City of Austin Unveils Proposed Changes to STR Rules

Last week, the city of Austin released a series of working drafts to change the current rules surrounding short term rentals in the city. This comprehensive update to the way the city will license and regulate STRS moving forward has been in the works for over a year.  It all started, when a series of court cases made the current short term rental ordinance no longer viable.  The court cases established a few principles that will have to be integrated into whatever version of the proposed changes eventually gets passed. 
In 2019, the Zatari vs. City of Austin case established that occupancy limits could not be created for STRs specifically.  The city can regulate occupancy for single-family homes but that is determined by the property maintenance code.  Thus, any future amendment addressing short-term rental use in the city code will be without respect to occupancy limits.
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In 2023, the Anding vs. City of Austin case made it to the federal court, where the judge ruled the city’s limiting of permits to only owner-occupants unconstitutional.  This case forced the City of Austin to begin issuing STR licenses regardless of whether that home was a primary residence or an investment property.  In the future, any Austin STR rules must not be based on the primary-residence requirement.

The City’s overhaul plan involves changing the Land Development Code to include STR use as an accessory use, and adding Short Term Rentals to the Business Regulations section of the city code.  I have reviewed the working drafts, and attended the first two public-input sessions.  In my opinion, there are various oversights with the drafted new licensing requirements, but the proposed rules are actually quite lenient. These code changes are only proposed at this time, but the earliest time these changes could go into effect would be 2/27/23. Anyone who has applied for or been granted a permit before this date would be grandfathered in and allowed to continue to operate indefinitely so long as they are a “good actor” and renew the permit timely. As has been the case previously, permits will be non-transferable when real estate is sold. 

The working draft specifies the following:

1. The operator must own the STR, and be an individual.  The city has stated they want the permit tied to the legal owner, and any owner must have a local contact who can respond to the scene within 2 hours.
2. In order to get a STR permit, the property must be owned in the name of an individual.  They allow exceptions for single member LLCs or a trust where the beneficiary is an individual- but the gist of this seems to be the city’s attempt to eliminate businesses buying up residential housing stock to use as STRs.
3. You can own multiple STR properties but the same individual can’t own one that is within a 1,000 ft. of one another.  The draft has zero limits for STR density.  This provision does prohibit the use of multiple STR units on one lot owned by the same person, AND prohibits one owner from getting STR permits for properties within 1,000 ft. of one another.  If you own a duplex, only one side can be used as a short term rental.  If you own a property with an ADU- you have to choose, do you want to rent out the main house or back house as a short term rental? If you own 102 Main St. and 104 Main St. , adjacent properties located less than 1,000 feet away from one another, you can only get a permit to STR one of them.  If you sell 104 Main St. to cousin Bill, he can get a permit to use it as a short-term rental and you could have two STRs side by side. Important caveat, this rule does allow for a condo-regime, a property with a main house and an ADU that has different owners, to both be used as short term rentals.
4. Multi-Family properties (those with 4 or greater units) will be granted unlimited STR permits, but no single owner can have more than 25% of their total units licensed as STRs.  This is vastly different from the previous regulations which capped total STRs per commercially zoned condo/apartment at a maximum of 25% of total units.  
5. Ambitiously, the City hopes to partner with platform providers such as airbnb.com and vrbo.com to enforce the rules.  The plan requires permit numbers to be displayed in listings and relies on the platforms to remove non-complaint listings.  I have yet to hear any feedback from provider reps into how likely they are to do this. 

The other requirements are fairly typical and lenient in my opinion.  For example, STR owners must complete a self-administered life-safety test and provide a $1,000,000 liability policy.  The City is currently gathering public-input on these revisions.  Now, is your time to ask questions, make comments, and shape the way this policy forms.  

You can Sign Up to Attend One of These Information Sessions

• Wednesday, Jan. 22, 6-8 p.m., Montopolis Recreation and Community Center  
• Thursday, Jan. 23, 6-8 p.m., Permitting and Development Center 
• Monday, Jan. 27, 6-8 p.m., Austin Central Library