Advantages and Disadvantages of Short-Term Rentals in HOAs

Advantages and disadvantages of short term rentals.

With the rise of vacation rentals listing services such as Airbnb, VRBO, and many more, homeowners are now leveraging short-term rentals to generate more cash inflow.  A short-term rental is when a homeowner rents out their house or a condominium for a short amount of time, typically for a few nights or a week, to people who need accommodations for a short stay.  Short-term rentals have become a lucrative business because it gives homeowners the opportunity to generate additional income and travelers a way to save money while avoiding the hustles and bustles of a busy hotel.  I Property Management notes that 43% of homeowners (called “hosts”) rent out their primary residence.  As the concept of short-term rentals extends from one HOA to another, are you prepared?  

In this blog series, we’ll discuss the advantages and disadvantages of short-term rentals in HOAs, how top community management companies handle the new trend, and how you as a community manager can leverage technology to keep up with short-term rentals in your communities (whether they are allowed or banned).

What are the advantages of short-term rentals?

According to Forbes, short-term rentals generated 30% more revenue for homeowners and investors than leases.  Seasonality allows homeowners to increase the rates of their short-term rentals. Homeowners in Las Vegas were able to charge 100% above the regular rate during New Year night, as an example. This extra source of income for residents may better position them to pay their dues and mortgage on time, as well as enjoy the use of their property in a financially rewarding manner.  Additionally, the rise of short-term rentals leads to a boost in tourism for the city. Affordable accommodations provided by short-term rentals can help travelers allocate their travel budget to other activities such as eating out and sight-seeing activities. 

What are the disadvantages of short-term rentals?

Short-term rentals when not handled properly can often burden the community and cause distress to immediate neighbors.  Adam Clark, Chief Operating Officer of Excel Association Management in Plano, Texas shares that the biggest disadvantages are “constant potential for noise disturbances and parties, and a constant stream of transient tenants gaining access to community common areas with no knowledge or regard for Association rules.”  Security is another concern in tight-knit neighborhoods – allowing for short-term rentals means strangers coming in and out of the neighborhood and increased traffic.  

How are concerns over short-term rentals shaping regulations?

Now that you have gained a better understanding of short-term rentals, the advantages, and disadvantages, let’s take a quick look at how those concerns are shaping regulations in the United States and internationally.  These laws place the onus of responsibility heavily on the homeowner and covers topics such as restrictions, documentation, and approval. It’s important for management companies serving community associations to understand the laws in their city/state pertaining to short-term rentals so they can handle it effectively.

  1. Arizona, USA – Restricting land use is covered under contract law, and therefore, HOAs can place time restrictions or completely ban short-term rentals.  However, for the most part, community members need to vote in order to make those decisions.

  2. Saskatoon, Canada – The city is trying to pass into law a requirement that condo owners who plan on having a short-term rental business to write a letter to the board and gain approval, even if short-term rentals are allowed per the bylaws.  This law would place more accountability on part of the residents and help the board to make better informed decisions in cases where the renter performs irresponsible actions.

  3. Berlin, Germany – After two years of banning short-term rentals in the city, the decision was overturned, but it doesn’t come without strict policies and even stricter repercussions if the rules are violated.  Those who wish to rent out their home will need to obtain a general permit from their borough even for shorter stays. The maximum penalty for violating the law has increased more than five times, bringing the amount to 500,000 euros or $617,000. 

Stay tuned to learn how to handle short-term rentals!

Knowing the advantages of short-term rentals and the repercussions, how would you handle this growing and much-debated issue in your HOA’s?  Sign up for our emails to receive the next blog posts in this series straight to your inbox. Next week, learn more about how to handle short-term rentals in your communities!  

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