Texas Proposes New Short Term Vacation Rental Regulations

5 Replies

Texas recently proposed 3 bills which will add many of the same regulations currently reserved for hotels to short term rentals. The rules appear very similar to the ones we operate under in the city of Austin, but this would affect all large cities in the state. 


Additional requirements which are not currently part of the Austin ordinance are:

1. Annual water testing

2. Room rates posted on the door

3. Affidavit from the owner to the marketing websites certifying compliance with local laws

4. The website operators are required to assist the state with any investigation (aka those operators not registered or not paying their taxes)

5. Regulations requiring cleanliness of the units.

The regulations do not apply to:

-primary residences

-individual room rentals (less than the entire dwelling). Some conflicting verbiage on this. 

-half of a duplex if the other side is owner occupied

Links to the proposed bills are below.

http://www.capitol.state.tx.us/tlodocs/84R/billtex...

http://www.capitol.state.tx.us/tlodocs/84R/billtex...

http://www.capitol.state.tx.us/Search/DocViewer.as...

Personally, I'm thankful that the state is creating a framework for the operation and expansion of the vacation rental model. 

For those operators who treat short term rental as a business, this is a great opportunity.

I don't expect that property owners booking the occasional event or those operating under the radar will echo my sentiment.

I'd love to hear from other vacation rental owners in Texas and other areas of the country. Would you welcome this type of regulation in your market?

@Scott Sutherland - Thanks for distilling the information (your post was much easier to digest than the House Bill language that was forwarded by VRBO) and for your perspective on this. Glad to hear that someone who is much farther down the road in this industry than me feels that it's a good thing long term. 

@Scott Sutherland I do not think this legislation is coming from vrbo folks or even short term rental as a business folks. This is coming from hotel owners. It is not intended to advance alternative rentals but to shut them down. I am not saying that is necessarily a bad thing but it is the objective here. Maybe only large entities should be able to offer a bed to passers through. However, red tape seems like a round about way to get there. The legislation should just declare that you have to have 50 doors to operate a short term rental.  

I personally have abandoned vrbo type rentals because the difficulty of compliance and the taxes associated are too high for my 3 or 4 units. After the costs of:
- Annual city fees
- County Tax
- City Tax
- Income Tax
- Booking fees
- Cleaning costs
- Accountant cost
- PITA from the city
- My time actually booking or cost of someone else booking
- etc.

I end up with less than I get from leasing. This is even counting $30k in SXSW rentals. So I lease. These rules create a scenario where you can only succeed when you have economies of scale which are rare for this type of property. So, in essence, it removes this affordable option from the visitors. Or you end up with house rentals that are strictly underground. Maybe it has the positive effect of creating more inventory for long term renters but that seems negligible. 

The only positive here is that they are not attacking personal residence rentals yet... but that may be coming. 

Agree with @Will R.

I suspect this is very much being driven by the hotel/resort industry to get rid of this new competition. It may seem like reasonable requirements at first, but if it's passed into law, the industries foot will be in the door and that law will continue to grow and become more and more complex and costly until they have it the way they want it. Just look at the history of any law... ever.

This was a line of REI I was interested in, will definitely have to keep tabs on these developments. Thanks for sharing.

Thanks for posting Scott.

Very good points on the expenses of operation and the time involvement. 

We have properties that only return $6K more per year than long term rental would. We also have a property that returns $40K more than long term rental. 

In Austin, it's very difficult to capture any additional income from vacation rentals using a third party property manager. VR property managers typically charge 20-30% of revenues.

But if you like managing vacation rentals and want to make it your job (pay yourself the PM fee) or you live in a desirable area and want to generate revenue from your home while you travel, it could be a good option. 

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