Is Airbnb Legal in Your City?
Is your city friendly to Airbnb real estate investors? To answer this question, we refer to R Street ‘s Roomscore 2016: Short-Term Rental report.
The R Street Institute is a non-profit “think tank”. Their mission is to engage in policy research and outreach to promote free markets and limited, effective government.
Roomscore provides an in-depth analysis of the local and state regulations in 59 US cities. Each city starts with a base score of 90.Points are added or deducted in five different categories. The final score is then translated into a letter grade. The highest score awarded is A+ and the lowest score is F.
Before we get to the overall scores for each city, here’s an overview of the five scoring categories.
- Tailored Legal Framework
The first question R Street asks is whether a city has a legal framework specific to short-term rentals. Cities that explicitly regulate both vacation rentals and room sharing score +10 points. Cities that recognize vacation rentals but not room sharing score +5 points. All other cities score 0 points.
- Legal Restrictions
The second category examines the limitations on short-term rentals. An example is a limitation on the number of days per year a property can be rented out. The more limitations a city has, the greater the negative score. Cities that prohibit short-term rentals altogether score -40 points.
- Tax Collection Obligations
In this category, cities are penalized up to 5 points if they force rental platforms to collect occupancy taxes. While Airbnb does collect taxes in many US jurisdictions, this is not feasible for a platform like Craigslist. Hence such a restriction is overly burdensome and limits the short-term rental industry.
Cities enforcing a tax rate that is higher than the rate paid by hotels are further penalized by Roomscore.
- Licensing Requirements
The fourth category penalizes cities based on the number and cost of filings that the city requires of short-term rental operators. Depending on the severity of the burden, a city receives up to -10 points in this category.
- Hostile Enforcement
The final category gives deductions for any other overheads inflicted on short-term rental operators. Examples include inspection requirements, occupancy limits, and restrictions on location or accessibility. A city with regulations that are hostile to short-term rental owners receives up to -10 points.
The Top Airbnb Friendly Cities
Let’s examine the overall results. R Street found significant variation in the legality of Airbnb across the United States. Total scores range from 50 at the low end to 97 at the high end. The following chart shows the distribution of scores.
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