Income isn’t guaranteed. Layers of expenses and risks are involved with hosting guests.
• Just as STR income isn’t ‘passive,’ potential liabilities aren’t either. A host needs to create and maintain a clean and safe environment for guests, and the STR unit’s operation should be community

Host Misconception #2

“There aren’t any laws about renting to guests. If I just accept reservations from Airbnb, I don’t have to get a business license since the platform has everything covered.”

If we choose to live within a community, layers of laws provide us with general safety. Laws and ordinances are meant to be applied equally to create acceptable social behavior. And there are regulations specific to running a small business, too. Ordinance requirements and standards protect our communities, businesses, and homes. The STR business owners should accept guest reservations, then manage the STR business where guests complete their reserved stay.

The misconception is that certain reservation platforms control the STR industry and the businesses that host guest stays. A reservation platform (simply acting as an online travel agency) may facilitate some guest inquiries or even financial details for accepted future reservations, but STR hosts are not platform employees, licensees, or franchisees. The owner/host is responsible for the STR business, including its management.

Section Two | Quality STR Hosting Tips:

• A host lists the STR unit available for guest reservations using various sources, such as a personal website, social media pages, a guidebook, or reservation websites like Airbnb, Vrbo, or Flipkey. Then the host either accepts or doesn’t accept the reservation inquiry offered through the source of the reservation inquiry.
• Online travel agencies like Airbnb, Vrbo, or Flipkey serve STR businesses as vendors or reservation agents. These businesses operate within a different industry than the actual STR industry. They don’t control the STR business.
• An online platform rarely gets involved when a guest misbehaves in an STR unless the violation is directly connected to the reservation details. Protections like a ‘million-dollar insurance policy” usually only apply to the guest’s contract with the platform, not the guest/host agreement or house rules. The host must use their own host/guest agreement to communicate expectations to guests.
• Using correct terminology matters. Calling an STR unit or business an ‘Airbnb’ or a ‘Vrbo’ is false branding. And the improper use of this nickname can give an industry vendor more power than is healthy.
• Just because something is listed online doesn’t mean it is a legitimate or code-compliant business.
• If a host accepts payment for a reservation stay in their home, they’re running a small business. And specific laws and standards govern the hospitality industry.
• If a local business license or permit is required for STR hosting in an area, simply creating a listing on a reservation platform website doesn’t exempt a host from needing the requisite license or permit to run the STR business legally.
• And a lessee subletting a unit does not usually have a legal right to host an STR there. Hosts should read their lease agreements and the local regulations to understand the extent of their privileges.

Host Misconception #3

“We have property rights! The government can’t tell us what to do! Neighbors need to mind their own business!”

Citizens do have rights. However, each person’s rights have boundaries and limits, especially when they’re operating a small business within a residential community.

Laws and standards can apply to any residential unit, resident, or visitor of the community, including an STR business, manager, home, and guests. And each neighbor has rights, too (and their rights have boundaries as well). Maintaining a safe community must be a top priority for all involved.

Section Three | Quality STR Hosting Tips:

• Contrary to popular belief, the government can tell residents and guests some things they can or can’t do — and impose penalties for noncompliance. It’s part of living in or visiting a community.
• A host can participate in the election of representatives who create laws and policies (and hosts may even serve in elective or appointed positions). If citizens disagree with a law, they still need to work within that law until it is changed.
• Laws exist for the safety and good of individuals and the greater society. Within the community, hosts and guests are covered by rights and protections. But so are other people.
• Rights have boundaries. Hosts should never think their guest’s desire for a good time is more important than maintaining peace within the neighborhood.
• The best answers regarding what needs to be applied to STR management will be found in the local and state laws and ordinances. Each community may have different standards, so hosts must read and understand the applicable rules. Hosts should not rely on tips from websites or friends when making business decisions.
• If neighbors complain about guest behavior and a code violation is verified, fines or other penalties may be designated to the host, the local contact, the manager, and/or the guest. Innovative systems and devices can help a host avoid such a designation or prove whether or not the complaint was valid.
• Hosts and their guests need to be good neighbors. An STR can be welcomed and appreciated within a neighborhood when hosts establish good relationships with neighbors and effectively manage their guests’ behavior.

Host Misconception #4

“Laws are too difficult to understand. The city must explain it to me. No one can hold me responsible if I didn’t know about it.”

There are reasons laws are called ‘codes.’ Ordinance language isn’t intended to be cryptic or secretive. However, for someone unfamiliar with how it’s organized, or the terminology used, they can find it challenging, intimidating, or difficult to understand.

It is the host’s responsibility to search for laws on federal, state, local, and common-interest community levels and work to understand them. It’s helpful when the municipality has specific information about STRs on its website, such as an FAQ page and links to ordinances. An education course about laws and STR best practices can save hosts and city staff time and frustration. However, the host is still responsible for understanding and implementing STR standards specific to their area.

Some end users may be unfamiliar with the critical need for code compliance. Particularly for new business owners, noncompliance with laws and procedures may be tolerated at first, but ignoring laws can involve negative consequences. More importantly, a host should understand from the start that code-compliant behavior can be positive and profitable for their small business. Lots of people have gotten away with ignoring rules in school, at home, on previous jobs, or even driving on the freeway, but ignoring rules as an STR business owner can result in costly code violations.

Hosting an STR well isn’t a casual hobby and hosts are ultimately responsible for what happens in their unit(s).

STR hosts must simply learn how to run their small business and act like professionals.

Section Four | Quality STR Hosting Tips:

• Some standards are location specific. Mandates, allowances, or limitations may be different for the house across the street, for example, if that home is in another city, county, or common interest community/HOA.
• The best place to look for answers about applicable STR rules and standards for each STR is within the laws and ordinances governing that specific area (on local, state, and federal levels respectively).
• While some cities include STR ordinance information on their websites (which is very helpful), there are usually other laws and standards a host must be aware of, such as pool, fire pit, or lodging tax standards.
• Answers from a realtor, attorney, blog, friend, or platform site are only as good as the knowledge of the source, so the details may not be up to date. Fact-checking should be a part of any sound business practice.
• If a host applies terrible advice to their business practice, the host will be responsible for the outcomes.
• There can be severe penalties for code violations, so it’s worth taking the time to research and understand applicable STR standards. Hosts should keep track of license renewal deadlines and frequently check sites for possible updates. Rules and systems can change.
• Hosts must create a guest/host agreement and communicate the rules to guests before they arrive at the STR. If there’s a concern or problem during the guest’s stay, the host must resolve it quickly. It’s in the business’s best interest to be a positive part of the neighborhood and surrounding community.
• STR education and business courses are available through accredited educational institutions and professional organizations. While social media posts and advice from friends may spark a host’s interest in knowing more, they should learn proper STR management best practices from trusted sources.
• The STR industry is rapidly changing. A host or manager is already behind if they aren’t constantly learning about changes in laws and trends.

Host Misconception #5

“If I get licensed, the government will use it to harass me and try to shut down my STR. We should just wait until the government gives up on requiring STR licenses. Other people are getting away with it, so why should I get licensed?”

Unfortunately, and in too many areas, these misconceptions are genuine. Mistrust, or the lack of reasonable policies, derails compliance efforts. But the reality is, however, officials don’t usually start out with a grudge against a particular type of business. The poor behavior of a few STR hosts is the most likely cause of the bad rap STRs have garnered.

When licensed hosts feel unfairly targeted for adverse treatment, the best hosts usually move their good business practices to another area. Sadly, unlawful hosts or conglomerate investor groups move in to capture the STR reservation demand. They aren’t code compliant, which further harms those few hosts who are lawfully managing STRs and other lodging properties. When a code-compliant host gives up an STR license due to adverse treatment, future guest bookings on their calendar are often transferred to unlicensed STRs.

Hosts must raise their STR management practices to a more professional level and ask other hosts to do the same. This will further validate the fact that the majority of hosts will become code-compliant if they have the chance to do so.

Code enforcement officials often state that their main goal is code compliance, not shutting down well-run businesses or vilifying a particular industry. Licensed hosts may better respond to an STR compliance support team, especially if the team can incentivize and reward compliant behavior. It would behoove hosts to cooperate with such efforts.

And hosts don’t want problematic guest behavior harming their homes or businesses. They’re usually grateful to learn how to host guests in a safe, code-compliant, and trouble-free manner.

When reasonable policies align with positive behavior, it elevates the emerging industry and benefits the community.

Section Five | Quality STR Hosting Tips:

• If a host doesn’t want to obey a local STR ordinance, they can move their good hosting practice elsewhere.
• Quality STR hosts should work with officials, not against them. To that end, officials usually understand that most hosts want to be code compliant, but some bad operators make it hard for all hosts.
• If a government official acts outside of legal bounds in a way that unfairly affects a code-compliant business, there are usually avenues to appeal those actions and report adverse treatment.
• ‘Everybody’s doing it’ is never an adequate excuse for ignoring laws. Penalties can be severe, so it’s not worth trying to host outside of lawful standards. And unlawful practices eventually catch up to people.

A few bad operators amid a sea of good hosts can unfairly impact all STRs. Most hosts don’t want STR guest behavior to disrupt their neighborhood or damage their homes. Many hosts started hosting before STR standards and licenses were created, or perhaps they didn’t realize laws and zoning restrictions existed until they had a calendar full of reservations. Still, misunderstandings and misinformation are part of the climate of social change, especially when disrupters are involved. But once hosts learn about the laws and how to manage an STR business properly, most hosts change their behavior to align with reasonable STR governance standards.

If a hostile STR environment is left unresolved for too long, behavior can get out of control, inspiring costly lawsuits. And when unlawful operators or conglomerates are the only ones left to accommodate STR consumer demand, it can be difficult and expensive for officials to stabilize the situation. It’s best to prevent this through reasonable policy revision that inspires the desired behavior from local STR hosts and managers.

STRs aren’t going away, and consumer demand will be met. But the way STRs are governed will determine who will meet this demand and how hosts and guests behave within a community. When sufficient code-compliant hosts meet STR demand, officials will have room to concentrate on unlicensed operators. And as a result, code enforcement would become easier because bad hosts would find unlawful hosting more difficult and less lucrative, so they would likely move to other pursuits or venues.

There are support tools and resources available to hosts and policymakers alike. Sound STR governance is vital. When updated policies inspire a change in behavior, even the most challenging social shift can stabilize into a positive new social norm.