Georgia Homeowner’s Guide to Hosting on Airbnb (Expanded Version – Includes Florida and Alabama Law)
If you are a homeowner in the state of Georgia with a little extra space, it may have occurred to you to post your space on a short-term vacation rental site like Airbnb or HomeAway. Short-term rentals are a great alternative to hotels when you are traveling. They give you the opportunity to live like a local, get advice on off-the-beaten-track sights and experiences, and it may even save you some money.
Atlanta is among the country’s most visited cities, and a 2017 report from Rented.com ranked Atlanta in the top three urban markets for generating income with Airbnb. There are also dozens of popular tourism spots throughout the state of Georgia that are also experiencing a proliferation of short-term vacation rentals (STVR). As short-term renting becomes a more common traveling choice, many people with extra space or an unused property are considering putting their homes on one of these sites to make some side income. However, if you are considering hosting on Airbnb or any other short-term rental site, there are quite a few things you will need to consider.
Does Your Town/City/County Allow Short-Term Rentals?
The first question to ask when you are considering hosting with Airbnb is: is this legal? Because STVRs are becoming so common, some jurisdictions are creating regulations and restrictions on how short-term rentals should operate. In the state of Georgia, there is an active conversation going on about how communities want to approach this issue.
Some jurisdictions, like Sandy Springs, Savannah, and Hall County, already have ordinances and regulations in place to control STVRs. These communities often use these regulations to strike a balance between protecting property owners’ rights, encouraging tourism, and preserving the welfare of neighbors and community members.
In October 2017, Representative Matt Dollar of Marietta introduced legislation trying to get the Georgia legislature to come up with a statewide framework for Airbnb and other short-term rental services. The idea behind one statewide law is to simplify the process for homeowners and to keep local governments from banning short-term rentals outright. Earlier this month, the Georgia legislature authorized a House Study Committee on Short-Term Rental Providers. This committee is due to submit a report of its findings regarding “the best methods to ensure the safety of the public, prevent illegal practices, collect taxes on business activities, and otherwise properly regulate short-term rental providers” by December 1, 2018, when the committee will be abolished.
If you are a homeowner in the state of Florida, you have no doubt heard about the millions of dollars Floridians make each year renting out their homes and spare rooms to short-term renters online. However, if you’ve been following local news, you also know that there has been a lot of debate about how short-term rentals should be regulated and by whom.
Local v. State: Who Should Regulate Short-Term Rental Properties?
The main debate comes down to who has the right to regulate short-term vacation rentals, like those set up through AirBNB and HomeAway. Local governments, at the county and city level, want to be able to use local ordinances to place limits on short-term vacation rentals by neighborhoods, numbers of guests, and frequency of visits. On the other side, many homeowners, lawmakers, and online rental businesses believe that regulation should be at the state level and limited to matters like collecting taxes and registering rental properties.
Before 2011, local governments had the ability to place any restrictions they wanted on short-term vacation rentals. Some counties limited the number of times a homeowner could host renters in a given year, others required that the homeowner must be present in the home during the stay, and still others banned the practice outright. In 2011, a state law came into effect preventing any new restrictions on short-term rentals in the state of Florida, although it did grandfather in any regulations already in effect. In the years since that law passed, there have been a few changes to the language of the statute, returning some regulatory control back to local governments.
In the 2018 Florida state legislative session, it seemed like some of this back-and-forth might finally get settled. While local governments are still implementing more and more restrictions on short-term vacation rentals in their jurisdictions, Senate Bill 1400 and House Bills 773 and 789 were introduced at the state level. These bills were intended to settle the AirBNB debate at last. They each attempted to limit the scope of restrictions state governments can place on short-term vacation rentals, in exchange for statewide registration and regulation. By the end of the 2018 legislative session, however, the bills had stalled.
Where Do Things Stand If I Want to Put My Home on AirBNB?
So far, local communities retain the right to make local laws based on local neighborhoods and community needs. Some counties, like Miami-Dade, passed new laws as recently as 2017 that require hosts to register their rental properties with the county, pay business taxes, and enforce certain vacation rental standards. Orlando City just passed an ordinance requiring that homeowners must remain in the property while it is rented out. “Hosted rentals” are one of the ways local communities are trying to cut down on property owners renting out multiple homes full-time.
By 2018, AirBNB has contracted with over forty counties in the state of Florida to charge lodging and tourism taxes through the site and remit them directly to the state. However, there may still be other local, state, and federal taxes (as well as possible deductions) that apply. It will be useful to consult with an accountant before posting your home on a vacation rental site.
As a homeowner in the state of Florida, you are likely very familiar with the valuable homestead exemption. If you aren’t, the homestead exemption is a tax benefit that reduces the value of a home when assessing its property taxes. For many homeowners, the homestead exemption results in significant tax savings each year. However, the homestead exemption is limited to properties that the homeowners make their primary residence. There is no homestead exemption for rental properties or vacation homes. Choosing to place your home on AirBNB or any other short-term vacation rental site — even if you are present in the house — could create a risk of losing your homestead exemption. In general, renting “all or substantially all” of your home for more than 30 days over a two year period will trigger the loss of the homestead exemption. With the increase in short-term renting, Florida is conducting more and more homestead exemption audits, and the penalties for claiming a homestead exemption when you do not qualify can be steep.
In the state of Alabama, there is no statewide set of regulations regarding short-term vacation rentals. Instead, all restrictions fall to the local jurisdictions where these rental properties are located. In recent years, each of these local jurisdictions has faced the same struggle as other popular tourist destinations — the comfort of a quiet neighborhood versus the desire to earn income as a part of the tourism industry.
To address this conflict, different jurisdictions are taking different approaches. In Tuscaloosa City, short-term vacation rental homeowners must be licensed and the property must be inspected. Short-term vacation rentals are limited to certain popular areas of the city. In Homewood City, city council banned short-term rentals from low-density housing areas (single-family homes) but continues to allow rentals in areas with apartments and condos.
In a highly publicized move, Orange Beach enacted a six month moratorium on new short-term vacation rental licenses while local lawmakers used the time to draft a new ordinance. In April 2018, the new ordinance was approved banning rentals of less than two weeks in all areas zoned for residential use. It also created a “Vacation Rental Classification,” which requires a $500 vacation rental business license.
Like many other states, Alabama’s Department of Revenue did enter into an agreement with Airbnb intended to resolve any tensions regarding lost tax revenue. Under the March 2016 agreement, Airbnb began directly collecting and remitting taxes to the state of Alabama, rather than relying on homeowners to pay taxes themselves. This agreement increased compliance and tax revenue almost immediately.
How Do I Prepare to Host with a Short-Term Rental Site?
Get Necessary Permission
Before you begin furnishing your spare room or advertising your home online, you will need to be sure that you have all necessary permissions required in your jurisdiction. This may include contacting the planning commission, local government business office, and/or the police department. You will also need to check with your homeowners association or co-op board to confirm that there are no prohibitions against short-term leasing.
Apply for all Permits and Business Licenses Required
If your jurisdiction requires certain permits and/or licenses, you will need to obtain these prior to posting your property on a rental site. These are often one-time application fees, although there may be annual fees that you will have to pay to maintain permission to use your residential property for profit.
Look into the Tax Implications
In addition to providing you with a source of income that will need to be reported on your income tax, there may also be local tax implications caused by renting out your home. This is an area where it is best to consult with an attorney or accountant. By allowing people to rent a room in your home or an entire property, you may be subject to one or more of the following taxes:
- Hotel or Transient Occupancy Tax
- Sales Tax
- Value Added Tax (VAT)
- Goods and Services Tax (GST)
Make Sure You Have Insurance Coverage
Although you already have homeowners insurance, it is very likely that your policy does not cover damages caused by short-term renters. Sites like Airbnb do offer some coverage, but you will likely need additional insurance to protect your home and your belongings. Some jurisdictions may also require this additional insurance as a part of an application for a business license or permit.
Complete Safety and Building Inspections
Some jurisdictions will require that your home pass a safety and building inspection before granting permission for short-term vacation renting. Make sure that you have a functioning smoke alarm, carbon monoxide detector, and fire extinguisher and that your property meets all relevant building code guidelines.
Set House Rules
Airbnb and other rental sites allow hosts to set their own house rules. A clear set of house rules can preempt many issues that may arise and gives you some back-up should something go wrong. Think about your property and how you best want to protect it. Your jurisdiction may have certain guidelines regarding parking, noise, and occupancy limits, so make sure you include these in your own set of house rules. Rules should be communicated to renters before they book and should also be made available in your home as a reminder.
Don’t Forget About the Neighbors
The main challenge that STVR hosts have when renting their property is with neighbors. It is important that you consider how your rental will impact your neighbors in terms of safety, noise, and parking. Some jurisdictions will contact your neighbors and inform them of your application for permission to rent, so it is best to go to them first on your own. This will give you a chance to present your idea to them and allow them to express any concerns they may have directly to you. Open communication will help prevent any conflicts or complaints that may arise in the future.
If you are thinking about purchasing a rental or vacation property, call our office in Atlanta, at 770-933-9009 to schedule an appointment with one of our experienced real estate attorneys today!