City outlines proposed code changes to regulate short-term rentals

The city plans to move forward with an overhaul of its short-term rental regulations, with public hearings beginning next month to discuss the code amendments under consideration to manage the industry and collect Hotel Occupancy Tax from the more than 10,000 STRs believed to be operating throughout the area.

The proposed changes are outlined in a memo from Assistant City Manager Veronica Briseño, with hearings beginning Feb. 4 and continuing Feb. 11 and 27. A second set of hearings centered on housing preservation incentives is slated for April.

In recent years, leaders inside City Hall have favored making the city’s licensing process for STRs easier to complete to encourage participation rather than relying on code enforcement for quality-of-life issues.

The proposed changes include making STRs an accessory use in all residential zoning districts for licensed operators, imposing density caps on STR ownership and requiring platforms like Airbnb to collect and remit Hotel Occupancy Tax on behalf of users.

Existing STRs will be allowed to continue operating under stricter rules provided they do not create nuisances or undergo ownership changes.

STR ownership on sites with three or fewer housing units will be limited to one property per 1,000-foot radius per owner, while on larger properties with four or more units, STR operations will be capped at the greater of one unit or 25 percent of the total units.

Platforms like Airbnb and Vrbo will be required to collect and remit applicable hotel taxes on behalf of operators, with the companies also called to ensure listings are only for properties with valid STR licenses and provide documentation of HOT collections to operators.

The proposed changes come amid increasing pressure from residents and community advocates to take action against the disruptive effects of STRs on residential neighborhoods. Noise complaints, parking issues and concerns about neighborhood character have been common grievances since Austin emerged as a popular market for tourists looking for lodging options outside of traditional hotels.

Last year, the Tourism Commission recommended easing licensing requirements to improve compliance rates, though critics argued that such measures might exacerbate STR proliferation in sensitive areas.

The planned overhaul also follows the passage of the HOME 2 ordinance, which addressed housing affordability and neighborhood preservation. Advocates have been vocal about the need for stricter enforcement mechanisms to ensure STRs do not undermine these goals.

Between Jan. 21 and 27, city staff will host community meetings to review the proposed amendments and gather feedback, with a City Council briefing scheduled for Jan. 28.

Elsewhere in Texas, cities have taken varied approaches to regulating short-term rentals, with Dallas recently approving regulations that limit short-term rentals to specific zoning districts, effectively prohibiting them in single-family residential areas. Fort Worth restricts short-term rentals to mixed-use and industrial zones and requires operators to register and pay hotel taxes.

Austin categorizes STRs into three types: owner-occupied or associated with an owner-occupied principal residence, non-owner-occupied single-family or duplex properties, and non-owner-occupied multifamily units. Austin also imposes density caps and separation requirements for these properties.

Austin’s past attempts to impose restrictions on STR activity have been undermined in the courts, with the 2018 case Tarr v. Timberwood Park Owners Association seeing the Texas Supreme Court rule that STRs do not violate deed restrictions limiting property use to residential purposes, supporting homeowners’ rights to engage in short-term rentals despite homeowners association restrictions.

In 2019, the 3rd Court of Appeals invalidated the city’s ban on non-owner-occupied STRs, declaring it an unconstitutional retroactive law and affirming the right to lease property as a fundamental privilege of ownership. More recently, in the 2023 case Anding v. City of Austin, a federal court upheld certain regulations in Austin, including licensing requirements and occupancy limits, while striking down other provisions such as a ban on gatherings at short-term rentals, citing constitutional concerns.

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