It’s no secret that there’s been an explosion in the use of Airbnb, VRBO, and other short-term rental companies to find a place to stay for a night or two. They’ve become an attractive way to travel and also an attractive way to use investment property in recent years. And cities have been scrambling to catch up. Earlier this year, Dallas passed some new short-term rental laws that all potential buyers and current owners of short-term rentals need to be aware of. What does this mean for our city? What does this mean for you as a property owner or buyer? Let’s dive into these questions and more!
What is considered a short-term rental?
First, let’s clarify what a short-term rental is. By definition, a short-term rental is a “full or partial rentable unit containing one or more kitchens, one or more bathrooms, and/or one or more bedrooms that are rented to occupants for fewer than 30 consecutive days or one month per rental period”. In other words, a short-term rental is a furnished house or condo that someone owns but rents out for a day or more.
Short-term rentals became (and have remained) very popular because they are alternatives to a hotel with amenities that you may not find elsewhere like a private pool and large common area for your friends and family. Short-term rentals provide you with a different experience than you would get in a hotel.
Why would there be a move to ban short-term rentals?
For many people, short-term rentals have been a different form of investment property. Because so many of these rentals are in single-family neighborhoods, many of the neighbors began complaining about loud parties, a more transient nature to the neighborhood, increased crime rate, and didn’t think that these belonged in residential areas. Therefore, the city of Dallas began investigating the impact of short-term rentals in 2019. They formed a committee, held public hearings, and tried to gather information so they could determine what might be best for the city. Ultimately, because homeowners are entitled to “peaceful enjoyment” of their property, a ban on short-term rentals took effect in June.
What’s changed?
The city ultimately concluded that using a property as a short-term rental does not qualify as “single-family residential use” and should be restricted to multifamily and nonresidential zoning. In multi-family settings, short-term rentals are only allowed in communities of 20 or more units and only 3% of the community may be used for this purpose.
Short-term rentals must also now register with the city to operate as short-term rentals and pay the same taxes and fees that hotels do. They also must have off-street parking available.
How does this impact current owners or potential buyers?
These new restrictions for short-term rentals were originally passed on June 14th of this year, however, they are not enforceable until December. But while it’s not enforceable today, it’s time for short-term rental owners to make the necessary changes.
If you currently own a short-term rental, it’s time to evaluate what your new strategy will be:
Continue to keep the property furnished, but rent it out for more than 30 days at a time. These sorts of rentals can be marketed for traveling nurses or corporate relocations.
Make the property a rental home for longer-term tenants looking for a home with a 12-month or more lease.
Or you can cash in and sell the home!
Your decision will ultimately come down to cash flow. How much equity you have in the home, how much rent you could get each month, and how occupied you think you could keep the property. We can also talk through options with you if you need additional information or help!
If you’re considering buying a property to use as a short-term rental, consider these things:
Many multi-family properties have HOAs that have already effectively banned short-term rentals in their buildings and communities due to these same issues listed above. Each HOA is different, but if you’re considering buying a property for this purpose, the details will be in the HOA bylaws and are subject to be amended by a vote from the owners.
Make sure you know and understand how many short-term rentals are already operating in the community
Do the math and make sure this makes financial sense!
We hope this brings you up to speed on the latest news here in Dallas and clarifies any questions you had lingering about these new short-term rental bans! We’ve simplified some details, but these are the broad strokes that will help you make a next-step decision if you own a short-term rental here in Dallas or are considering buying one.
If you’d like to discuss your unique situation, give us a call! We’re always here to help you navigate the market and make the best decision when it comes to your property.
Until next time,
Brianna and Keelie